Satellite Operators Can Expect Insurance Reductions

NU Online News Service, Dec. 1, 2:16 p.m. EST

A profitable 2009 for space insurers could mean continued declines in rates for operators of orbiting satellites, a report from Aon's International Space Brokers said.

The Chicago-based insurance broker's London affiliate said space insurers are expected to generate more than $400 million in profit for 2009, provided there are no claims before the end of the year.

Aon said the space insurance market has been very profitable over the last five years and this will inevitably lead to more competitive premiums for satellite operators in the New Year as the capacity for space risks continues to increase.

In 2009, more than $800 million of premiums is expected to be paid for "all risks" launch and in-orbit insurance.

The third quarter of 2009 saw five major insured launches (two Ariane 5s, two Protons and one Long March 3B--of which the broker said it was involved in four), which generated an estimated $154.6 million of premium income for the space insurance market.

The Long March 3B launch fell short of the target orbit due to a third-stage anomaly, but engineers managed to maneuver the Palapa D spacecraft to the correct orbit, which resulted in a loss of only one-third of the spacecraft life.

Losses occurring so far this year amount to between $400 million and $450 million, while the other major launch vehicles have performed flawlessly, Aon said.

The result is that insurers will have been profitable for four out of five years, with the only exception being a deficit in 2007, said Aon. The favorable market conditions are attracting more capacity into the space insurance market, enabling risks to be placed at better terms due to increased competition. As a result, rates in 2009 to date have continued their slow but steady decline.

"Demand for satellite communication capacity continues to grow, from delivering broadband and television to surveying the earth for pollution, resources and disaster monitoring," said Clive Smith, space business unit leader, in a statement.

"The recession made it more difficult for some operators and particularly new projects to raise capital, but nevertheless there are a number of interesting projects that are still progressing well," he noted.

Mr. Smith added, "The health of the insurance industry means it's well positioned to support satellite programs by providing sufficient capacity to satisfy investor requirements."