Space: The Final Insurance Frontier?

As the space shuttle program nears retirement, private commercial companies are using more of their own capital and help from NASA to develop spacecraft to deliver cargo and humans to space, bringing forth new needs for commercial insurance.

NASA's Commercial Crew Development (CCDev) initiative, now in its second phase, seeks to "accelerate the availability of U.S. commercial crew transportation capabilities and reduce the gap in U.S. human spaceflight capability." The hope is to spur economic growth as potential new space markets are created. Once developed, crew transportation capabilities could become available to commercial and government customers.

NASA will work through CCDev with commercial companies to develop space craft and launch vehicles that can deliver cargo and crew to low-Earth orbit and the International Space Station for when the space shuttles become obsolete. With this change in strategy, however, come risk management complications.

"What was once a fairly simple idea of launching a rocket on a one-way trip into space to deliver its cargo, typically a communications satellite, has now come closer to resembling a traditional transportation system, like an airline," said Bruce Kraselsky, managing director for Space Partnership International (SPI), an organization that provides insurance products and risk management strategies to support private companies working with initiatives like CCDev.

"More and more, there will be takeoffs and landings, and there is risk management of airspace, people, and cargo involved," he said.

With that idea in mind, the CCDev program requires that participants obtain appropriate commercial insurance to include coverage for damage to the participant's property (such as its launcher and any other flight hardware), and for third-party damages not otherwise addressed by FAA requirements.

"NASA intends to offload more and more risk to the private sector," said Mr. Kraselsky. "Traditionally, they used cross waivers of liability--NASA indemnified the private company and vice versa--but now the message is, 'We want you to participate, but if you damage the space station you're going to have to pay.' So things are changing and insurance is bridging the gap."

Jan Michel Eid, also a managing director at SPI, said, "If you extend traditional commercial space activity to include manned activities in orbit, such as docking with the International Space Station, it raises all kinds of new liability issues that need to be addressed.

"We look forward to working with the insurance community as we develop our products to meet these new requirements."

SPI formed an alliance with other aerospace experts including United Insurance Brokers and RKF Engineering, and recently introduced several space insurance-related products to support these needs.

"In order for us to really address appropriately the risks and provide mitigation strategies for these companies in the space industry, we felt the best way would be to bring together the cross-disciplinary expertise--legal, regulatory, technical, financial and risk management--necessary to address these complex issues," said Mr. Kraselsky.

Previously, SPI has been involved in insurance placements for space shuttle cargos, civilian astronauts, the Mars mission, and the X-Prize.

Eric Gilkey is an editor for Summit Business Media, which owns National Underwriter. Mr. Gilkey can be reached at EGilkey@sbmedia.com.