UK Space Industry Update – Launch of government consultation on insurance and liabilities requirements under the Space Industry Act 2018

As part of the Government’s Industrial Strategy, the UK government is committed to increasing the UK share of the commercial spaceflight market, with a target to grow the UK’s share of the global market to 10% by 2030. The Space Industry Act 2018 (SIA) was enacted to support this strategy, by creating a high-level framework that enables commercial spaceflight from UK spaceports, including small satellite launch, sub-orbital spaceflight and space tourism.

We previously considered the Government publication of the Call for Evidence in relation to implementing the SIA framework here. The Call for Evidence considered industry views on the level of liabilities, insurance issues and charging provisions of the SIA.

Following the Call for Evidence, the Department for Transport has now launched a consultation on the draft insurance, liabilities and charging requirements to implement the SIA.

The consultation seeks views on the operability and effectiveness of the proposed requirements to implement the SIA. The key changes to the liability and insurance requirements include proposals to:

1. introduce a limit on operator liability;
2. implement the use of a Modelled Insurance Requirement (MIR) to set insurance requirements for operators; and
3. set the operator’s liability at the same level as the MIR, with the UK government providing indemnity for amounts in excess of the limit of liability.

The consultation also requests comments in relation to the draft Space Industry (Liabilities) Regulations, Guidance for Stakeholders on insurance and liabilities requirements under the Space Industry Act 2018 and Guidance on the Modelled Insurance Requirement Determination Process.

Responses from industry stakeholders are expected by the 10 November 2020 and the government’s response will follow thereafter.

Proposals for Insurance Requirements

It is intended that operators carrying out spaceflight activities in the UK would be required to obtain and maintain third-party liability (TPL) insurance (via licence conditions) to cover operator liabilities under the SIA. Following the Call for Evidence, the government has confirmed that this will remain the only type of insurance that will be mandated in licence conditions. It is also now proposed that licence conditions will specify the amount of cover required, and the period and scope of insurance (which will be based on the specific activity).

The key proposal, following the previous consultations, is that the minimum amount of TPL insurance required will be based on the MIR approach. The MIR is based on the Maximum Probable Loss methodology used in the US and Australia but reflects the UK approach to calculating damages arising from death, injury and property damage as applied by UK courts. The MIR is intended to be the amount of potential third-party liability claims that an operator could incur in a realistically possible scenario. Broadly speaking, the MIR will be based on two parameters: (a) the likelihood of a launch failure occurring which leads to a major accident and (b) the level of financial damage which might occur should that major accident materialise. The aim of the MIR is to enable the level of insurance cover to be set on a case by case basis. It is intended that the modelling would be carried out by the regulator rather than individual operators, however where an operator disagreed with the level of MIR set, there would be options to challenge this.

Comments are invited on the use of the MIR approach generally, the financial values used (which are set out in more detail in the methodology guidance), and whether the insurance requirements for each launch vehicle should be published.

The consultation also states that insurance for sub-orbital launches and air-launched rockets will be set using the MIR approach. The Government seeks views/clarification on (i) whether there are additional requirements for sub-orbital launches; (ii) how these insurance arrangements are currently managed; and (iii) how they might change in future.

The consultation also considers and seeks views on insurance for the in-orbit and re-entry phases of a mission.

Liabilities under the Space Industry Act 2018

Under the SIA operators have a liability to indemnify the Government for claims brought against it, including under UN Space treaties. Operators also have strict unlimited liability to third parties, including the uninvolved general public in the UK who, suffering injury or damage, can bring a claim against an operator without having to prove fault.

This unlimited liability, and the lack of availability of insurance cover, was a key concern which came out as part of the previous Call for Evidence. In response, the consultation now proposes to limit operator liability, so that operators need only indemnify the Government for claims up to the amount of the insurance requirement under the MIR (as set out above). The Government will meet any amounts over and above the operator’s limit of liability. It is proposed the limit will be disapplied in the case of wilful misconduct, gross negligence or non-compliance with licence conditions or the SIA. Feedback is sought on this approach to the limit of liability.

Impact Assessment

Finally, the consultation provides an impact assessment on the main affected stakeholders, costs, benefits and risks, and seeks feedback on this assessment, in scenarios where either (a) no action is taken (and unlimited liability continues to apply); (b) MIR is implemented setting liability and insurance on a per-launch basis; or (c) a €60M fixed limit of liability is introduced, in line with other European launch nations.

Comment

The consultation clearly indicates that the Government has taken on board the concerns raised by respondents to the Call for Evidence and the latest proposals seek to address the risks highlighted, with a view to making the UK space sector more competitive in the global market.

This latest consultation may help shape the future of the aerospace market for UK players and therefore operators and insurers with interests in this market may wish to take this opportunity to engage with the proposals before the end of the consultation period (currently due on 10 November 2020).