One small step for insurance: the Space Industry Act 2018 and Government response to call for evidence

One objective of the Government’s Industrial Strategy is for the UK to increase its share of the commercial spaceflight market. As part of this policy, the Space Insurance Act 2018 (SIA) was enacted to establish a regulatory framework that would enable spaceflight and associated activities to take place from the UK. To assist with the development of the framework, the Government published a Call for Evidence earlier this year, seeking industry views on the liabilities, insurance and charging provisions of the SIA. 14 industry respondents provided answers to the questions raised in the Call, including insurers; and satellite and launch vehicle operators.

Liabilities

The majority of respondents felt it was necessary for there to be a limit on the liability to indemnify both the Government and third parties. Their aim is to ensure that the UK remains attractive for launch activities when compared to other jurisdictions, as other countries do have limits in place. Concerns were also raised as to availability and cost of insurance to cover this risk, as well as the lack of clarity in terms of potential liability exposure. The Government noted the comments, but said the response did not provide enough substantive evidence to justify a liability cap for UK launch activities, so it is conducting further investigation in this regard.

Third Party Liability (TPL) Insurance

Given the novelty of the SIA activities, respondents commented that the first launch could be uninsurable or prohibitively expensive, given the lack of both flight heritage and knowledge of risk level. Various factors could influence the level of premium for TPL insurance, including level of risk, the extent of coverage sought, payable excess and general market conditions. Respondents did also comment that cost and availability of TPL Insurance had affected their operations.

The Government sought views on using a Maximum Probable Loss (MPL) approach to calculate the TPL Insurance level needed for UK launch activities. Although the majority were in favour of MPL, some objections were raised, with one centring on the additional costs involved in the modelling work by operators. Some minority respondents favoured setting a TPL insurance level, or aligning the level with the traffic light system (as is currently in place with satellite operations under the Outer Space Act 1986).

The Government noted the comments but stated that the requirement to have TPL Insurance in place for activities regulated under SIA will remain. LaunchUK are working to develop a methodology to calculate a minimum TPL Insurance level, which will be similar to the US and Australian models but take account of specific UK factors. Consultation on the methodology will take place once a draft methodology is completed. The Government believe there is sufficient capacity in the market to provide this specified amount of TPL insurance.

Additional Insurance Policies

Respondents identified that, in addition to TPL Insurance, further policies are needed to cover potential risks that may face spaceports or range control service providers. Such coverage concerns included premises; public liability; property damage in respect of both ground infrastructure and the spacecraft themselves; weather damage and natural disasters; environmental and pollution damage; security risks; and contractors’ risks. Respondents believed that coverage could be obtained through conventional insurance products. The Government noted the comments, and indicated they would consider this issue further.

Alternative Financial Securities v Traditional Insurance

Only half of respondents provided answers on this point. The consensus was that, whilst provision for securities would be beneficial, it was unlikely that parties would actually make use of such securities. Again, the Government noted the comments, and indicated they would consider this issue further.

Comment

There is still a lot of work to do, and the Government continues to consider which approach to take in respect of development of the best possible regulatory framework and guidance that works for insurers, operators and end users. However, this process will take time. A working group examining the issues covered by the Call is being established, so industry stakeholders hoping to have a say on the SIA provisions should look to engage with this.