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SmallSat insurance 101: Covering the basics

A satellite is a very valuable asset. It is made to order, extremely fragile and a complex piece of engineering. It must endure the stresses of the launch and then must operate in an alien environment and cannot be fixed if something goes wrong. Therefore, obtaining specialist smallsat insurance cover from an insurer that has a deep understanding of the industry is essential for any commercial smallsat operator who is aiming to bring revenue in from its small satellites.

Source: XL Insurance

In a nutshell, there are two principal types of satellite insurance. The first is pre-launch and launch, which covers loss, damage or failure before, during or in the first year if the satellite’s operations – the most critical phases of the satellite’s life. If something does go wrong, it would be most likely to occur during these phases. During post-in-orbit testing, the chances of the satellite failing tend to fall significantly.

The second type of insurance is in-orbit insurance. This is basically life insurance for the satellite and typically begins once the launch insurance runs out. It offers cover in the case of partial or complete failure of the satellite over the course of its operational life.

Insurance Procurement

Insurance procurement can be a long, drawn-out affair. According to AON, a well-known insurance broker in space industry, the entire process can take anything from a couple of weeks to several months and, for smallsat operators who are looking to launch not one but multiple satellites, this can add complication.

Usually, a satellite operator approaches a broker who is mediating between the insurer and the entity seeking insurance. Then, a presentation of the risks involved in the mission is made, including disclosure of all the facts regarding the mission. This risk is then analysed in great detail by an underwriter who takes into account a range of different issues such as the chosen launch vehicle’s heritage and success rate, the mission type, the model of a satellite to be launched. An offer is then made, depending upon this evaluation.

As it stands, brokers are only prepared to insure smallsats and cubesats during the pre-launch and launch and the separation phases. They do not currently insure for the in-orbit phase. This could be down to two schools of thought. Firstly, a small satellite from a much larger constellation is a loss that could be accepted due to sheer amount of satellites involved. Secondly, small satellites that were experimental or one-off science experiments were historically not insured. However, this needs to change. There have been several notable launch failures and anomalies which reinforce the requirement for smallsat and cubesat insurance at all phases of their life – pre-launch and in-orbit.

In September 2016, SpaceX experienced a severe explosion just before a routine static fire test which ripped through the upper stage. The payload fairing, containing the AMOS 6 satellite for Spacecom (which was insured as marine cargo for the pre-launch phase by UK insurer, Lloyds), was atop the rocket and fell off triggering another explosion which destroyed the spacecraft.

In November 2017, a Soyuz 2-1B Fregat launched from Russia and experienced a total failure. Due to a software design fault, the upper stage was sent in the wrong direction which resulted in the vehicle re-entering the atmosphere after half an orbit, meaning that the satellites did not reach their intended preliminary orbit. The primary payload on board was the Meteor-M 2-1 weather satellite and 18 secondary payloads from international companies and institutions, including Canadian operator, Telesat and 10 Lemur satellites for Spire Global. Though the Telesat smallsat was insured, the 10 Spire Global satellites were not.

What does Precious Payload suggest?

In terms of insurance, Precious Payload has partnered up with the space insurance provider, AON to deliver the world’s first online insurance provision. By setting up an account with Precious Payload, operators gain access to an exclusive online insurance portal for small satellites where they can obtain quotes and coverages almost immediately with no underwriting for standard satellites and supported launch vehicles. Due to the low overheads and automation offered by the online platform, the savings are passed on to the operator. There is no requirement for face-to-face meetings or conference calls. The entire transaction is completed online rapidly and can be paid for using a credit card.  Once an operator has signed up for a free account, they have the freedom to update their mission information at any time.

If you are interested in getting insurance for your smallsat, contact the Precious Payload team via +971 529733429 or info@preciouspayload.com. 

Also, check this solution page — ‘Insurance Procurement‘.