Are you sure you want to leave this site?
Entering 2021, the space insurance market was still facing significant challenges from the volatility caused by market events in 2019 and 2020. However, despite a large loss to the space insurance market in January 2021, pricing trends are settling for good risk profiles.
There is still significant differentiation in pricing for technically challenging risks or those with high insurance limits. However, we are seeing an increase in competition for the best risk profiles, in part due to:
A period of increased pricing since July 2019 for space insurance started to settle in 2020 for certain risk profiles. While a significant loss — US$225 million — reported in January 2021, has had a limited impact so far, it could affect the pricing trend going forward, especially if other large losses are experienced in the near term.
Insurer capacity increased between 2004 and 2019. AIG’s exit in 2020 was offset by new entrants and increased capacity from existing markets. In 2021, capacity appears stable, barring unforeseen changes in the market.
The previous reduction in geostationary communication satellite orders will impact premium income in 2021-2022. However, a resurgence of satellite orders in the past 12 months should help minimize long-term impacts.
Insurers are more focused on technical aspects of space risks, increasing the differentiation in respect of pricing and coverage between risk profiles, especially for large, complex placements. The technological challenges of flexible payloads and new launch vehicles — several of which are scheduled for flight in 2021 — may lead to difficulties in terms of capacity and premium rates for some space programs, particularly those involving untested technology.
The COVID-19 pandemic led to some delays in satellite launches and manufacturing — due in part to restrictions on travel and on-site labor — resulting in some delays of premium income to insurers. There has yet to be any observable negative impacts on underwriting terms and conditions offered by insurers. The impact of COVID-19 on the aviation insurance industry has been more severe. This may have future implications for space underwriters where the space and aviation premium and losses are combined internally. Furthermore, if overall business interruption claims due to COVID-19 run high, many classes of insurance would be affected, including space.
Underwriters focus on the following areas when considering a risk:
Space placements offer both high exposure and significant premium opportunity for insurers. The catastrophe potential is high, and new technologies require additional levels of due diligence from insurers. Each policy is tailored to individual risk profiles in what is a specialized insurance sector.
Underwriters are becoming more selective, particularly when newer technologies are involved, and are asking for detailed risk information. It’s important to understand the key information that insurers will require, and to allow adequate time for negotiation.
In a challenging market, it’s important to know your priorities to ensure an optimum balance of breadth of coverage, insured value, and the overall premium spend. Having a clear strategy in place before commencing negotiations with insurers will be helpful.
Strong, long-term relationships with the lead insurers can help bring beneficial results at placement. Still, it is important to understand the context of your quotes and ensure that they represent good value propositions. Try to build relationships with a number of lead markets to ensure enough support is available if/when placements become more challenging (for example, on-orbit anomalies/component failures).
Share with underwriters the details of risk management policies and procedures you have in place, with specific reference to how they mitigate exposures. Space insurers are particularly interested in the technical oversight and are cautious when new technologies are being rolled out. In general, the more information and transparency that can be provided to the insurers, the more comfortable they will become.
Marsh Specialty has vast experience in the space insurance sector. Our specialists will work with you and provide clear, considered advice to develop an effective risk management strategy. In addition, our data and analytics capabilities will allow you to understand your program in the context of the wider market.
For more information about space insurance or other risk and insurance issues, please contact your Marsh Specialty advisor.