Due to being ‘at the very start of space tourism’, there is currently ‘a lack of data’ to inform underwriting – but there is demand for cover from ultra high net worth travellers
The launch of two of the world’s richest men into low space orbit has officially opened the commercial space tourism sector, with insurers now having to explore how to cover the risks of this emerging market arena.
However, the unregulated nature of low orbital flights and the lack of data will likely cause initial premium prices to rocket.
July 2021 saw spaceflight company Virgin Galactic’s VSS Unity undertake its first test flight with a full crew in the cabin, including the company’s founder Sir Richard Branson.
Days later, aerospace manufacturer and sub-orbital spaceflight organisation Blue Origin’s New Shepherd took its founder, Amazon chief Jeff Bezos, and three others into low earth orbit.
Elon Musk’s aerospace firm SpaceX is also now planning to offer trips to the International Space Station for an estimated $50m (£36m).
The insurance industry has reacted to the out-of-this-world travel trend with the launch of a bespoke space tourism cover from intermediary Battleface, backed by Lloyd’s underwriting capacity.
The company’s managing director Paul Simmonds said the insurance sector has to respond to new risks such as space tourism.
“The advent of space tourism has been well publicised,” he added. “As an industry, we need to ensure that we can offer cover for these emerging risks if we are to remain relevant to our clients.”
Simmonds explained that Battleface’s space tourism insurance is not a rigid policy, but rather a bespoke coverage to fit the needs of those who will take the trip into space.
“It is clear that with an estimated price tag of $250,000 (£180,568.75), those who will purchase a ticket will have won the lottery or will be very successful sports or entertainment stars and business leaders,” he explained.
“For many of these space tourists, it will be around how they will protect their assets if things go wrong. They will be looking at covers to protect against inheritance tax, for example.
“Our approach is to invite these travellers to contact us and we can then work out a coverage that suits their needs.”
It is likely that the limits in these policies will need to be considerable given the wealth of the policyholders.
Simmonds added that his firm’s solution has met with support from Lloyd’s, which has a long history when it comes to space exploration and insurance.
Market evolution
Meanwhile, Paul Curtis, aerospace partner at Gallagher, said the speed of the space tourism sector’s development demands an expert response from insurance firms.
“Space tourism is evolving fast. The insurance products supporting these new and exciting enterprises needs specialist brokers and insurers with the capability to bring creative approaches to risk and risk pricing,” he explained.
Gallagher is currently active across the space tourism market, but Curtis said the risks were complicated by the delineation between aviation and space.
“The type of technology being used and the nature of the operations will determine which marketplace the risk will sit in,” he added. “We are active in this market and we are finding solutions that work from across circa 25 aviation and space insurers that operate in these markets.”
From a personal liability standpoint, Curtis said individual clients are required to sign a waiver in the event of an accident that results in an injury or worse. Without signing this waiver, passengers will not be allowed to fly.
“However, despite this, space tourism companies may look to secure some kind of passenger liability cover to protect them if bodily injury were to occur, so this will be an additional cover required,” noted Curtis.
“Individuals taking these flights may look for life assurance, plus cover akin to travel insurance – [for example,] for losses if a flight is unsuccessful in reaching orbit, cancelled or aborted at the last minute - given the tickets are likely to be very high cost.”
Meeting demand
Underwriters may have embraced the need to explore the space tourism market, however Pete Laidlaw, accident and health underwriter at Atrium, explained there are clear differences between the services on offer.
The sub-orbital trips of Virgin Galactic and Blue Origin differ greatly from the SpaceX plans for orbital, week-long trips to the ISS, for example.
“At present, the sector will not be regulated by [US governing agency] the Federal Aviation Administration (FAA) until at least 2023 in order not to stifle innovation,” he explained.
“As such, those who travel on the vessels are deemed participants - not passengers - and have to sign extensive waivers.”
In addition, “we are not seeing any requirement for extensive medical checks before these flights”, added Laidlaw.
“For sub-orbital trips, the travellers will be experiencing three and half Gs [g-force] and for those on the SpaceX trips, that figure will rise to between five and six.
“There are incredible strains on the body and as an industry, I think we would like to see commercial clients undergo robust medical tests to ascertain their fitness to travel.”
He noted that it is also likely, given the ultra high net worth nature of those who can afford a ticket, that there may be demand for “keyman” cover to indemnify businesses in case of accident or loss.
Keyman insurance is a policy bought by a business to insure their most valuable employees.
“There are very different risks between the SpaceX missions and the sub-orbital trips and we may see a demand for cover should those travellers suffer any illness or impairment post being signed ‘fit to fly’ and prior to launch,” Laidlaw explained.
“While SpaceX has carried out 100 plus launches, the sub-orbital services have carried out very few flights by comparison and as such, there is a lack of data, which is likely to be reflected in the premiums.
“Once the services have been operating for some time and there is a degree of data on which underwriters can base their pricing decision, the current uncertainty will be factored into the premiums.
“There is a demand and the market will likely look to offer pre-launch, launch and post trip cover.
“It needs to be remembered there are some very different and complex risks with the services that are currently looking to operate and we are at the very start of space tourism.”
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