A consortium of Lloyd’s underwriters has formed a new facility for satellite insurance that will “enable the most accurate pricing of risks the sector has ever seen,” said an announcement on the Lloyd’s Website (www.lloyd’s.com). The consortium is adopting a new approach that will combine the market’s underwriting expertise with detailed intelligence on the reliability of satellites and their components.
Liberty Syndicates formed the new venture in partnership with Sciemus, and will provide up to $400 million of insurance capacity for the sector. The facility is expected to create savings of more than $10 million a year for some satellite operators while enhancing insurers’ returns.
The bulletin said the “consortium will provide a one-stop shop for coverage using data from a 40 year study carried out by the Ministry of Defense. The research will enable the consortium to individually tailor accurate prices according to the specific risk profile of each operator.”
The new approach is designed to eliminate the “fragmented” market for satellite coverage. Notably it “involves the broker agreeing to terms with a string of underwriters.” The announcement explained that the “lack of data surrounding the risks associated with satellite launches meant there was a blanket rate for coverage.”
Jeffrey Wright, director of reinsurance at HSBC Insurance Brokers, one of the select few brokers with access to the capacity, observed that the approach was ground breaking. “It will revolutionize the approach and the underwriting of satellite risks. This is not about offering cheap insurance. It is about rewarding the best companies in the business with premiums, which reflect the risk. It brings accuracy and market leading technology and information to a sector which requires it.”
The bulletin also explained: “Despite some high profile losses in the past, the Space industry has grown to an estimated capacity of $490 million for launch risks and $310 million for in-orbit risks for 2006. Insurance costs are often an operator’s second largest cost.”
Liberty Syndicates’ chief executive Sean Dalton commented: “This represents the largest single source of new capacity made to the industry, which hitherto has suffered from an inability to differentiate between good and bad operators. The model will enable differentiation between good and bad risks within the satellite sector, and price to reflect this. Operators will be able to see the benefit in terms of significant cost savings and certainty.
“The model will also enable contract certainty and facilitate claims resolutions, an area that has caused all parties difficulties in the past due to imbalances in knowledge and desired outcomes,” he concluded.
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