A bulletin on the Lloyd’s web site (www.lloyds.com) notes that the State of New Mexico and Virgin Galactic recently announced plans to construct a “multi-million pound spaceport.” As a result Lloyd’s brokers and underwriters have indicated that “there is capacity in the market to provide insurance cover for the commercial flights, if underwriters are convinced about their level of exposure to passenger liabilities.”
Virgin is a project of UK billionaire financier Richard Branson. It is the “first of a number of commercial ‘spacelines,’ which are set to take off in the coming years,” Lloyd’s said. The vehicles aren’t the main coverage problem, however, but the “prospect of space vessels filled with high net worth passengers could prove more difficult to place.”
Developers say the first purpose-built commercial spaceport for the personal spaceflight industry is to be constructed in Upham, New Mexico, and the aim will be to offer two or three space flights per day from the site on completion in late 2009 or early 2010.
Will Whitehorn, President of Virgin Galactic, said the first target was to reach the figure of 500 passengers, which is the number of astronauts that the world’s governments have put into space. “We hope to do that in year one and eventually be carrying up to 10,000 people a year by the later years of the project,” he added.
The article explained that “celebrities and business leaders have already paid the $200,000 to be one of the first to use the flights, but Lloyd’s aviation and space experts say the insurance implications will only become apparent once the spacecraft itself is constructed.
“Virgin and Rutan Scaled Composites have formed the Spaceship Company to build a fleet of commercial suborbital spaceships and launch aircraft. Virgin Galactic believes the ships should be launched from the air rather than from the ground and as such has ordered five of the suborbital craft and specially constructed planes which will act as the aerial launch pads.”
Roger Bathurst, CEO of International Space Brokers, a subsidiary of Lloyd’s broker Benfield, who’s responsible for its aviation division, said the commercial spacecraft will be a new risk for the market. “The liability cover for the risk associated with commercial spaceflight will come into the aviation market,” he explained. “What we have to remember is that there is already a firm in the US that will put you on a Russian Soyuz rocket and take you to the International Space Station, but it costs tens of millions of dollars so there are very few people in the position to take such a flight.”
He also indicated that “suborbital flight,” would bring the possibility of a space adventure “within the reach of many more people. But at present, until the design and construction of the craft itself is finalized, insurers will not be in a position to give any rating to the risk.”
Bathurst also explained that the “other question surrounds the number of craft that will be in operation. Rarely in aviation do you find that an entire design of aircraft goes wrong, it tends to be on an individual basis, so, if there is more than one craft, then clearly the issue in terms of the ability for the company to operate the flight would be greatly enhanced.” He added that the “risk will be extremely specialist and the Lloyd’s market would be viewed as a natural home for what may be the final frontier for aviation risk. It opens up an exciting new area for the aviation market.”
Underwriters believe that the issue will be where the risk lies in terms of the space or aviation market but they agree that the personal accident liability would be the area of greatest concern.
Brit Insurance’s Space Class Underwriter, Chris Gibbs, observed: “The question remains whether it is deemed a space or aviation risk. As space underwriters, we use special technical staff to evaluate the risks we are being asked to underwrite and as such commercial spacecraft would be no different.
“It will depend on the type of technology being used. Traditionally aviation underwriters tend to have large fleets with established aircraft and it will be down to the loss record, maintenance levels and the reputation of the airline.”
He also indicated that the “hull and third party liability covers would not be viewed as an issue for aviators, but the fact that the costs of the flights precludes all but the very wealthy would pose a problem. There would be some concern over the passenger legal liability cover because of the type of passengers that would be using what is a new type of service. An aircraft which would be regularly full of very high net worth passengers would cause some concern for underwriters in terms of their exposure should any accident occur.”
Source: Lloyd’s
Topics Carriers Commercial Lines Excess Surplus Underwriting Aviation Lloyd's
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