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16TH ECSL SUMMER COURSE ON SPACE LAW AND POLICY September 3rd-14th, 2007

16TH ECSL SUMMER COURSE ON SPACE LAW AND POLICY September 3rd-14th, 2007 Noordwijk, Wednesday 12th, 15 :30-16 :45 Lecture on : Risk management and insurance practices Dr Benito PAGNANELLI Managing Director. SPACE RISKS Catastrophic nature Little value of statistics

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16TH ECSL SUMMER COURSE ON SPACE LAW AND POLICY September 3rd-14th, 2007

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  1. 16TH ECSL SUMMER COURSE ON SPACE LAW AND POLICY September 3rd-14th, 2007 Noordwijk, Wednesday 12th, 15 :30-16 :45 Lecture on : Risk management and insurance practices Dr Benito PAGNANELLI Managing Director

  2. SPACE RISKS Catastrophic nature Little value of statistics Technical evaluation case by case Risk management Reliability and level of confidence TECHNOLOGY EVOLUTION LAUNCHERS: - Single satellite launch: Thor Delta, etc.. - Multiple satellite launches: Proton, Atlas, Ariane 5, etc... - Space shuttle satellite launch (reusable) - Space shuttle as such not insured SPACECRAFT: - from 15-18 kgs weight to 600-700 - ISS: International Space Station

  3. SATELLITES UTILIZATION Military: not insured Scientific/civil: sometimes insured Commercial: mostly insured SPACE INSURANCE EVOLUTION Evolution from 1965: Intelsat I (Early Bird) insurance The insurance market Brokers, insurers, reinsurers Insurance capacity Volatility Insurance premium pricing: just a gamble ? Period of insurance Launch and in-orbit multi-annual policies (health status evaluation) Market insured satellites launched, claims, loss ratio statistics:

  4. Market Insured Satellites Launched

  5. Market Exposures vs. Capacity

  6. Market Capacity - 2007Source: Broker statistics for Launch Placements Asia US Europe UK • $540,000,000 • 28 companies • No single market has more than 10% share

  7. Split of Failures by Phase of MissionLaunch plus first year in orbit, since 2000Commercial communications satellites Remainder Of First Year 19% Launch Vehicle Flight 39% First Month In Orbit 42%

  8. Space Insurance Market LossesLaunch Vehicle vs. Satellite

  9. Space Insurance Market Premium and Losses

  10. Space Insurance Market Profit MarginCumulative since 1998 Profit margin over ten years: 5%

  11. SATELLITE INSURANCE, MAIN RISKS CONVENTIONAL SEGMENTATION MATERIAL DAMAGE AND LOSS OF REVENUE: - Pre-launch phase - Launch phase - In-orbit (life) phase - Performance incentives - Launch delay - Re-launch guarantee by manufacturers and launch operators THIRD PARTY LIABILITIES: - Pre-launch, launch and in-orbit phases - Launch operators and state protection schemes (ESA, NASA, etc...) - Joint assureds OTHER RISKS: - Product liability - Contractual liabilities

  12. POLICY WORDINGS Pre-launch Launch In-orbit Performance incentives Third party liability Etc.. MAIN CHARACTERISTICS OF POLICY WORDINGS Pre-launch insurance: property and transport traditional language Space launch insurance: innovative Satellite in-orbit life insurance: innovative Third party liability insurance: - pragmatic solutions solve difficult legal issues on responsibility - joint assureds - no subrogation among operators

  13. SOME LEGAL ISSUES Treaties and conventions on third party liability: state and/or private responsibilities Proposed space protocol to the Convention on International Interest in Mobile Equipment (by Unidroit) ITAR (Internationl Traffic in Arms Regulations) Claims handling Litigation Partial loss and total loss Definition of loss (total or partial), insuring agreement, salvage, subrogation, additional insured and loss payee, due diligence, misrepresentation Arbitration CCC (Claims Coordination Committee)

  14. SPACE TOURISM Space tourism evolution Aviation or Space legal-insurance regime? USA: Federal Aviation Administration (FAA) regulates space tourism activities under a space related regime (Act HR5382, effective date Feb. 13th, 2007). Main features: Launch liability insurance policy must cover all launch participants and a reciprocal waiver of claims subrogation is mandatory. Required insurance is statutorily capped by a known formula, the maximum probable loss («MPL»), for third party bodily injury or property damage (not to exceed $ 500 million often ranging $ 150 million) and damage to Government property (not to exceed $100 million) for each launch. Above these amounts, the Government endeavours to pay claims above the required limit of insurance up to $ 1.5 billion. In excess of the Government contribution, insurance should then apply again. Under the liability insurance policy of the licenced operator the following entities must be insured (joint assureds) Launch licensee Government and its Agencies and sub-contractors Contractors and sub-contractors of the customer Customer related entities with financial interest continues

  15. Continued Need for new international legislation to facilitate development By year 2015, 15.000 tourists expected(?) First fatal accident already occurred on the ground INTERNATIONAL INSURANCE BODIES International Union of Aerospace Insurers (I.U.A.I.) Space Risks Study Group (SRSG) (I.U.A.I.) Policy Certification Initiative (PCI) (I.U.A.I.) Claims Coordination Committee (CCC)

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