(Bloomberg) — The orbiting satellites of ViaSat Inc., valued at over $1 billion, are facing issues, prompting space insurers to prepare for an increase in claims that will drive the market forward.
The company’s nearly $1 billion ViaSat-3 Americas satellite, which is central to expanding its fixed-broadband coverage and beating rivals including Elon Musk’s Starlink, encountered an unexpected problem as it entered orbit in April. I had positioned my antenna. Should ViaSat declare it a total loss, industry officials estimate that claims would reach a record-breaking $420 million and, in turn, would make it harder – and more expensive – for other satellite operators to obtain insurance.
Because insuring an expensive satellite like ViaSat-3 carries significant financial risk, it is probable that the coverage is spread across multiple policies provided by various companies.
Dennis Bensouson, the head of Beazley Insurance’s satellite insurance business, which is a syndicate at Lloyd’s of London and one of the insurers for ViaSat-3, expressed that no insurer is willing to assume the risk individually. Despite this, no other prominent insurer has openly acknowledged their involvement as an underwriter for the satellite.
On 24 August, Viasat announced the occurrence of a new spacecraft malfunction. Their Inmarsat-6F2 satellite, which was sent into orbit in February, experienced electrical issues. Space Intel suggests that this failure may render the satellite unserviceable and could lead to an insurance claim amounting to $350 million.
After major insurers like American International Group Inc. and Allianz SE closed down their space portfolios, ViaSat encountered difficulties in orbit. Consequently, only a handful of providers are now willing to assume risks in the well-known $553 million market.
While major telecommunications companies still seek coverage through multimillion-dollar satellites, other space operators, like Musk’s Space Exploration Technologies Corp, have prioritized launching numerous smaller satellites into low-Earth orbit. They are not concerned about the loss of a single satellite as it does not pose a significant problem for them.
Viasat officials indicated that it was premature to speculate on whether they would submit a claim.
On August 9, following Viasat’s impressive quarterly results, CEO Mark Dankberg assured analysts that the company’s decision-making process would not be rushed, stating, “Even if it takes us a few more months to gather accurate data and reach a conclusion, it’s inconsequential.”
Investors, however, have expressed concerns as Viasat shares experienced a significant decline of 28% in a single day, setting a new record, following the announcement of the ViaSat-3 problem in July. Despite executives stating that the satellite issues would hinder growth in 2025, the impact was confined to their fixed-broadband service, which constitutes only 13% of their overall business.
According to Louis DiPalma of William Blair, the company’s ViaSat-2 satellite, which was launched in 2017, encountered an antenna discrepancy resulting in a claim worth $188 million.
DiPalma expressed sadness over the extended wait and the added pressure from SpaceX that ViaSat is currently experiencing.
According to a note by DiPalma on August 25, the recent Inmarsat-6 anomaly has resulted in significant difficulties for ViaSat and other industry participants in securing insurance for upcoming satellite launches.
The loss of $420 million would exceed the previous record for the largest satellite loss in 2019, which was the FalconEye 1 satellite with a loss of approximately €345 million ($373 million). Although this is a significant setback for the satellite insurance market, the repercussions could extend to other sectors like aviation, potentially resulting in losses amounting to billions of dollars.
Industry experts have observed a recurring pattern: after a significant satellite loss, there is typically a minor exodus of players from the industry. As a consequence, insurance premiums tend to increase.
According to Seradata, a launch and satellite database, losses from satellite claims amounted to $788 million in 2019. As a result, total premiums for the year reached $500 million. In subsequent years, major players such as American International Group Inc., Swiss Re AG, and Allianz SE ceased offering satellite insurance.
If the number of insurers decreases, the remaining insurers will perceive it as a safer option.
According to Bensausen from Beasley, individuals will display reduced enthusiasm for investing capital in high-risk satellite or challenging projects. They may either increase the premiums or limit the coverage for such ventures.
Insurance for satellites.
Satellite insurance operates similarly to property insurance, with satellite operators like ViaSat usually paying a premium to cover the initial year of the satellite’s presence in orbit. They have the choice to renew the insurance and are also protected against potential catastrophic failure during the launch phase.
“In the event of a mission failure,” stated Marsh’s managing director of insurance brokerage, Patton Kline, “they have the option to restore their operations by purchasing a launch service, acquiring another satellite, and relaunching the mission.”
Smaller satellites have the possibility of securing coverage from an insurer. However, as satellites increase in value to multimillion-dollar range, operators usually need to rely on a limited number of insurers to obtain comprehensive coverage. Currently, the satellite insurance industry comprises approximately 20 to 30 participants.
Chris Kunsteder, AXA SA’s global space head, highlighted the difficulties we encounter in terms of infrequent occurrences but significant impacts. “These events are rare, but when they do occur, they have substantial consequences,” he explained.
AXA chose not to provide any comments regarding their involvement in the coverage of ViaSat-3, while Marsh, another insurer, stated that they were not involved in placing the satellite.
According to insurers, with numerous insurance companies preparing for a substantial payout, it is expected that premiums for satellite insurance will rise in the upcoming months. Consequently, this increase will burden satellite operators with higher costs. Although this impact on the market is expected to diminish over time, it coincides with insurers’ withdrawal from a market recognized for its considerable unpredictability and susceptibility to significant losses.
Marsh Kline stated that the proliferation of mega-constellations like SpaceX’s Starlink has resulted in a significant increase in the number of active satellites in orbit. This surge has raised concerns about the heightened risk of satellite collisions in space. Kline further warned that if such collisions occur, it could lead to increased rates for the affected satellites.
Insurers claim that SpaceX does not obtain insurance coverage for its satellites. With an increasing number of venture-backed companies launching small satellites into low-Earth orbit, the demand for satellite insurance has declined. When multiple small to medium satellites are sent together in large batches, the loss of one or more of them is not as significant, particularly when compared to the massive ViaSat-3 satellite weighing approximately 13,000 pounds.
“The absence of a significant premium is a notable factor contributing to the stagnant growth of the space insurance market, despite the highly dynamic and expanding space industry,” Benshausen remarked.
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