The I Word

That's right: Insurance.

An insurance-savvy SLP reader sends over this interesting
recap of the 14th International Space Insurance Conference, held in Milan, March 22 - 23, 2007.

A bunch of space-smart lawyers gathered at the event, and I've excerpted the recap to highlight the lawyers' presentations. (But read the whole thing if you're into insurance. And who isn't? Obligatory Pat Bahn quote at end of post...)


"The legal panel was moderated by Mr. Rudolph Vic Pino Jr., partner of Pino & Associates LLP. Mr. John A. Ordway, partner at Berliner, Corcoran & Rowe LLP, was the first to speak. He addressed the International Traffic in Arms Regulation in the USA and reported about the progress of the State Department in clearing up the backlog of the last year, although ITAR restrictions in exporting and re-exporting technical information regarding satellites are still a hurdle to a prompt settlement of the claims and heavily interfere with the arbitration phase. Moreover, when an applicant for a Technical Assistance Agreement (TAA) seeks approval to export preparatory data, the State Department may ask him to obtain the approval of the owner, thus forcing him to disclose his strategy. Coming to reinsurance, when a technical issue that may have ITAR implications arises regarding a commercial space-related reinsurance policy, the easiest way to obtain authorisation is usually for the insurer to request that the U.S. person who initially obtained the TAA seeks the State Department approval of an amendment to the TAA. Unfortunately, many US persons who hold a valid TAA are unwilling to have it amended to the described purpose, as they are liable for any violation a party to the TAA commits. In conclusion, to a certain extent ITAR makes resolution of a commercial space-related reinsurance issue complicated and time consuming, but if well-managed it should not preclude resolution of any such issue.

Stephen Tucker, Senior Partner at Mendes & Mount LLP, expanded on the US regulation of space tourism. It is known that starting in 2009, Virgin Galactic plans to commercially fly 500 passengers per year at costs ranging somewhere between $ 100,000 and $ 200,000 per passenger to an altitude of roughly 68 miles, offering about 6 minutes of weightlessness. On February 13, 2007, the US Federal Aviation Administration adopted final rules for space tour operators, which will apply to American companies launching from anywhere in the world and to foreign companies launching from US land. The rules require: (i) passengers to be informed in writing of risks, including death; (ii) passengers to accept a "fly at your own risk liability regime", as they will be legally required to waive liability claims; (iii) mandatory training for passengers; (iv) specific qualifications and training for crew besides informed consent of crew itself; (v) crew waiver of claims against the US government; (vi) the licensee to demonstrate no significant environmental impact and an acceptable level of safety to the general public; (vii) the licensee to cover the Maximum Probable Loss to third parties in the event of an accident in compliance with the general legislative framework regarding traditional commercial launches.

Nicholas Hughes, partner in the Aerospace Department at Barlow Lyde & Gilbert, presented a speech about the main topics of the space insurance sector from a legal standpoint. Unquestionably, the space risk is a catastrophic one, as it is more likely to happen in the first phase of the life of the satellite. Moreover, insurance has a price that may not always be affordable for the operators. Even if generally speaking there is no mandatory insurance in the space sector, some compliance issues may arise from time to time (in respect of liability towards third parties and governments) and affect the choice to buy insurance. Most of the time the choice whether to buy insurance or not is mainly a commercial decision. The biggest operator may easily afford self-insurance, especially when they can rely on sufficient capacity and technical redundancy in their fleet.

The finance panel was moderated by Peter D. Nesgos, partner at Milbank, Tweed, Hadley & McCloy LLP...

Tim Hughes, Chief Counsel at SpaceX, outlined the activity of Space X, an emerging launch services provider which has currently three launches contracted with NASA to ferry cargo and crew to the International Space Station under the Cots program....

Finally, Sean Gates, Senior Partner at Gates and Partners, expanded on the legislative framework concerning space activities in the private sector. International law doesn't cater for commercial launches, such a situation being very similar to the one of the aviation industry at its beginnings. Some air law rules may also probably apply to the space flights, but it is unclear which ones and to which extent. As for passenger liability, for example, the Montreal Convention provides for strict unlimited liability up to 100,000 special drawing rights, while in the space sector the Liability Convention 1967 may be inadequate in regulating the new commercial activities. Time is possibly ripe for a new international convention on the new frontiers of space business...."


And remember, as Pat Bahn of TVG Rockets says, most quotably, "Amateurs talk propellant, professionals talk insurance." Indeed. (See also, The Space Review, March 27, 2007, among other places.) I'm beginning to believe it.

IMAGE: Courtesy of CartoonStock.

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