1. The comet and the policy

Larry Niven and Jerry Pournelle’s Lucifer’s Hammer is about what happens when a comet hits Earth. The book spends as much time on who saw it coming, who failed to prepare, and who pays for the aftermath as it does on the impact itself. Insurance and liability are like that. They are the financial language of failure. The desktop must have a credible answer to the question: if this goes wrong, who owes whom, and who can pay?

Entry 288 closed the regulation arc. This entry opens the insurance and liability arc.

2. Why insurance is not optional

Most launch licensing regimes require the operator to demonstrate financial responsibility. This usually means insurance. The regulator wants assurance that a launch failure or on-orbit incident will not leave victims uncompensated or the public purse holding the bill.

Insurance also serves the operator. A launch failure can destroy years of work and capital. On-orbit anomalies can end a mission before it earns revenue. Without insurance, a single failure can kill the programme.

3. Launch insurance

Launch insurance covers the period from ignition to spacecraft separation and often includes an initial on-orbit phase. It typically covers:

  • Destruction of the launch vehicle and payload during ascent.
  • Failure to reach the intended orbit.
  • Partial loss due to underperformance.
  • Initial spacecraft health during commissioning.

The premium depends on the launch vehicle’s track record, the mission’s complexity, the value of the payload, and the operator’s own risk management. A new rocket costs more to insure than a proven one.

4. On-orbit insurance

Once the spacecraft is operating, on-orbit insurance covers the asset itself. It can cover:

  • Total loss from collision, anomaly, or propulsion failure.
  • Partial loss from degradation or subsystem failure.
  • Loss of revenue from an inability to provide services.

Premiums depend on orbit, design heritage, operational experience, and the quality of telemetry and anomaly response. A platform with no flight history pays more than one with proven heritage.

5. Third-party liability

Third-party liability covers damage the space object causes to others. This is the liability imposed by international space law and implemented by national regimes. Key features:

  • The launching state is internationally liable for damage caused by its space objects.
  • National law often requires the operator to carry insurance up to a maximum probable loss.
  • Cross-waivers of liability are common among launch participants, but they do not waive claims by third parties.

For the desktop, third-party liability is most relevant in three scenarios: launch failure over populated areas, collision with another satellite, and uncontrolled reentry.

6. Liability between contracting parties

Contracts allocate risk among the operator, launch provider, customers, insurers, and suppliers. Common mechanisms include:

  • Cross-waivers of liability among launch participants.
  • Liquidated damages and termination rights.
  • Warranties and indemnities.
  • Insurance requirements imposed on subcontractors.
  • Force majeure clauses.

A customer who buys payload capacity will want to know what happens if the launch fails or if the platform does not perform. The operator’s contract terms are part of the product.

7. The cost of risk

Insurance and liability are not just line items. They shape the programme:

  • A higher-risk orbit increases premiums.
  • An unproven design increases premiums or reduces coverage.
  • Foreign customers or payloads may require additional coverage.
  • Long mission life increases the duration of on-orbit coverage.

The cost of risk must be included in the business model from the start. A mission that is technically possible but uninsurable is not commercially viable.

What this changes

  • Insurance is a prerequisite for licensing and a protection for the operator.
  • Launch insurance, on-orbit insurance, and third-party liability are distinct products with distinct triggers.
  • Liability flows from international law through national regimes to contracts and insurance policies.
  • Risk allocation is part of the customer offering.
  • The next entry will cover launch and on-orbit insurance products in more detail.