24 June 2024
When the Stars are the Limit: Insuring a Future Space Economy
Exploration has always been at the forefront of human evolution, be it navigating the most treacherous oceans, drilling miles underground, or exploring deep space. With private companies and government space agencies in a race to find, analyse, and mine asteroids, the future space economy is no longer the stuff of Sci-Fi dramas but an impending reality.
NASA’s OSIRIS-REx mission to the Bennu asteroid has demonstrated what could be possible for future celestial mining expeditions. Studies of the 4.5-billion-year-old sample taken from the asteroid is an example of “science like we’ve never seen it before,” according to NASA administrator Bill Nelson. Asteroid mining has so far been theoretical due to its prohibitive costs, but new technologies are lowering barriers to entry.
Space is no longer a frontier dominated by governments and the military. Miniature satellites, privately funded ‘rideshare’ rocket launches, and rockets that return to Earth are just some of the innovations that are making the commercialisation of space exploration more and more likely. It is becoming an area where start-ups are gaining a foothold, and where the potential to tap into space minerals is seen as one way to solve problems closer to home.
Space is no longer a frontier dominated by governments and the military.
Risks associated with Space Mining and Colonisation
Private enterprises and space agencies are researching deeper into the possibility of mining and extracting valuable resources from celestial objects, some even discussing the eventual human colonisation of other planets or moons. Asteroids, the moon, Mars, and other celestial bodies contain valuable resources, including water, metals, and minerals.
Supporters of space mining believe it could drive a future space economy and tourism while reducing our reliance on Earth’s finite resources. Opponents cite ethical concerns, technical challenges, harsh financial realities, and the potential that mining activities could add to the growing problem of space debris in Earth’s outer atmosphere. Then there are the legal and regulatory unknowns and the potential for conflicts over the right to access and own space resources.
The latter issue was again thrust into the spotlight when India won the race to land on the moon’s south pole last year. Currently, governments or private firms considering space mining would be governed by the 1967 Outer Space Treaty (which many commentators have noted is rapidly becoming out of date), which states that countries are free to explore the moon and other celestial bodies but that outer space ‘is not subject to national appropriation by claim of sovereignty’.
Regulatory uncertainty
The legal framework governing space missions poses several challenges, including property rights, liability, and environmental protection. Adhering to government regulations such as licensing requirements, international treaties, and national space policies is critical for future space industries.
Determining liability further complicates the picture. If and when the space exploration and habitation industry becomes a reality, there will be inevitable concerns over which bodies and jurisdictions are responsible for export controls, space debris mitigation, space traffic management, and cybersecurity regulations.
Technological challenges and human error
Technological failures pose significant threats to commercial aspirations in space. The ability to mine and colonise other celestial bodies depends on advanced technologies for critical processes such as communication, resource extraction, life support, and transportation.
Where humans are responsible for operating equipment and machinery, there are inevitable issues around losses caused by human error or deliberate sabotage. Faulty software or equipment malfunctions could also have catastrophic consequences, resulting in mission failures, loss of high-value assets, and loss of life.
Current technological capabilities may prove inadequate to support the ambitious goals of space mining and colonisation. Mitigating these risks requires continuous research, innovation, and collaboration between space agencies across the private and public sectors.
Interplanetary risks
Each celestial body presents unique environmental conditions, including extreme temperatures and atmospheric challenges. Risks may arise from resource limitations, such as fuel and life support systems, and/or contamination of food and water.
Further, the logistical hurdles of a space economy are immense, involving vast distances and introducing navigation and communication hurdles, while debris and weather pose additional hazards from a transportation perspective.
Despite the fact that rocket launches and re-entries have become more routine, they remain inherently risky. And, as the frequency of launches and re-entries increases, the exposure will inevitably grow. Please see our latest market updates in Plane Talking for further information.
Presence of earthly contaminents
Research conducted by scientists from the University of Birmingham and NASA's Glenn Research Centre, on the International Space Station (ISS), found that concentrations of potentially harmful chemical contaminants in the dust on the station exceeded those found in dust on floors of houses in the US and Western Europe.
Among the various contaminants the study identified were polybrominated diphenyl ethers (PBDEs), commonly used as flame retardants in electrical equipment.
Prolonged exposure to such chemicals could endanger the health and safety of future space economy workers. Mitigating such risks will require a fresh perspective during the R&D and eventual construction of future infrastructure and machinery.
Resource extraction limits
The ability to extract valuable resources like water, metals, and rare minerals from celestial bodies such as asteroids, moons, or planets can be hindered by equipment malfunctions, supply chain disruptions, and environmental impacts. Similar to mining on Earth, there are numerous operational and extraction challenges to overcome, along with the need to carefully assess resource availability, circumvent logistical hurdles, manage environmental exposures, and ensure economic feasibility.
Presence of earthly contaminents
Research conducted by scientists from the University of Birmingham and NASA's Glenn Research Centre, on the International Space Station (ISS), found that concentrations of potentially harmful chemical contaminants in the dust on the station exceeded those found in dust on floors of houses in the US and Western Europe.
Among the various contaminants the study identified were polybrominated diphenyl ethers (PBDEs), commonly used as flame retardants in electrical equipment.
Prolonged exposure to such chemicals could endanger the health and safety of future space economy workers. Mitigating such risks will require a fresh perspective during the R&D and eventual construction of future infrastructure and machinery.
Market volatility
Market volatility can be induced by fluctuations in demand for materials, the impact a surge of precious extra-terrestrial metals and minerals would have on commodity markets, regulatory and technological disruptions, and funding challenges. Together, the uncertainty and potential volatility involved in space industries could hinder their future economic viability.
Does insurance play a role in future space economies?
Insurance will have a crucial role to play in the future space economy due to the unique risks associated with space exploration and mining. That said, it will take substantial balance sheets to consider some of the more prototypical technologies and processes as they come to market. Specialist carriers will evaluate the technological readiness and reliability of advanced systems and the risks posed by extreme environments and human error in order to price and underwrite these risks in a sustainable way.
That said, the lack of historical data and the high cost of equipment will make it extremely challenging for insurers to accurately assess and underwrite early iterations of these new space-related risks. As space insurers and reinsurers know only too well, the class is well known for its narrow spread and volatility, with a single large claim having the potential to wipe out a whole year’s underwriting profit.
However, some of these challenges may be overcome as a future space economy evolves in the coming years beyond a mere hypothetical concept and we see the demonstration of these new technologies. Thorough and ongoing risk assessments, data capture and analytics, tailored policy wordings, introduction of deductibles, the use of consortiums, catastrophe reinsurance, and ILS offerings are all tools that can assist in producing a viable market for space exploration and commercialisation. As we’ve seen in the past, once technology and businesses are established specialist space insurance carriers will provide dependable products forging a robust market for future clients.
While celestial body insurance remains somewhat speculative at this stage, some of the questions being raised are a testament to the forward-thinking approach of the insurance industry in anticipating and addressing the risks and needs associated with a future space economy. As humanity ventures further into the cosmos, the concept of insuring celestial bodies could become a reality, offering protection for investments in the final frontier.
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