09 January 2025
Space Market Update Q4 2024
The spacecraft insurance market is slowly emerging from the turbulence created by a raft of substantial losses experienced in late 2023 and early 2024. As a result, the past year saw underwriters double down on technical risk analysis, taking a more cautious approach to deploying their capacity and hike premium rates.
As we look forward to 2025, however, despite the recent shift in underwriting attitudes, there are several positives.
First, the market has been fully tested, with circa. USD2bn of claims being notified within 18 months. Insurers have nonetheless continued offering effective products and sufficient capacity for most risks. In the face of pressure from their managements and financial backers, most – but not all - underwriters have continued to trade, albeit in a less sure-footed fashion than either they or buyers would wish.
Second, the price increases achieved by underwriters have resulted in a sense of, if not confidence, at least less pessimism than we saw at the outset of 2024. To some extent, a ‘new normal’ has now been established for launch and in-orbit business. This has resulted in many insurers suggesting they are on track to return to modest profit.
Third, although buyers have borne higher insurance costs and some have scaled back the limits they purchase, the majority continue to see the value and benefit of risk transfer, protecting their business-critical assets.
So, while 2024 has been a tough year for clients, underwriters and brokers alike, most have been able to weather the storm. We believe this demonstrates the resilience of a highly specialised market to be able to trade through the highs and lows of an industry characterised by a notoriously volatile risk profile. Such resilience is critical for stakeholders looking for long-term views and strategic partnerships.
Market outlook - looking ahead to 2025
The final level of the 2025 supply remains uncertain. Nevertheless, we expect sufficient capacity to be available for the foreseeable future, especially for the traditional GEO ‘plain vanilla’ risks and launch programmes. In some areas, we believe this competitive pressure could re-emerge as insurers look to secure their preferred participation. All the more so in the context of stalling demand and buyer consolidation.
Some of the key drivers for the space insurance market going into the New Year are:
Available competitive capacity
Right now, the outcome of their reinsurer and capacity renewals on 1/1/2025 is the foremost focus of many insurers. Initial feedback suggests their business plans are less gloomy than expected. While we are expecting a contraction, with growing confidence in the opportunity for future profitability, most are expecting strong reinsurer and MGA capacity support. It seems that the departures of Hiscox, Canopius and Munich Re Syndicates from the space class may have released some of the “built-up” tension with the associated reduction in overall deployed capacity.
We are, however, still seeing difficulty in securing capacity for technically distressed or challenging risks, especially for post-separation coverage. The focus from senior management and capacity providers on each underwriter’s portfolio remains high, therefore there is reticence over programmes with a heightened risk profile, even where higher pricing is on offer. This reduction in risk-tolerant capacity is particularly impacting those programmes without heritage and/or a lack of redundancy, often the case with ‘Small Sat’ projects.
As the market trades through this period clients, capacity providers and brokers are seeing the true leaders of the market emerge - those who are showing discipline in their approach while being prepared to offer cover and pricing proposals based on their own assessments of risk.
New technology being proven and understood
Through 2024 we have seen some significant steps forward, with new launch technology demonstrated notably by Vulcan Centaur and the Ariane 6 maiden launches as well as SpaceX’s Starship successful ‘chopsticks’ landing in Texas.
In addition, following presentations by satellite manufacturers and operators, we feel that step-change technologies across product lines (for example SDS satellites and small ‘GEO products’) are now becoming well-understood by underwriters. As such, we expect insurance for these projects to accelerate in the coming year.
Acceptance and support for these new technologies will build some much-needed diversity in what has become a narrow market for satellite and launch vehicle service buyers.
Programme delays
Although many projects have moved forward, several continue to experience delays - in particular, on the satellite manufacturing side. This has been causing significant pain to both the manufacturers (several news articles have highlighted the direct cost to Boeing and Airbus) and operators who are relying on these satellites to drive growth and open up new revenue streams.
Delays also have a meaningful impact on the space insurance market. As launches are delayed insurance buyers can defer coming to market, especially when pricing levels are seen as unfavourable. However, with a very limited amount of business currently available to insurers, we expect further pressure on underwriters to participate in programmes when they do come to market, or risk missing out.
Key space industry developments
Traditional GEO operators continue to see competition from both long-established competitors and newer players such as Starlink. The resulting squeeze on profitability has resulted in a number of mergers and buyouts being announced. Two of the most significant are the purchase of Intelsat by SES and the merger of Yahsat and Bayanet to form Space42. Once these mergers are complete and the dust settles there will no doubt be significant benefits in size and scale.
The shift towards new technologies and the need to reduce costs for new products has intensified. In recent years, multiple operators have placed Software Defined Satellite orders, including Intelsat, SES, Inmarsat and ARABSAT. Alongside this, strong interest is emerging from ‘blue chip’ operators in smaller, less capital-hungry satellite programmes such as “Small GEO” products from Astranis and SWISSto12.
The New Space industry projects an exciting future ahead. With SaxaVord announcing plans for the first vertical launch on UK soil, Rocket Lab successfully launching two vehicles back-to-back within 24 hours and industry veteran Lockheed Martin partnering with ICEYE to advance AI-powered target recognition technologies to note just a few. ‘Small Sat’ industry events are developing in size and scale, with Space Tech Expo Europe – Europe’s largest Space Industry B2B expo - boasting a significant rise in attendance from previous years. With the push for more cost-effective, quick-to-market solutions we are closely tracking this highly diverse and fast-moving sector.
Noting all of these major shifts in the market, Gallagher will be striving to create bespoke and innovative solutions with partners that can draw on the capability and vision to develop the products services and approach needed to support the next generation of space utilisation and commerce.
Final words
The recent experience of circa. USD2bn losses have no doubt had a massive impact on the space insurance market, however, things are looking more positive as we enter into 2025. On the basis that reinsurers and capacity providers continue to support the class, and the number of claims re-settles at more typical historical levels, we expect insurers to be competitive and attractive products to remain available. We may well see some slight softening as the year progresses and some large, highly attractive satellite launch packages come to the table.
Following a period of turbulence and uncertainty, Gallagher Specialty’s Space team hopes that 2025 proves to be a less stressful environment for sellers and buyers of space insurance. In our view, recent price increases across space insurance products should enable underwriters to move from a short-term survival focus to being able to develop a more consistent and sustainable insurance market for the long term.
Gallagher Specialty will continue to provide our clients with accurate, real-time and bespoke risk management advice. We will ensure that insurers are given every opportunity to provide robust and viable risk transfer products that offer the best possible value.
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