03 October 2024
Space Tourism Takes Flight
The Space industry continues to evolve at pace. There is now a very significant movement towards increased commercialisation, with the emergence of many new, exciting and innovative business opportunities.
One of those gaining momentum is Space tourism. Although an industry still in its infancy, we have already seen Virgin Galactic and Blue Origin complete multiple commercial missions in 2024. And, SpaceX has just completed the Polaris Dawn private human Spaceflight mission, where the astronauts on board completed the first-ever commercial spacewalk. As of 2023, the Space tourism market was estimated to be worth USD 827.2mn and is projected to grow to USD 12.95bn by 2032. Currently, this sector is small and mostly dominated by the big three: Virgin Galactic, Blue Origin, and SpaceX. As we look towards the horizon, things become even more exciting with the prospect of more frequent commercial Space travel, the operation of commercial Space stations, and potentially even trips to the Moon and Mars. The continuing growth of the Space tourism industry can be seen as a positive development for the industry, as well as the insurance market, though it comes with its own set of unique challenges.
Challenges
One of the more significant challenges for the Space tourism industry is the inherent risk associated with these types of flights, especially during the early stage of vehicle testing. Virgin Galactic, through its testing partner at the time – Scaled Composites - experienced a catastrophic failure in 2014 when the VSS Enterprise, during a test flight, suffered an in-flight breakup resulting in the serious injury of the pilot as well as the untimely death of the co-pilot. Blue Origin has also seen several setbacks with its New Shepherd vehicle, the most recent failure in 2022 putting a stop to launch activity for over a year. Setbacks such as these, however, are not just limited to the early flight vehicles; for example, SpaceX’s seasoned Falcon 9 rocket recently posted a failure after no less than 344 consecutive successful launches. Consequently, insurers continue to approach providing insurance support for these flights with a degree of caution, resulting in a limited insurance market for operators and elevated pricing for early missions.
Another significant challenge for the industry lies in the need for a consistent regulatory framework, along the lines developed for the airline industry. Due to the limited number of previous commercial Space missions existing regulatory frameworks are often underdeveloped or untested. This complexity poses difficulties for Space tourism operators in obtaining licenses, often leading to delays in launches and additional capital expenditure. The insurance industry also faces challenges in this regard, as launch and in-orbit liability requirements and the methodologies to define these limits can vary significantly between countries. For example, many countries, including the US and the UK, calculate liability limits on a risk-by-risk basis, making planning difficult.
Opportunities
Despite these challenges, the Space tourism industry presents numerous opportunities with several startups in the early stages of business operations. However, for such companies, an early flight failure can be disastrous, predominantly in the potential loss of life but also in significant operational delays. These delays have a substantial impact on available capital and can be the difference between success and failure for these companies. The insurance industry has the potential to play a crucial role in enabling the development of this industry by offering competitive solutions to new operators, helping them manage risks and supporting them through their journey to achieving full operational capacity.
The benefits of the Space tourism industry extend far beyond direct impacts. As the industry continues to grow, so does our access to Space, which has positive implications for the science, research, and manufacturing sectors. Increased access to Space allows scientists and manufacturers to gain a better understanding of the Space environment and how materials, components and technologies respond in Space. This valuable data can ultimately lead to risk reduction in terms of mission success and improved manufacturing of in-space equipment with reduced failure rates. Additionally, with increased accessibility to Space, particularly through reusable vehicles, the cost of reaching Space is expected to decrease. This in turn will create opportunities for new satellite applications and uses.
The insurance industry has the potential to play a crucial role in enabling the development of this industry by offering competitive solutions to new operators
How can Gallagher help?
Gallagher is uniquely positioned as one of the few insurance brokers with first-hand experience in the Space tourism industry, with team members such as Tony James (previous Director of Risk Management at Virgin Galactic) who has direct experience working with space tourism entities. Our team has worked closely with several Space tourism companies, providing them with innovative and tailored solutions designed to meet their specific needs and requirements. In addition, we have provided advice to several countries regarding space legislation, to ensure that our clients' and future clients’ requirements are fully considered and covered in these discussions. These valuable experiences and insights mean that Gallagher is also able to assist companies when navigating and interpreting regulatory frameworks. We firmly believe Gallagher is the ideal partner for Space Tourism companies. Leveraging our expertise and global presence, we can offer comprehensive risk solutions wherever and whatever risk management situation our clients face.
Market update
In our most recent Plane Talking update we reported the current extremely challenging period within the Space insurance sector. Claims totalling circa. USD2bn since December 2022 have resulted in significant rate increases from insurers and the exit of several key players, notably BRIT and Canopius. However, for technically attractive risks with manageable sums insureds we have seen sufficient capacity being available and competition between insurers, proving the market is still able to deploy effective risk appetite and deliver products that meet the needs of many Space insurance buyers.
Looking to the remainder of 2024 we anticipate further stabilisation of market conditions and competition between insurers, driven by a need to meet premium income expectations as we approach the end of the year. Nevertheless, we’re keeping a close watch on reinsurance and MGA capacity renewals on 1 January 2025 as any shift in underlying support for insurers may start to influence market conditions. Ultimately, as we have seen in 2019/2020 and 2023/24, pricing is primarily driven by available capacity and recent underwriting performance, so any further negative shift in these key areas may well result in consolidation and prolonging of the current relatively hard market.
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