Space debris, a new headache for insurers

Nearly 65 years ago, humans started their space missions and since then the space debris is swelling at an alarming rate is threatening satellites that hover around Earth. It is making insurers leery of offering coverage to the devices that transmit texts, maps, videos and scientific data, industry sources told Reuters.

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Every year, thousands of new satellites are launched into areas where orbital rubbish has been accumulating. The risk of collision have left handful of insurers to either pulling back coverage or exit the market, executives and analysts said.

Richard Parker, co-founder of Assure Space, a unit of AmTrust Financial, told Reuters, “This is a real issue for insurance.”

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Its been a year that the company stopped providing spacecraft insurance in the Low Earth Orbit (LEO) where most satellites operate. The new policies exclude collision damage.

“It may start to get difficult to get that type of coverage in the near future as more insurers realize that this is a significant risk that we can’t even get our arms around,” Parker told Reuters.

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According to Seradata, which tracks the statistics, there are 8,055 satellites roaming Earth’s orbits and 42% of them inactive. There has been 68% increase in number of active satellites in one year and in five years, it has increased more than 200%.

Space coverage took in $475 million in gross premiums to cover satellites, rockets and unmanned space flights last year and has been a lucrative niche for insurers. It paid just $425 million in losses, according to Seradata.

Space premiums are 10-20 times aviation premiums, said Peter Elson, CEO of insurance broker Gallagher Aerospace.

“This is a risky business in the first place,” he said.

The insurance are in a dilemma as no one is cleaning up the mess in space.