A new Race to Space

Space matters. Yet, how can we insure risks in space? Citibank estimates space tourism and inter-city passenger travel to be worth $8 billion in annual sales by 2040. With high ambitions to commercialize space, Sir Richard Branson and Jeff Bezos catapulted themselves into the beyond. The "race to space" this will soon go far beyond tourism. Today, insurers need to think ahead on how to insure risks in the space.

Commercial space tourism is on the horizon. Our societies’ reliance on space-based infrastructure has increased over the last few years. For most of us it happened rather unnoticed. Nothing less than some iconic media events with eye-popping made us realize that at least four mega projects are currently under earthily development:

• Blue Origin completed its fourth successful space tourism mission on the 31st March 2022.
• Virgin Galactic intends to launch commercial flights in 2023. However, this is challenged due to the sudden fall of the company’s stock value
• SpaceX’s Starship's rocket exploded on 20 April 2023, minutes after lifting off in South Texas. The rocket was the most powerful ever built. It did not reach orbit but important lessons for spaceflights were learned.
• Axiom-1, a commercial spaceflight, was launched by SpaceX at the beginning of April 2022. The mission was meant to last 8 days. It took one week longer. Unfavourable weather conditions made the astronauts return one week later, on April 24th.

Here is what you need to know on the current "race to space" and the impact on the insurance industry:

#1 Lower launch costs will drive access to space

Lower launch costs will drive broarder access to space. For the optimists amongst us, new space applications could generate $100 billion in revenue annually by 2040 (Citibank). Investment is also supportive. Flows shift from government agencies and the wealthiest nations towards private funding.

Space tourism is developing quickly. Numerous private companies are looking to offer commercial space flights in the medium term. The upcoming sector is set to be worth $3bn by 2030 and $8 billion by 2040 (OECD; Citibank; New York Times).

Check out Zephalto from Toulouse. The start-up is reimagining space tourism, aiming to offer tourists a view of sunsets and stars from the border area between Earth and outer space.

#2 Solar power and data storage in space are being explored

Space is not only good for tourism. To commercialise space, ideas of generating solar power and storing data in space are currently being explored, primarily by private companies.

• Storing data in space could contribute to the reduction of carbon footprint.
• Space solar projects could produce continuous renewable energy as the global energy demand is set to increase by 50% for 2050.

Global data production is set to reach an impressive 180 zettabytes by 2025 (Forbes). There is a vast need for more places to store data. And space is now being considered as a possible option. We are not far from it. Satellites are currently orbiting Earth already, storing data for private companies on a solid-state drive (SSD) which contain information about climate change, pollution, oil spills, and changing in the Earth’s ecosystem.

Space could be a potential solution to decrease carbon footprints on Earth. Arguably, this is a one-sided view. While storing data on Earth generates approximately 0.2 tons of CO2 per 100 gigabytes of data, the impact of massive data storage in space is yet to be explored.

Space-based solar energy projects are an innovative solution to create sustainable renewable energy. Aim is to produce solar energy in space. Space-based solar power could support the cleantech revolution as the amount of power from the sun that strikes the Earth in an hour is more than what the entire world consumes in a year. Precisely, 430 quintillion joules. Contrary to other renewable sources such as wind and earth based solar farms, producing solar energy in space would be constant.

#3 Space economy will affect the risk landscape around us

This new space economy - from commercial human space flights to data centres - will affect the risk landscape around us. Evidently, it will have effects on insurance as well.

The development of the space sector is risky. Space economy becomes more “mainstream” with private companies, universities, launching of small satellites. Even though it is a marginal to us today, there is a lot at stake for insurers. Space travels brings a new area of risks that the insurance industry had not contemplated before.

States are liable in case of damage to third party as per international treaties. Some of them are asking their operators (through space law) to buy Third Party Liability insurance up to 60M€. However, this insurance has never been tested for bodily injury for space travellers.

Today's property insurance will see space risks excluded - satellites, aircraft or spacecraft and sometimes also launchers too. But third-party liability coverage is already available. There is liability insurance for on the ground facilities or aircraft in flight (cf. Outer Space Treaty and Liability Convention). In fact, AXA XL currently offers coverage for physical damage to spacecraft and launch vehicles.

Over and beyond this, and before space trips become commercially available, important factors such as environmental and safety laws need to be considered.

• Insurance for space commercial flights would be akin to aviation. However, the risk profile would be unique to space, requiring expertise in a number of new areas. Lack of sufficient data may be a hurdle for insurers to determine appropriate coverage.
• Many questions are still open in view of the legal responsibilities related to space tourism. Under the current international legal framework, space tourists or their families cannot claim for compensation under the 1972 UN Liability Convention. The most likely situation is that space tourists will be required to sign carefully worded informed consent.
• Well likely, the legal liability structure may only be finalized once there is an accident. The subsequent lawsuits will outline the need for future insurance policies.
• What about the space traveler’s health. What are the long-term effects of space travel on health. Today accidents in space have been caused only by hardware malfunctions, Accident and Health insurerance are still to be developed.

As we start understanding space risks better, insurers work on answers on how they would insure risks in the space. Space matters.

Space tourism: 6 key considerations for future space travel | World Economic Forum (weforum.org)

Mirjam Bamberger is member of the Management Committee of AXA's European Markets & Latin America. Until January 2022, she has been?CEO of AXA Luxembourg and CEO of AXA Wealth Europe. Prior to this she served in various roles as a board member of AXA Switzerland, having completed an international trajectory in High Tech and Financial Services across US, Asia and Europe