Solar flares from the sun produce geomagnetic storms (such as the Northern Lights), which can disrupt communication transmissions of satellites. While modern satellites are designed to withstand solar flares up to a certain point, about 40 satellites are believed to have suffered critical or catastrophic malfunctions as a direct result of geomagnetic storms. However, the report states that it is often difficult to attribute a problem to this type of radiation event, rather than to a flaw elsewhere in the system. “The risks associated with solar flares are closely monitored, since they could affect several satellites at the same time. However, the probability of a major solar flure erupting, such as the one in 1859, remains low,” says Colliot. Throughout their lifespan, satellites need to be able to withstand harsh environments, says Colliot. Modern satellites have to deal with conditions that include solar radiation, extreme temperature changes, pressure, and orbital drift. The report notes that the launch phase is perhaps one of the most dangerous times for a satellite because the carrier rockets that launch the satellite into orbit subject the satellite to huge variations in temperature and pressure. Not to mention the risks of an unsuccessful launch, i.e. the rockets exploding or failing shortly after lift- off. “Once in orbit, satellites and their internal subsystems are exposed to temperature extremes. Exposure to the sun varies and depends on the satellite’s orientation in reference to the sun. Also, the proximity of heat-sensitive components to satellite parts that generate high temperatures plays a critical role,” the report states. Satellites, particularly those in LEO, are exposed to perpetual expansion and contraction of the atmosphere, caused by temperature variation linked to the solar cycle, the report notes. During periods of the greatest solar activity, the atmosphere expands and reaches higher altitudes, which has a braking effect on the satellite and could push it off course – leading to a need of more fuel and complex maneuvers.
Insuring for the outer limits
It is clear that space is not the vast vacuum that we perceive it to be, at least not in Earth’s orbit. Considering the technological level and the extensive financial effort that it takes to put a satellite into orbit and maintain its operation during its life span, insurance is essential. The costs involved, should anything happen, are immense. Not only is the loss quantified by the value of the satellite itself, but business interruption as well, particularly in situations of tremendous public attention, such as broadcasts of major sporting events, interruptions such as these could prove financially and reputationally disastrous for TV broadcasters and communication services. According to the Allianz report, the average insured satellite in LEO has a value of $40 million and an operation lifespan of five years. In GEO, where most of the commercial telecom missions operate, the satellites are worth an average of $200 million and are in operation for up to 15 years. “When a contract is taken out, the satellite and the services it will deliver are studied in
Pre-launch insurance: Munich Re Pre-launch insurance provides all-risks coverage while the satellite is being transported to the launch pad, while it is being attached to the launch vehicle (the rocket), as well as for the configurations and storage leading up to the launch itself. Allianz provides additional coverage during the manufacturing and testing phase prior to the transportation of the satellite – assembly, integration and test coverage (AIT).
In-orbit insurance: detail, including the ability of its transponders to provide the necessary geographic coverage, its built-in redundancies to cope with component failures, and the various failure mode analyses. Should an incident occur that reduces the satellite’s operation capacity, insurance liability is assessed in proportion to the demonstrated level of loss,” the report states. Typically, satellites are insured against damage under ‘all risks except’ type of policies, and the insurance is divided into three parts, with each form of cover reflecting the various stages of a satellite’s life: pre-launch, launch, and in-orbit insurance.
Launch insurance: The launch of a satellite is perhaps the riskiest stage. The rocket needs to propel the satellite at 11 kilometers a second in order to break away from Earth’s gravity and insert into orbit. Launch insurance covers this phase. Munich Re’s launch insurance also covers the satellite’s first year of operation. If the satellite is only partially operational, or if the service life is shortened as a result of the launch, it will be considered a partial loss. In-orbit insurance protects against the satellite’s complete or partial failure during its operational lifespan in orbit. According to Munich Re, the sum agreed upon at the start of the satellites life covers the total cost of manufacturing and launching a replacement satellite into orbit. However, Munich Re recently launched a new satellite cover they refer to as end-of-life insurance that begins with the launch and ends with end of the satellite’s service life, or after 15 years. What makes this cover different is that even if the satellite’s technical condition changes there will be no adjustments made to the conditions of insurance. Conversely, in-orbit insurance is typically renewed annually after the satellite’s technical condition is reassessed, and subsequent adjustments to the extent of the cover and price are made. As technology makes the mysteries of our solar system ever-more accessible, the sky is clearly not the limit for the scope and innovation possible for insurance offerings. According to Munich Re, it is critical for product providers to evolve with these new-world risks to ensure continued relevance and maximised opportunity into a far-changing future.