Sir Richard Branson has a dream, and a bold message for insurers and reinsurers. Not only does he intend to corner the space tourism market, he plans to insure his space launches under aviation – not space – insurance. David Banks spoke to Virgin Galactic to find out more.

When Sir Richard Branson and space ship designer Burt Rutan unveiled their latest launch system in July, they also had a message for their partners in the insurance industry: the success of commercial space tourism will rely on its insurability.

Rutan has built a system where the space plane is carried under a larger conventional aircraft and taken to the edge of the atmosphere, where it disconnects and flies into space under its own power (see graphic of launch method on page 34). It won the X-Prize for reusable space flight in

2004 and immediately gained the backing of Virgin.

Since the system employs a conventional aircraft to carry the space plane into the upper atmosphere, Branson and his team at Virgin Galactic are hopeful that launches will be classed as an aviation risk rather than as a space risk. In the last few weeks, Virgin Galactic has begun discussions with the insurance industry – “a process of education”, according to Will Whitehorn, president of Virgin Galactic.

“Our engineers and the aviation insurance market will learn from each other,” he said. “This is an entirely new concept in space launch so we can’t consider the space systems of the past as any kind of precedent.”

He added: “We are working to minimise risk and create a new industry for the future which will be insurable. Our lead insurance partners have been very supportive of what we are doing and are coming along on the journey with us.”

Virgin Galactic has run a series of demonstrations for insurers and brokers to explain the technology and to highlight plans for the test schedule. “The insurance market has never been exposed to a space launch system of this type,” said Kathryn Leahy, Virgin’s group risk and insurance manager.

“That is why we have run a number of demonstrations which have given insurance professionals the opportunity to gain more details and come back to us with their questions.”

Virgin has a relationship with the aviation insurance market going back 25 years. Some of its long-standing partners in (re)insurance include AIG, Allianz, Swiss Re and Catlin, while others are AXA, Mitsui, Glacier Re and GIC. Marsh acts as broker for the Virgin Group.

“These companies came to the table when we started this project and these are the guys we will take through to the next phase of the project with us,” Leahy said.

“We are involving them all the time and they will be able to talk to the engineers and they will be present when the engines are fitted. It’s a very open relationship, this first step will be a springboard and it is a continuous process of education for them.”

Wide canvas

The success of commercial space tourism rests on its insurability

The same can be said for the authorities, for whom space tourism is a developing concept. As such it provides a “wide canvas” for managing the industry in the future, Whitehorn says.

“Space flight from a passenger point of view is not governed by the same rules as airline flights. This is going to be certified as a space launch system, under legislation on the commercialisation of space that was passed recently by the US Congress.

“This covers science payload as well as space tourism. It has left a wide canvas to create the structure of how we will manage this industry in the future. We need this broad canvas going forward. The Federal Aviation Administration (FAA) in the United States and ourselves are looking into the regulatory process together.”

Whitehorn argues that far more research has gone into wing-based technology than other take-off systems, making it much more reliable. However, the launch plane and space plane are also brimming with technology which will be fine-tuned over months of test flights.

“This will actually be one of the biggest test flying projects in history in terms of number of flights. This will also be one of the key factors in taking the insurance market with us from this beginning,” he adds.

“This is because the insurance industry has to gather data, it is a partnership and, if it is successful, it will allow greater scientific access to space as well as space tourism. I think the insurance industry

realises this is a very important project in terms of its potential.

“Testing will be based on data gathering rather than a series of deadlines, which is particularly important because we are using a new type of rocket motor hybrid based on laughing gas and rubber, which are both a lot safer,” he adds.

As such, they are not setting a timetable for the first paying customers.

“We have been very open but non-committal on when we will take someone into space, because we want to make sure that we have safety absolutely in place. So we are a long way from talking about liability insurance for example. The whole process is safety-led, not deadline-led. We will go commercial when we are ready.”

The next step for Virgin Galactic and its insurers will be to formulate and evaluate the risk of launch and flights, then to calculate a viable way forward for further types of cover such as liability insurance.

David Banks is deputy editor of Global Reinsurance

This is an entirely new concept in space launch so we can’t consider the space systems of the past as any kind of precedent.

Aviation: Explosion

The technology of space flight has changed little in the past 50 years: put someone in a tin can, bolt it to an enormous exploding missile and hope for the best. That was until the X-Prize encouraged plucky, privately-backed scientists to develop ways to make space flight much more accessible and re-usable.

Virgin Galactic takes pride in the fact that it is using a system based on aviation principles, using a large carbon composite plane called White Knight 2.

“Traditional space launch is based on a very risky concept: you send it up and it blows up. It is often equivalent to a 1-kilotonne nuclear explosion which sends the shuttle into space,” says Will Whitehorn,

the company’s president.

Aviation: $200,000 deposit will take you into space

Virgin Galactic’s launch plane, White Knight 2, is the largest all carbon composite aircraft in the world. It carries Space Ship 2, the space plane, which carries six people: two flying astronauts and four passengers. It has a potential payload of 16 metric tonnes, which means that it could send a micro-satellite into low Earth orbit.

Manned space launches are normally considered to have a one in 75 failure rate, but this is a safety level that Virgin Galactic aims to improve “by many thousands of times”.

The Virgin Galactic space vehicle is expected to be ready for testing in early 2009. The vehicle will be carried by White Knight 2 in tests and drop tested from the upper atmosphere. However, the company does not expect to carry a person into space on an experimental basis until 2010.

Compared to the 480 people who have gone into space since 1961, Virgin Galactic expects to carry 700 or 800 people into space in their first year of commercial operation.

Virgin Galactic holds more than $40m in deposit from the 270 people have registered to fly by paying $200,000 each. A further 70,000 have registered an interest in space travel.