The satellite insurance industry has to date offered non-specific coverage, but the one size does not fit all, argues André Finn.
To date, the satellite insurance market has not offered meaningful differentiation of risk and has argued that the market is simply too small to warrant it. Underwriters have not known what questions to ask and lack the skill sets required to do a proper analysis.
This undifferentiated approach was accepted in the past, as the insured have typically been governmental institutions, which are more accepting of buying insurance as a ticking the box process. Now with the advent of private equity firms buying into the satellite market, the tolerance is no longer there. Where the companies they invest in have ensured better reliability through investment in superior risk management processes and procurement, they want to see this reflected in the pricing of insurance. In the absence of any differentiation, some firms are beginning to look at alternative offerings as a mechanism for more cost-effective insurance.
Underwriters would be better off looking at the reliability of the systems people are operating. They should also take a look at what processes are adhered to when building the satellite. There are huge differences in the processes people adopt when building and manufacturing a spacecraft and those companies that invest heavily at this stage are more likely to have fewer risks.
The fact remains that different companies have different needs based on very different risk profiles, and the bottom line is that underwriters have not, thus far, been able to quantify those risk profiles. If satellite operators can save money on insurance because they have better risk management processes, they can redeploy that capital elsewhere in their business, be more innovative as a result and can cut prices for their customers. The whole competitive landscape of the industry would change.