The Wall Street Journal-20080116-Satellite-Launch Insurers May Temper Rate Increases
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Satellite-Launch Insurers May Temper Rate Increases
Satellite-launch insurers, which suffered an estimated $150 million cumulative loss last year and seemed poised to demand significantly higher premiums for 2008, are now likely to temper future rate boosts in light of yesterday's successful launch of a Middle Eastern communications satellite.
Lower insurance costs could make it easier for start-ups to put innovative technologies into orbit. Particularly for smaller or less- established satellite buyers and operators, insurance and launch costs sometimes can approach one-third of total expenditures.
Yesterday's early-morning deployment of the satellite, owned by Thuraya Satellite Telecommunications Co. of Abu Dhabi, also marks the resumption of launches by Sea Launch LLC, a Boeing Co.-led joint venture, following an accident in January 2007 that destroyed a European communications satellite and damaged the floating platform. After repairs, Sea Launch attempted to launch the Thuraya-3 mobile communications satellite in November, but unusually strong currents and adverse weather conditions forced a scrub of that mission.
In recent weeks, a number of space-insurance underwriters and satellite-industry officials had been predicting rate increases ranging from 25% to 40% over last year's premiums for coverage of 2008 commercial satellite launches. Last year, premiums for the launch and first year of in-orbit operations averaged about 12% of insured value. Some rates, however, were as high as 18%, based on technical and other risks. In the early part of the decade, premiums climbed above 20% of insured value following a series of malfunctions and a shrinking pool of insurance providers.
Before Thuraya's successful liftoff, Andrea Maleter, technical director for space and telecommunications at consulting firm Futron Corp., said she expected insurance rates for some launches this year "could go as high as" 18% as part of a cyclical swing from the lower premiums the industry enjoyed in the past two years. For some fledgling projects, she noted, insurance costs "can make a big difference."
