Satellite Anomalies Pushing Insurance Rates Up
In recent years, the satellite insurance market has experienced a great deal of volatility. This is consistent with insurance markets overall, in particular the dramatic rise in insurance rates after September 11.
In addition, satellite insurance rate increases are directly linked to a growth in claims, industry analyst Futron says in a research paper released Wednesday.
Satellite insurance rates are affected by several factors, primarily the levels of anomalies, or malfunctions, in the operation of a satellite. While anomalies occur every day within the global satellite fleet, it is severe anomalies resulting in a total or partial inability for the satellite to perform its mission that can trigger an insurance claim.
Thus, satellite insurers are very sensitive to any increase in satellite anomalies, which can be a leading indicator of decreased satellite reliability.
However, the situation surrounding the increase in satellite anomalies is complex. Many factors have contributed to this increase, only some of which are directly related to satellite reliability.
A sentiment exists in parts of the satellite manufacturing community that the satellite insurance industry has overreacted to the increase in anomalies. The recent insurance rate increases have affected the already-thin profit margins associated with satellite manufacturing and, in some cases, jeopardized the economic viability of certain satellite ventures.
The satellite insurance industry argues that it is simply correcting a situation that produced large losses. If not for this correction, insurers would be forced to abandon the satellite industry for more favorable markets.
There are elements of truth in both positions, and Futron does not take sides in this White Paper. Instead document attempts to clarify some of the issues through an objective analysis of satellite insurance, reliability, and performance.
This White Paper also includes a technical analysis of the range of anomalies experienced in recent years, and puts this in the context of the increased number and complexity of satellites launched.
Paper/Chart in Details - PDF file
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