Lloyd’s Examines Third Party Liabilities from ‘Space Junk’

March 5, 2008

Lloyd’s examines the potential liabilities from falling space debris, following the U.S. North American Aerospace Defense Command’s (NORAD’s) successful destruction of a U.S. spy satellite.

The article on the Lloyd’s web site (www.lloyds.com) traces the successful destruction of the satellite by a guided missile, launched to “strike so any debris would fall over water or on to less-populated areas of land.”

David Wade, space underwriter with Lloyd’s Atrium syndicate explained that, although it’s a rare occurrence, there “have been cases of ‘space junk’ falling back to earth from orbit. Numerous fuel tanks from Delta 2 [the US expendable launch vehicles] survived re-entry. As did a nuclear powered spy satellite, coming down over Canada and a Chinese satellite landing in the ocean.”

Although the core of the satellite insurance business is physical damage and business interruption, Lloyd’s insurers can also write third party liability risks for space industry clients. “There is liability exposure all through the life of a satellite, from the day it is launched through to its commercial retirement,” explained Bruno Ritchie, space underwriter with Hiscox.

He indicated that there is a third party risk for satellites operating in the low earth orbit, which is within 2,000kms [1200 miles]. “These are satellites used by the space imaging industry in connection with agriculture or weather for example,” he stated. “Satellites in the low earth orbit can potentially be lost and come back to earth.”

The hazards are, however, increasing as the volume of space junk circling the earth increases. The “junk” can pose a threat to orbiting hardware. Lloyd’s notes: “Approximately 11,000 objects larger than 10cm [app. 4 inches] are known to exist. The estimated population of particles between 1cm [1/4 inch] and 10cm in diameter is greater than 100,000. A new report from the International Association of Space Safety is calling for new international laws to regulate space.”

The density of debris in space varies according to the altitude. The most concentrated area for orbital debris is low earth orbit.

Space junk is becoming a more serious issue as more items are put into orbit and more collisions create more debris. Space agencies are getting better at tracking debris at various altitudes and the agency publishes a list to aid satellite owners. “Insurers expect owners to move their satellites out of the way of known debris to avoid collisions,” Wade pointed out.

However, Ritchie warned that there’s a “downside of destroying satellites by missile in orbit, as it “creates more debris that could damage satellites in the future.”

Most commercial satellites are at geo-stationary orbit (around 36,000km) where the debris density is lower. Satellites in geo-stationary orbit cannot fall back to earth – they are too far out, Ritchie explained. “The third party liability risk here is if the satellite goes out of control and bumps into another satellite,” he noted. “Alternatively, the third party risk may relate to its ground communications system interfering with another satellite operating in the vicinity. Cover is available for this risk too.”

Source: Lloyd’s

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