War in Orbit Falls Outside Satellite Insurance, Gallagher Partner Warns

Satellites used for military purposes are increasingly viewed as legitimate targets, and that specific risk is one satellite insurance does not cover. Tim Rush, a senior partner at Gallagher Aerospace, told the MilSat Symposium at Silicon Valley Space Week that war in space is not currently insurable.

Rush, speaking Thursday in a talk on the new space insurance market, said it is now widely reported that there are weapons in space and reasonably well accepted that satellites can be legitimate targets when used for military purposes. Satellite property policies are written on an all-risk basis, covering failures, malfunctions and loss of use, but the exclusions page lists war in several forms as well as cyber. Gallagher is one of the world's largest insurance brokers.

A separate war-risk market exists for airplanes and ships, and the International Union of Aerospace Insurers made space war risk a major topic at its annual meeting this year, Rush said. Coverage is not available yet because demand has not materialized, which he called a chicken-and-egg problem. Even if it were offered, he said, it would be imperfect. Policies could cover war, invasion and hostile acts, but not conflicts involving the world's major nuclear powers. If the war risk involves the U.S., the U.K., France, Russia or China, then it is going to be excluded, he said.

National security programs barely use the market today. The space insurance market has averaged about 500 million dollars a year in premium in recent years, Rush said, and less than 1 percent of that has gone toward national security programs. The obstacle is information. Underwriters need to understand a satellite's architecture, redundancy and margins to price it, and for national security programs that information is classified. Among cleared insurance professionals, a couple of underwriters and a couple of brokers is it, Rush said, so companies that want coverage often cannot get it.

Only a defense contractor working under a program of record can nominate and sponsor an insurer for a clearance, which brings real cost and delay, Rush said. He suggested the Space Force's new ACES program, which Col. Tim Trimailo described Wednesday as a way to help early-stage companies get clearances, could also help clear insurers. Rush also advised acquisition officials vetting young companies to check their insurance and risk management, so that a mishap on the factory floor does not bankrupt a supplier.

The gap means operators flying satellites for military purposes face a financial exposure that the current risk-transfer market is not structured to absorb. As Rush framed it, the risks tied to a conflict reaching orbit remain excluded events that insurance will not pay out on, leaving affected companies without coverage for one of the threats they increasingly face.

Rush pointed to the ACES program as a potential path to clearing more insurers, and to the International Union of Aerospace Insurers' continued attention to space war risk as a sign the market is weighing the question. Whether demand materializes to support a dedicated war-risk product remains the open issue he described.