Slashdot Mirror
Could Insurance Coverage Hobble Commercial Space Flights?
coondoggie writes "Should the government continue to share the monetary risk of a catastrophic spacecraft accident even as the United States depends ever-more on commercial space technology? The question is one currently up for debate as the program that currently insures space launches, the Federal Aviation Administration's 'indemnification' risk-sharing authority, which can provide a maximum of $2.7 billion of insurance per launch, expires at the end of the year. According to the Government Accountability Office a catastrophic commercial launch accident could result in injuries or property damage to the uninvolved public, or 'third parties.' In anticipation of such an event, a launch company must purchase a fixed amount of insurance for each launch, per calculation by FAA; the federal government is potentially liable for claims above that amount up about $2.7 billion."
Contact me, I'll write the coverage.
Deregulate!
So a launch from Cape Canaveral could cause $2.7 Billion in damage? From what? Hitting an ocean liner? And the chances of that are. . .astronomical? I can't imagine the insurance would be very expensive (relative to the cost of a launch).
Given these things are usually launched over water. Granted it could malfunction in that way, but in all of US launch history, how many civilian deaths among the uninvolved public have there been? I can't off hand think of any, but maybe someone else here knows of some?
So at least, the risk seems small, although of course it's never going to be zero. Can private insurance the entire thing, not just some fraction under the 2.7 billion? Dunno how it works for space launches, but for my auto etc insurance, doubling the policy amount does not double the cost of the insurance.
I would say you cant call it commercial space flight until it funds itself privately.
The insurance coverage requirement applies to all launches. This includes launches that occur outside of the United States by entities that do not have assets in the United States.
No!
The Kruger Dunning explains most post on
Clearly the airlines fly many, many more flights over much more populated areas than commercial space companies plan to over the next decade or longer and they are still in operation. So what is their insurance coverage strategy?
I'm guessing that the biggest difference is that the actuary statistics are well established for the airline industry, while they're limited for the commercial space industry.
Perhaps in that case it would be reasonable for the government to continue to indemify the commercial space industry until there is sufficient data for commercial insurance companies to feel comfortable selling coverage.
1. Space is risky. If you are going to go there, or benefit from going there (do you like having satellites able to inform where the hurricane is going to make landfall?) you are going to participate in that risk.
2. Sometimes, risk is imposed and you don't get an opt-out. The world is not made of Nerf. Neither are satellites or boost systems. You don't get to vote on this, otherwise we sink to the level of the loudest coward.
3. Nothing, and I mean NOTHING, is a greater threat to a country's ability to achieve great things than its lawyers and those who would employ them to their own benefit without regard to the costs to us all.
Life involves risk. Wear a helmet... unless you're a tort lawyer.
Everybody gets what the majority deserves.
It is a joke that if you open a skate park, and someone gets hurt, brings drugs, a weapon, or threatens someone that you get sued so hard you can lose your property. I love the USA, but you don't have a lot of private individuals opening their property for people to ride motorcycles or just chill outside with free concerts. Also car insurance is a big scam because of liability. You can buy a used car every 4 years at even the low rates of car insurance. Car insurance certainly isn't there to keep you on the road. Ski resorts get sued when someone falls down in even ordinary skiing conditions. The only reason ski resorts stay open is that they need to make more money than they lose in lawsuits. You don't have to agree with me on this one, but I think liability needs drastically reformed, and it has been this way for over 100 years..
God spoke to me
. . . injuries or property damage will go unnoticed.
Actually, launch locations in China and Russia might look more commercially attractive now. A rocket launch has destroyed your house? Your tough luck for living near a launch pad.
Schroedinger's Brexit: The UK is both in and out of the EU at the same time!
When does insurance not act as a killjoy weapon for those who want to shut something down, or control someone's behavior? It's a financial yoke that requires a fear-driven, risk-adverse culture to function. Life has risks. Deal with it. many of the problems brewing over the last 50 years or so are caused by too much risk aversion and litigiousness and not enough decisive leadership. I blame insurance as both a part of this problem and as a symptom of it. In the end, paying a bunch of bankers a lot of money doesn't save your sorry hide if the rocket/car/human fails somewhere along the way.
Insurance companies provide two services for the community: 1) pricing of risk and 2) transfer of risk. Those are good things. Some risks are too large for one person or company or entity to handle. That's where reinsurance comes in, which is a large and established industry. Reinsurers help insurance companies spread out the risk to more people. Each gets a share of the potential profits AND losses.
Other markets work like this and they work well. Do you think any one company wants to take the risk of insuring homeowners on an earthquake in CA or a hurricane in AL? No. They may take a portion of the risk but then they transfer other parts to other companies. It works well.
2.7 billion dollars is an insane amount of money to have to buy for every launch.
Get the government out of backing the insurance, but also set the requirement for launch insurance far lower, or eliminate it altogether. The launch companies will have to buy insurance anyway, investors would not stand for not being covered.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
Punitive Damages.
>>>You can buy a used car every 4 years at even the low rates of car insurance.
Nationwide insures me for just $110 a month. So that would be $880 over four years..... not enough to buy a car, unless it's a really old one (like 1997).
My AC stalker: " I personally agree with your posts most of the time, but that won't keep me from modding you troll"
...because they have the resources to deal with such a catastrophe. I suppose private companies have the resources too though. How much does it cost to tie a case up in court until the other side runs out of money and/or dies from injuries? Probably cheaper to buy off a Senator anyway. At the risk of being modded troll I'll add 'Viva Libertarian Paradise!'. But I'll touch off by saying that at least with the gov't it's not somebody's 9 to 5 day job to make sure the victims don't get paid (Tobacco companies, I'm lookin' at you).
Hi! I make Firefox Plug-ins. Check 'em out @ https://addons.mozilla.org/en-US/firefox/addon/youtube-mp3-podcaster/
$110/month = $880/4 years? Que?
Wow, there's only 8 months in 4yrs?
110 x 12 x 4 = $5280
That would be $5,280 over four years and even with the ridiculously high used car prices out there now you could buy a car with that every four years.
>>>You can buy a used car every 4 years at even the low rates of car insurance.
Nationwide insures me for just $110 a month. So that would be $880 over four years..... not enough to buy a car, unless it's a really old one (like 1997).
Math fail? $110 a month, multiplied by 8 months, equals $880. $110 a month, multiplied by 48 months (since there are 12 months in a year, multiplied by 4 years, equals 48 months, are you still with me?), equals $5280, which happens to the around the price of an okay, not great, but pretty okay used car, plus the cost to get it registered. Give it a few months and if this used car was an automatic, maybe you'll need another 24 months (2 years) worth of car insurance in order to get the transmission fixed.
Um...so years have two months where you come from?
$110 a month is $5280 in four years. Yes, you could buy a pretty decent used car for that.
>>>Math fail?
No word fail. I meant to type: Nationwide insures me for just $110 every 6 months. Or $880 over 4 years.
My AC stalker: " I personally agree with your posts most of the time, but that won't keep me from modding you troll"
Do oil refineries have to pay insurance to the surrounding communities, for the possibility of a catastrophic failure at a refinery? I don't suspect so. Oil refineries in the US, then, implement security protocols, checkups, and more checkups, to prevent the possibility of refinery failure.
I'd like to mention, then, that NewSpace companies will have more on the line than any governmental space agency even possibly could. I'm sure they must all well understand the full extents of the importance of launch vehicle safety and launch site safety, thoroughly.
Then take over the business from the US. They could institute no fault laws and hold space launches that go bad unsuitable.
In the united states it's also trivial to setup shell companies to take a fall for anything. Companies are only liable for up to what they have in the bank and their infrastructure collateral. A company at risk for disaster and being sued will transfer it's money easily enough and rent it's critical infrastructure. Nothing to stop them from going bankrupt.
Only thing your risking is your short term income of up to a year which for a spaceport could be substantial. Subcontractors can possibly be sued to recover income they made from said company for something like a year prior under laws that make shell companies somewhat accountable for at least a trifle something.
>>>Math fail?
No word fail. I meant to type: Nationwide insures me for just $110 every 6 months. Or $880 over 4 years.
Really? ~$18 a month? Really?
Just bundle with all your other insurance, house, NYC appartment, California house with garage car elevator, lake cottage, classic Chevy corvette, wifes 2 Cadilacs , motorcycle, ATV, ski boat, yacht, jet ski, private jet , campaign bus...
Geico covers all your rides.
Absolutely insurance coverage could hobble commercial space flight... just like it hobbles commercial atmospheric flight.
more corporate welfare.
What happens to incentives when government provides indemnification beyond what private insurers are willing to cover?
Any risks beyond what is covered by insurers becomes essentially free to the corporation taking the risks. That cost is "socialized" onto taxpayers. That means they will take unreasonable risks for which they won't be accountable.
Insurers have incentives to evaluate the risk properly. Otherwise they lose business and money. Government agencies cannot provide the equivalent service and protection as they lack incentives and accountability.
These comments are mine; I do not speak for my employer.
It seems that if commercial space vehicles need the government to cover the risk, then they aren't really commercial. Commercial space ventures should pay their own way, including insuring against catastrophic failure. If that makes the commercial endeavour too expensive, then the market would dictate that commercial space ventures aren't feasible and it should be left to the government. That might not be what people want to hear, but if the private sector really can't do it cheaper than the government, then the government should do it.
Most people don't know that large airliners can't fly without FAA-issued aviation war risk insurance to cover planes, passengers, crewmembers, and third parties against terrorist acts like the September 11 attacks. Private insurance will only cover $50 million, which is less than the replacement cost of a Boeing 737.
The only required car insurance is liability. It doesn't protect you at all. It protects the people that you injure and hospitalize, in addition to the damage you do to other people's property.
"Comprehensive" car insurance coverage is very useful.
It covers deer hits and theft.
I've went through at least half a dozen hoods due to wildlife.
One time it was a precision hit that took out the radiator and AC system with a 3" ding right in the center.
If I didn't have the coverage, damage would be in excess of $1500.
You aren't kidding.
They must be 50 years old (statistically least likely to have an accident) own a lightweight, under-powered car (or no car at all..), opted for basic liability only (legally required in most states to get a driver license), and told their agent they only use it to drive 3 blocks to church on Sunday.
Or they're lying.
Either way, practically nobody else in the country gets rates that low.
This is my sig. There are many like it but this one is mine.
Insurance carriers have been a driving force in automotive safety for a long time albeit not always in a way automotive enthusiasts appreciate. Lloyds of London got its start insuring shipping when losses and damage were common. Ship and cargo owners pooled the risk. As a result leaky worn out ships cost more to insure. The same approach can be applied to space flight. There is no reason why the insurance industry would not insure commercial space launches so long as they sell enough policies to pool the risk. They will force four to six sigma quality at every step of the process because lower quality will cost more.
you have liability only then...which means when you wreck the car you get nothing.
compare comprehensive over that same period......
Sorry, I for one think subsidizing SpaceX to buy insurance is wrong. I would prefer welfare mama's all be given Cadilacs. Want to be in the space business, pay your own way.
* Carthago Delenda Est *
Car insurance is necessary. If you trash my expensive car you are going to pay for it. I don't want to waste my time suing you, taking your shitty possessions and selling them off to pay for it, maybe making you homeless. If you manage to injure me severely the cost of medical care could be hundreds of thousands, even millions over a lifetime. Want to give me every penny you earn for the rest of your life?
If you can afford a car and fuel you can afford basic 3rd party insurance, unless you are such a terrible driver you keep getting into accidents in which case pricing you off the road is a good thing.
const int one = 65536; (Silvermoon, Texture.cs)
SJW, n: "Someone I don't like, and by the way I'm a fuckwit" - AC
Could Insurance Coverage Hobble Commercial Space Flights?
No, because humanity as a whole is not stupid enough to continue hobbling itself with such ridiculous rackets as "insurance companies." If they are holding up progress, eventually they will be discarded as the worthless trash they are. Won't let me launch my rocket in the U.S.? Oh well, I'll find some other country that's interested in being a part of the solution, not the problem.
The only required car insurance is liability.
Oh, that's all huh?
It doesn't protect you at all.
You're right. I'm perfectly capable of protecting myself, actually.
It protects the people that you injure and hospitalize, in addition to the damage you do to other people's property.
I have never hurt, injured, or hospitalized anyone in my life, with an automobile at least. Tell me again why I have to buy into this racket?
The whole point of this involves third party risk, not risk by the launch company or risk by the contractor.
If a commercial SpaceX launch goes horribly wrong, and they can't abort it, and it crashes into a nearby down and kills 10 people and causes tens of millions in property damage - who is responsible for compensation? The people in that town had nothing to do with the launch and did not sign up for that risk, so your commentary is meaningless.
If we want the reward of space travel, then take the risk. If we collectively decide the reward isn't worth the risk, then stay home.
And enterprising space companies will go to countries willing to take the risk in order to develop their private space programs.
The problem is the sue-happy state of affairs. If liability were genuinely limited to real, financial damage done by a failed launch, it would be possible to get private insurance. As long as courts are willing to award outrageous sums for stupid things, the liability is simply not calculable - and no private insurer will touch it. You know, things like "You launched, the smoke drifted thousands of miles over my city, I have lung cancer, it's your fault".
As a "small government" type, it pains me to say this, but until genuine tort-reform happens, there is little alternative to government involvement.
Enjoy life! This is not a dress rehearsal.
Insurance deals in risks, not unknowns or certainties. There is a fine line between the two that is frequently misunderstood. A risk is an event whose probability you can calculate; an unknown is an event whose probability you cannot calculate; a certainty is, well, certain to occur.
We know for instance, with a statistically meaningful sample, that a certain percentage of the population dies or has a car accident each year. They follow near perfect gaussian distributions, and therefor are risks. You can price them appropriately and a private insurance take care of them.
From a mathematical standpoint, an insurance company's usefulness begins and ends here: guaussian distribution, large enough sample. This can be priced; nothing else can. Collecting an insurance coupon for anything else is gambling, leeching, or both -- and on the tax payer's back, more often than not.
Earthquakes or stock market moves, for instance, follow power laws, and therefor are unknowns. You cannot price them appropriately and a private insurance cannot credibly take them. When it does, you end up with lavish profits and dividends in good years (heads, I win), and State emergencies / AIGs in bad years (tails, you lose).
Health follows a power law too (diseases are contagious, health degrades with health issues) with the added twist of certainties (e.g., the majority of one's health care costs are concentrated in the last few years of one's life). These are unknowns and certainties, not risks. As such, they cannot be priced appropriately from an insurance's standpoint. For healthy people, the best an insurance can do is gamble (heads, I win); for the elderly or chronic diseases, it needs to price (or refuse to "insure") the inevitable (tails, you lose).
Yet other things, such as space flight accidents, might arguably follow gaussian distributions. They could be insured in theory -- if gaussian indeed. In practice however, the sample is too small to know the precise risk. Until it's larger, this risk cannot be adequately priced. And the best a private insurance can do is gamble. The insurance might over-price the risk and over-provision for catastrophes (heads, I win, tails, you win; yay!). It might also under-price the risk and distribute lavish dividends (heads, I win) and go bust when a space ship crashes into a nuclear power plant (tails, you lose). It simply lacks the data to take the appropriate decision; it's an unknow.
So the real question is: is the tax payer comfortable with someone winning on heads, without knowing if he'll win or lose on tails?
Without debating the merits of insurance and liability itself, yes. This program needs renewed, even if it's not tweaked a little to modernize it's language. My reasoning? We're a horribly litigious society. If a Dragon capsule crushed an interstate on reentry, or a lift rocket careened of course and plowed into a residential neighborhood, everyone within 12 miles, every traumatized witness would be suing whichever commercial entity owned the item. plus the facility that allowed the launch. plus whatever manufacturer of whatever component failed that initiated the accident.
Even if the collateral you have to lay down is hefty, this keeps one accident from immediately bankrupting the company. IMO the initial outlay for insurance also serves as a "ticket to ride". If you can afford the stuff, your probably not half-assing your products, making accidents more likely.
If the Wright brothers waited to have correct insurance, they never would have gotten off the ground and we would STILL be without air travel.
Insurance companies will simply put the private space industry back into the stone age.
FUD.
If you open a skate park, and someone gets hurt, brings drugs, a weapon, or threatens someone that you get sued so hard you can lose your property.
It's a little more complicated than this. It's true that under some circumstances you can sue the property owner for something that happens on his property, but this is really only possible if he has "invited" you there for a business transaction (in which case he has a duty to keep you safe) or, under other circumstances, if he knew that dangerous things were happening on his property and did nothing to mitigate the danger. Even in these cases, if you post good warnings, you'll often be off the hook.
You don't have a lot of private individuals opening their property for people to ride motorcycles or just chill outside with free concerts. Also car insurance is a big scam because of liability.
Well, you see lots of municipalities do it, and they typically run just as much risk of being sued as private landowners. Maybe the bigger reason is that most people would rather use their own property than open it to the public.
. Also car insurance is a big scam because of liability.
You've shown that it's expensive, but not that it's a big scam. Under your proposed system, what happens then if I'm badly injured when you hit me with your car. Can I sue for compensation? If so, you have not reduced the cost of insurance. If not, how is this arrangement just?
Ski resorts get sued when someone falls down in even ordinary skiing conditions.
They may sue, but they will lose. We lawyers are actually taught this specific case in our first year of law school.
Maybe your complaints come from how damages are computed in these sorts of cases, not the institution of tort law itself. You could be right about that but first, do me two favors: 1) look around for some actual statistics about the average damages collected in tort suits, the prevalence of punitive damages, and the victory rate of plaintiffs. Also look at the facts and outcomes of some actual tort suits. I think you'll be surprised by what you find. 2) Remind yourself that whenever there is a big tort verdict, it goes to compensate a person who was injured. Sometimes this person may be exaggerating their claim, but much more likely they are not. Any "reformed" system has to serve these people as well.
caritj.org
A lot of the discussion here seems to be focused on the fear that a failed explosion is going to rain fire down upon local communities or some other fear and terror, but the real issue driving all the talk about insurance is the payload itself. The real concern is whether or not: a) will my satellite make it into space without being destroyed and b) when it gets to space, will the rocket do what it claims and put it into proper orbit? When you consider that these satellites cost hundreds of millions of dollars, take years to build and delay or loss can make or break a company, any prudent businessman would want to make sure that they have some kind of protection (insurance) to mitigate any potential losses. This is doubly true for a company that doesn't have an established track record for successful launches or has proven that it can, for the most part, make you whole if they screw up the launch.
Is this really an honest question, whether the taxpayer should be on the hook for the business costs of a private business? Of course they should. That's how our crony capitalism works. People forget that the whole point of government is to provide services that cannot be provided by the private sector, whether due to cost or other factors. That's why we have NASA. Now that the popular fad is that the exalted market can provide us with our every wish and desire people want to privatize space exploration. Those people are stupid, but unfortunately we live in a representative republic.
Utter nonsensensical argument, but the conclusion is right.
There is nothing magical in either the Gaussian distribution or the power law distribution. Both are simple mathematical models of reality, and both models can be incorrectly parameterized. But what really breaks insurance is the wrong choice of model - either using a Gaussian model for a power law reality or vice versa.
A second concern that you miss is the disconnect between chance and risk. The chances of an earthquake happening are fairly well understood. But the damage done (and therefore the risk insured) depends very much on location and possibly also time. In comparison to earthquakes, car accidents vary far less in damage, if only because the number of people affected varies less. Aircraft accidents would be somewhere between earthquakes and car accidents.
Your health example fails for another reason. It's in fact a nice gaussian risk. To be precise, you want a health insurance that collects premiums during your working life and covers your entire life. As such, it's a given that the insurance must pay out, but the main risk is that the insurer pays our early (before collecting sufficient interest). The moment of payout, and therefore the interest collected, can be approximated reasonably well with a Gaussian around age 72 or so.
You are right on the final conclusion though: there is just not sufficient data available to make a reasonable estimate of the statistical risk, and that has nothing to do with Gauss-versus-power.
>>>when you wreck the car you get nothing.
So I buy a new one. (shrug). Same thing I do when my TV or PC dies.
My AC stalker: " I personally agree with your posts most of the time, but that won't keep me from modding you troll"
Because you haven't YET hurt/injured/hospitalized someone. You see, there's a saying that goes "past performance does not a guarantee of future performance". Unless you can prove that you WILL NEVER hurt/injure/hospitalize/kill anyone in your vehicle or damage other property there's a chance. Oh, and this includes anyone who drives your vehicle - whether with permission or not (could be someone stealing your car, could be your kids, whatever).
Oh, and you do know sometimes if someone runs into you, you can still be partially or even fully liable? E.g., you're turning left at a traffic light, and it turns red (and cross traffic gets the green). You proceed to clear the intersection and someone runs the red and smashes into you. Depending on your location, precedent may have it that you're still liable for most of the damage. Even though you had right of way (you were clearing the intersection so cross traffic may go).
Then again, perhaps you have a few million dollars in the bank just in case...
I don't expect the US spaceflight insurance is fully comp, though....
Got them moderator blues I blieve I walk out the do', With these mod-points I been gettin', I 'most never post no mo'
This is SpaceX -- we're not planning on launching the Enterprise any time soon!!
Got them moderator blues I blieve I walk out the do', With these mod-points I been gettin', I 'most never post no mo'
Which completely misses the point of this conversation, or maybe proves it, idk which.
At any rate, GoodNewsJimDotCom was clearly talking about insurance that pays out in the event of your car being totaled, and is saying that by not getting that insurance, you can put the money saved away and buy a used car every 4 years with the amount saved.
It helps if you follow the thread you are replying to, so you don't get lost.
Launch it from Mexico, with only 1/10 as many middlemen sticking their fingers in your pocket.
It isn't difficult to conceive of a world where if you want monetary compensation for loss of car or hospitalization, your insurance should pay for it. If someone is an actual risk to the health and welfare of others, they get imprisoned or lose their license. There's no guy out there going,"If I don't have to pay if I wreck someone's car, I'm gonna be Wreck it Ralph and play demo derby on the street."
God spoke to me
Your definitions are correct, but the statement that private insurance won't touch these things is not correct. Berkshire Hathaway has a division that does this, and so do many other large insurance and financial companies. Sending up a $200M satellite on a rocket that hasn't been used before? There's a rate for that. It might be $50M, but is that really so bad?