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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."
Deregulate!
No!
The Kruger Dunning explains most post on
UP to 2.7 billion. But. lets say you're satellite you are launching hits the Space station. Bam, more then 2.7B right there. Hits another satellite and cause substantial debris. Many things.
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
At the bargain price of $22k a song, a music server would only have to hold about 123,000 songs to reach $2.7 billion! Just the iPods on that ocean liner might have that many. Where's your sense of value? Clearly some don't have the same stuff upstairs that bankers and insurance folks do.
Just imagine the cost if they hit Facebook. The loss of exports alone... imagine the great loss to mankind. Better keep some bottled in case of an emergency. Why in 100,000 years with scarce resources they'll find some fossilized facebook and be in awe. Imagine what that'll be worth.
For all people speculating about juristiction, please read the Outerspace Treaty (the relavant parts are below).
Since these launches are from the US and the US signed the treaty, the US is potentally liable for what a non-government (e.g., private) entity does in outer space. Forcing the non-governmental entity launching in a signator's territory to carry sufficient insurance to offset most of the potential liabiity seems like it would always be a likely on-going requirement (by any the 100 or so nation-states who are signators to this treaty including the US).
Article VI: States Parties to the Treaty shall bear international responsibility for national activities in outer space, including the moon and other celestial bodies, whether such activities are carried on by governmental agencies or by non-governmental entities, and for assuring that national activities are carried out in conformity with the provisions set forth in the present Treaty. The activities of non-governmental entities in outer space, including the moon and other celestial bodies, shall require authorization and continuing supervision by the appropriate State Party to the Treaty. When activities are carried on in outer space, including the moon and other celestial bodies, by an international organization, responsibility for compliance with this Treaty shall be borne both by the international organization and by the States Parties to the Treaty participating in such organization.
Article VII: Each State Party to the Treaty that launches or procures the launching of an object into outer space, including the moon and other celestial bodies, and each State Party from whose territory or facility an object is launched, is internationally liable for damage to another State Party to the Treaty or to its natural or juridical persons by such object or its component parts on the Earth, in air space or in outer space, including the moon and other celestial bodies.
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.
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.
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.
Since these launches are from the US and the US signed the treaty, the US is potentally liable for what a non-government (e.g., private) entity does in outer space.
Bullshit. This is unenforceable cold war nonsense. If somebody decides to launch a rocket from the Congo or Madagascar with permission from the government, the U.S. isn't going to do a damn thing about it. If someone send a spacecraft to Mars and sets up a colony there, the U.S. isn't going to do a damn thing about it.
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?