TIM FURNISS / LONDON
The space insurance market's difficulties cannot be blamed on the events of 11 September, but on a design problem with the solar arrays of the Boeing 702 communication satellite bus. Because of the flaw, 2001 could result in the biggest losses for space insurers since 1998, when payments outweighed premiums by over $600 million.
The space insurance business has been in trouble for some time. Between 1996 and 2000, the market produced a massive deficit, with $3.9 billion in premiums paid against $4.9 billion in mission losses, compared with a profit in 1992-96, when $2.8 billion was taken in premiums and $2.4 billion paid out.
Claims for on-board anomalies that occurred last year could add $1 billion in net losses, mainly a result of the now-corrected flaw on the Boeing 702. The recent accumulation of losses has resulted in reduced insurance capacity, increased premiums and greater restrictions in coverage. This is leading some satellite operators to look at self-insurance.
Premiums for launch and in-orbit cover have risen by 50-100% in the past two to three years and, whereas a typical policy previously would cover the launch and five years in orbit, coverage is now restricted to launch and the first year in space. The definition of what constitutes an in-orbit loss is also changing.
Previously, insurance underwriters considered a satellite to be a constructive total loss if half its communications capacity or half its life was impaired as a result of an in-orbit failure. This allowed operators to recoup their original investment and order a replacement satellite while continuing to operate the degraded spacecraft. Now 75% of a satellite's capacity or life must be lost for an in-orbit failure to be considered a constructive total loss.
Most claims are made for unseen satellite component failures. One-fifth of satellites launched have problems, mainly due to flaws in design, manufacture or testing. This figure and the Boeing 702 problems have drawn underwriters' attentions to satellite manufacturers' quality control.
The industry's problem is that spacecraft ground tests cannot fully replicate the environment in space, making risk assessment almost impossible. Of the 14 claims and expected claims for satellite and launcher malfunctions during 2001, six are likely to relate to contamination that could not be replicated in ground tests of Boeing 702 spacecraft buses. What seemed a relatively simple design innovation could result in insurance claims ranging from $500 million to $1.5 billion, depending on how many affected satellites are declared total losses.
In the first of those claims to be presented, Thuraya Satellite Communications is expected to seek $371 million - potentially the largest insurance pay-out for an individual satellite - for the loss of the Thuraya 1A communications satellite. This suffered power losses due to a solar-array phenomenon, specific to 702 models, which has also been experienced to varying degrees by the Galaxy XI, XM-Rock and XM-Roll, PanAmSat 1R and Telesat Anik F1 satellites. Boeing - which purchased Hughes Space and Communications and inherited the design flaw - is claiming $750 million from Hughes for the trouble caused.
The problem concerns a design feature introduced on the original 702s: angled reflector panels mounted along both sides of the solar arrays to form a shallow trough and concentrate the sun's rays on to the solar cells. The possible contamination of these mirror flaps is thought to have resulted in a phenomenon which led to a serious degradation of power on the six 702-family satellites. The problem may have been fogging of the mirrors - possibly due to outgassing by the satellite - which reduced the sunlight reflected on to the solar cells, or it could have been a temperature effect created by the reflected sunlight on the arrays.
Having corrected the flaw - by removing the concentrator flaps - Boeing now hopes it can draw a line under its technical problems with the 702 with the launch of the Galaxy IIIC aboard a Sea Launch booster this month. "The flaps are being removed and we've gone back to the tried and tested flat planar array," says Boeing. The arrays are being modified on the other 702s on firm order: Anik F2, two Wideband Gapfiller satellites for the US military and New Skies Satellite's NSS 8.
The 702 design flaw has led insurance underwriters to call for manufacturers to adhere to tried and tested spacecraft designs, rather than introducing changes intended to improve performance and reduce cost. Quality control is also under attack. Problems with the Boeing 702 - and some Boeing 601 spacecraft buses - have resulted in a quality control purge at the US manufacturer that has already delayed the launch of one satellite, the 601-based Asiasat 4, from May to September. Boeing and PanAmSat jointly agreed to delay delivery of two satellites to allow a few extra months of tests. Underwriters may take some comfort from the fact the extra time enabled Boeing to fix problems that surfaced and re-test the satellites before launch.
Barring more losses, higher premiums should return the space insurance market to profitability, although recovery may come too late for some. Larger companies can spread risks across several business sectors, but it can be harder for smaller firms. Already this year Belgian company Aviabel, with about 5% of the market, has pulled out. Whether, as analysts claim, that decision will prove premature is up in the air.
Source: Flight International
