space tourism risks a space insurance perspective 2010 acta astronautica

6
Space tourism risks: A space insurance perspective Denis Bensoussan Hiscox, France article info Article history: Received 16 June 2009 Received in revised form 24 December 2009 Accepted 5 January 2010 Available online 24 February 2010 Keywords: Space Tourism Risks Insurance Liability abstract Space transportation is inherently risky to humans, whether they are trained astronauts or paying tourists, given that spaceflight is still in its relative infancy. However, this is easy to forget when subjected to the hype often associated with space tourism and the ventures seeking to enter that market. The development of commercial spaceflight constitutes a challenge as much as a great opportunity to the insurance industry as new risks emerge and standards, policies and procedures to minimise/mitigate and cover them still to be engineered. Therefore the creation of a viable and affordable insurance regime for future space tourists is a critical step in the development of a real space tourism market to address burning risk management issues that may otherwise ultimately hamper this nascent industry before it has a chance to prove itself. & 2010 Elsevier Ltd. All rights reserved. Amateurs talk propellant, professional talk insurance’. These were the words of Pete Bahn, Founder of TGV rockets at the Space Access ‘07 Conference in Phoenix. 1 With Scaled Composites dramatic accident a few months later, Bahn’s new ‘Law of Rocketry’ is a sad reminder that rocket engines are associated with tremendous risks and that it is an activity where insurance contribution is of utmost importance. While more of an industrial rather than an aerospace accident, it does generates an awakening among an industry that has primarily focused on building vehicles, raising money, and enhancing its public profile, on possible response to such tragic events from the insurance industry as reflected by the current mounting interest on risk management and insurance topics. Space transportation is inherently risky to humans, whether they are trained astronauts or paying tourists, given that spaceflight is still in its relative infancy. However, it is easy to forget such blunt truth when subjected to the hype often associated with space tourism and the ventures seeking to enter that market. However, such statement suggests space tourism business does not have its head entirely in the clouds. In addition to the development of a sound business case for space tourism as suggested by Futron’s market study, 2 space tourism professionals are expected to investigate such down-to-earth topics as space vehicle and passenger insurance among others critical issues like space law and regulations; environmental impact concerns; and passen- ger medical and fitness screening/training processes. 2009 and 2010 are generally perceived as bridges years toward the first commercial flights in 2011–2012. Therefore the time is ripe for entrepreneurs, brokers and insurers to step-in and identify their respective concerns, requirements and negotiate risk transfer and insurance solutions to address the burning issues that may other- wise ultimately hamper the industry before it has a chance to prove itself. Space tourism exposure to the space insurance industry scrutiny and benchmarking will provide a Contents lists available at ScienceDirect journal homepage: www.elsevier.com/locate/actaastro Acta Astronautica ARTICLE IN PRESS 0094-5765/$ - see front matter & 2010 Elsevier Ltd. All rights reserved. doi:10.1016/j.actaastro.2010.01.009 E-mail address: [email protected] 1 Bahn also said that ‘Insurance is the single biggest concern of the space tourism industry’. TGV is an acronym for ‘Two Guys and a Van’. Bahn’s pragmatic operational approach is emphasized in the Michelle-B rocket design: a single stage, suborbital, manned rocket vehicle. The Michelle-B would be capable of vertical take-off, carrying one metric ton and a human crew to 100 km. See www.tgv-rockects.com 2 ‘Space Tourism Market Study’, from FUTRON Corporation, October 2002, ‘A Fresh Look at Space Tourism Demand’, from FUTRON Corporation, June 2006 and ‘Suborbital Space Demand Revisited’, from FUTRON Corporation, August 2006. Acta Astronautica 66 (2010) 1633–1638

Upload: pepehux

Post on 25-Jan-2016

7 views

Category:

Documents


3 download

DESCRIPTION

About Risks article

TRANSCRIPT

Page 1: Space Tourism Risks a Space Insurance Perspective 2010 Acta Astronautica

ARTICLE IN PRESS

Contents lists available at ScienceDirect

Acta Astronautica

Acta Astronautica 66 (2010) 1633–1638

0094-57

doi:10.1

E-m1 Ba

space to

Bahn’s p

rocket

Michell

and a h

journal homepage: www.elsevier.com/locate/actaastro

Space tourism risks: A space insurance perspective

Denis Bensoussan

Hiscox, France

a r t i c l e i n f o

Article history:

Received 16 June 2009

Received in revised form

24 December 2009

Accepted 5 January 2010Available online 24 February 2010

Keywords:

Space

Tourism

Risks

Insurance

Liability

65/$ - see front matter & 2010 Elsevier Ltd. A

016/j.actaastro.2010.01.009

ail address: [email protected]

hn also said that ‘Insurance is the single big

urism industry’. TGV is an acronym for ‘Tw

ragmatic operational approach is emphasize

design: a single stage, suborbital, manned r

e-B would be capable of vertical take-off, carr

uman crew to 100 km. See www.tgv-rockects

a b s t r a c t

Space transportation is inherently risky to humans, whether they are trained astronauts

or paying tourists, given that spaceflight is still in its relative infancy. However, this is

easy to forget when subjected to the hype often associated with space tourism and the

ventures seeking to enter that market.

The development of commercial spaceflight constitutes a challenge as much as a

great opportunity to the insurance industry as new risks emerge and standards, policies

and procedures to minimise/mitigate and cover them still to be engineered.

Therefore the creation of a viable and affordable insurance regime for future space

tourists is a critical step in the development of a real space tourism market to address

burning risk management issues that may otherwise ultimately hamper this nascent

industry before it has a chance to prove itself.

& 2010 Elsevier Ltd. All rights reserved.

‘Amateurs talk propellant, professional talk insurance’.These were the words of Pete Bahn, Founder of TGVrockets at the Space Access ‘07 Conference in Phoenix.1

With Scaled Composites dramatic accident a few monthslater, Bahn’s new ‘Law of Rocketry’ is a sad reminder thatrocket engines are associated with tremendous risks andthat it is an activity where insurance contribution is ofutmost importance. While more of an industrial rather thanan aerospace accident, it does generates an awakeningamong an industry that has primarily focused on buildingvehicles, raising money, and enhancing its public profile, onpossible response to such tragic events from the insuranceindustry as reflected by the current mounting interest onrisk management and insurance topics.

Space transportation is inherently risky to humans,whether they are trained astronauts or paying tourists,given that spaceflight is still in its relative infancy.However, it is easy to forget such blunt truth when

ll rights reserved.

gest concern of the

o Guys and a Van’.

d in the Michelle-B

ocket vehicle. The

ying one metric ton

.com

subjected to the hype often associated with space tourismand the ventures seeking to enter that market.

However, such statement suggests space tourismbusiness does not have its head entirely in the clouds. Inaddition to the development of a sound business case forspace tourism as suggested by Futron’s market study,2

space tourism professionals are expected to investigatesuch down-to-earth topics as space vehicle and passengerinsurance among others critical issues like space law andregulations; environmental impact concerns; and passen-ger medical and fitness screening/training processes.

2009 and 2010 are generally perceived as bridgesyears toward the first commercial flights in 2011–2012.Therefore the time is ripe for entrepreneurs, brokers andinsurers to step-in and identify their respective concerns,requirements and negotiate risk transfer and insurancesolutions to address the burning issues that may other-wise ultimately hamper the industry before it has achance to prove itself.

Space tourism exposure to the space insuranceindustry scrutiny and benchmarking will provide a

2 ‘Space Tourism Market Study’, from FUTRON Corporation, October

2002, ‘A Fresh Look at Space Tourism Demand’, from FUTRON

Corporation, June 2006 and ‘Suborbital Space Demand Revisited’, from

FUTRON Corporation, August 2006.

Page 2: Space Tourism Risks a Space Insurance Perspective 2010 Acta Astronautica

ARTICLE IN PRESS

(footnote continued)

‘Space Launch Vehicle Reliability’, I-Shih Chang, Crosslink, Aerospace

Corporation magazine, 2000. According to NASA, 4% of the people who

have flown in space have perished (See supra. 3).6 Talking of extreme sports or adventures safety records, very often

their inner purpose dictates that they involve danger even if it is make-

believe danger. To a greater extent as in sky-diving or bungee jumping,

what is really being tested is pure nerve and resistance to a situation of

perceived physical danger rather than actual risk of physical danger

per se. In this respect, without going so far as comparing it to the Russian

Roulette space travel would be enormously more dangerous. Perhaps

more relevant in term of degree of risk is the example of Mount Everest

climbing. Since 1990 until today, there have been 1,640 people who

ascended Mount Everest of whom 73 have died. The fatality rate is thus

about 4.4% (fatality rate is defined as successful summits compared to

D. Bensoussan / Acta Astronautica 66 (2010) 1633–16381634

valuable opportunity to conduct necessary reality checksof the proposed space activities or applications and betterbalance the conflicting interests of business and dreams. Itis a fantastic opportunity to gauge and stimulate theinterest of the space community towards a sound riskassessment, prevention culture and the development ofrisk transfer strategies.

The creation of a viable and affordable insuranceregime for future space tourists would be a critical elementin the development of the overall space tourism market.

It constitutes a real challenge as much as a greatopportunity to the insurance industry as the full range ofrisks is not yet identified and standards, policies andprocedures to minimise/mitigate and cover risks have stillto be engineered.

In this view, we will analyse the most stringent issueschallenging future buyers and sellers of insurance coversfrom an underwriter of space risks perspective.

1. Space tourism: risk identification

1.1. Spaceflight is a risky business

‘Historically, 4% of the people who have flown in spacehave perished’ according to NASA.3 Such records togetherwith the highly visible Challenger and Columbia disastersand more recently with Scaled Composite accident andSoyuz repeated near-catastrophic re-entries, tend to provethat Space transportation is inherently risky as space-flight, commercial or otherwise, is still in its relativeinfancy and rocket technology is all but fully mastered.

In its landmark report, the Columbia Accident Investi-gation Board warned that ‘because of the dangers ofascent and re-entry, because of the hostility of the spaceenvironment, and because we are still relative newcomersto this realm, operation [y] of all human spaceflight mustbe viewed as a developmental activity. It is still far from aroutine, operational undertaking’. Federal Aviation Ad-ministration Associate Administrator Dr. George C. Nieldonce said that ‘Passengers will be riding a vessel packedwith a volatile mix of carefully processed chemicalingredients, thousands of interdependent parts, andextremely sophisticated software; and they will be boundfor an inhospitable environment far, far away from wherethey bought their tickets. Private human spaceflight is likeclimbing Mount Everest with a lot farther to fall’.

Space tourism risks are often downplayed or forgottenand it is easy to get lured in the hype and glossymarketing that is often associated with this activity andthe ventures seeking to serve that emerging market.4

Behind the smoke screen created by glossy brochures,websites and public relations stunts boasting recreation inthe fantastic space environment and the thrill of a daringlife-threatening adventure to would-be clients, lie spacetravel grim reliability and safety records.5 The risk of

3 ‘Informed consent for space faring passengers’, from Tracey L.

Knutson, SpaceNews, April 30, 2007.4 ‘Risk comes from not knowing what you’re doing’, Warren Buffett.5 Of the 4378 space launches conducted worldwide between 1957

and 1999, 390 launches failed resulting in a success rate of 91.1%, from

death is an order of magnitude higher than for otherextreme experiences like bungee or base jump oracrobatic flight.6 Potential customers need to be explicitlywarned of the full dangers of space travel. Here is theparadox of space tourism, torn between the promotion ofrisk and the promise of maximum safety, betweenmarketing and reality.

1.2. Spacecraft damage insurance

One of the first items the insurance market will have todetermine is the nature of space tourism-related risks inorder to apply dedicated assessment skills and under-writing methods and criteria.

A symbolic yet currently hotly debated issue within theinsurance industry relates to the technical nature of thefuture insurance coverage: is the lead vehicle hull risk anaviation risk or a space risk? Far from being a trivial issue,the answer to this question must be addressed through itsvarious characteristics and will greatly influence theoverall structure and cost of the insurance package.

1.2.1. Legal

The issue of defining outer space is a question ofdemarcating the boundary between outer space and theatmosphere. Since 1959, the issue of defining outer spaceremains a topic for deliberation in the United NationsCommittee on the Peaceful Uses of Outer Space(UNCPUOS). However, to this day all efforts to draw aninternationally recognised line between the atmosphereand outer space have end up in vain since the internationalcommunity has not yet reached a consensus due to manypolitical, military, diplomatic, legal and other concerns. Asa result there is no international legal definition of thedemarcation between air space and outer space.

Two main delimitations of the atmosphere and outerspace are generally mentioned.

If one view suggests that outer space begins at analtitude inaccessible for aircrafts with aerodynamicprinciples of sustaining the flight, i.e. 30–40 km abovesea level, the Karman7 line which lies at an altitude of

fatalities). Source: www.mounteverest.com.7 When studying aeronautics and astronautics in the 1950s,

Theodore von Karman, a Hungarian–American engineer and physicist,

calculated that above an altitude of roughly 100 km, in accordance with

the celestial mechanics law, a vehicle would have to fly faster than

orbital velocity (7.9 km per second) in order to derive sufficient

aerodynamic lift from the atmosphere to support itself.

Page 3: Space Tourism Risks a Space Insurance Perspective 2010 Acta Astronautica

ARTICLE IN PRESS

D. Bensoussan / Acta Astronautica 66 (2010) 1633–1638 1635

100 km (62.1 miles) above the Earth’s surface remainsnowadays the most commonly used reference to definethe boundary between the Earth’s atmosphere and outerspace. This definition is accepted by the FederationAeronautique Internationale (FAI).

Reaching outer space is the raison d’etre and the topselling argument for all space tourism projects in order togrant potential customers astronaut wings. Given thegenerally admitted definition of 100 km, most vehicleshave targeted to reach outer space and as a result wouldqualify as spacecraft. It is therefore logical that a space-craft flying in outer space would be considered as a spacerisk. Therefore, from a legal standpoint there is noambiguity as to the nature of space tourism-related risks.

1.2.2. Technology

When observing space tourism vehicle designs, it is afact that most of them are largely inspired if not similar intheir external appearance to the designs of today businessjets. One reason is that aeronautics principles and aircraftjet propulsion are the safest and more reliable solutions totimely reach the outer fringes of the air space. Anothergreat incentive behind these designs is also to benefit fromthe aeronautics proven and experienced technologies.Another less obvious reason may lie in the interest to havethese new suborbital vehicles look as familiar as possiblewith today jets to give some measure of confidence andcomfort to potential customers, investors and insurers.

However, beyond external resemblance, a sea ofdifferences distinguishes jet aircrafts from space tourismvehicles.

The main difference and the one dramatically increas-ing the space vehicle risk profile is the propulsion mode:turbojet running on jet fuel as opposed to rocket enginerunning on liquid oxygen/hydrogen, ergols, methane/propane.8

Other major differences involve re-entry technology,redundancy scheme, safety devices and procedures andground maintenance and vehicle handling.

In addition, full consideration should be given to theissue of certification and licensing. The two respectiveregimes are widely different in terms of constraints. Therigid ICAO-led certification regime with its stringentobligations for civil aircrafts at equipments and systemslevels explained by its vocation as a mass transportationmode, as opposed to more accommodating domesticlicensing regimes based on requirements and bestpractices for launch systems and spacecrafts.

1.2.3. Human experience

The journey to outer space will be a totally newexperience which would have no similarity with air travel.

The main differences will relate to the internal andexternal environment, the physical and psychologicaleffects on the passenger, travel’s danger perception bythe passenger, the cost and the purpose of the travel: mass

8 Statistics show that among the causes of failure for space launch

vehicles worldwide from 1980 to 1999, propulsion subsystem problems

predominated (56% of launch failures). That particular subsystem

appears to be the Achilles’ heel of launch vehicles.

commodity transportation at affordable price as opposedto an exclusive, dangerous, gratifying and costly adventure.

1.2.4. What is the insurance industry answer?

The prototypical nature of the risks combined with ahigh degree of new technology and the inadequacy or lackof relevant historic statistics compel a case by caseanalysis from specialist underwriters.

For this reason, this risk would in priority be bestaddressed by the space insurance market with itssystematic technical analysis and tailor made coveragesrather than the aviation insurance market which is ill-equipped for such unique/new risk as it is more used todeal with large fleet, common designs patterns and masstransportation.

When vehicles will reach reasonable levels of relia-bility, design and equipments communality, flight fre-quency and commercial sustainability the insurancemarket forces and underwriters will be able work outinsurance solutions of lesser exceptional nature.

1.3. Global risk picture

1.3.1. Spacecraft physical damage (hull risk)

The primary risk which insurers would consider andanalyse is related to physical damages that may affect SpaceTourism vehicles themselves in the course of their opera-tions. Such risk is usually called within the marine, aviationand space insurance markets the hull risk. By extension tospace tourism, ‘Hull’ in the insurance policies would refer tohulls, machinery, instruments and the entire equipment ofthe vehicle. It essentially consists in all risks of physical lossor damage to the vehicle whilst on the ground and intransit from any cause except those specifically excluded.Standard exclusions are: wear, tear and gradual deteriora-tion, mechanical breakdown, war, strikes, riots, civilcommotions, effects of radiation or nuclear device. How-ever, the term ‘all risks’ can be misleading as it does notinclude loss of use, delay, or consequential loss.

What the policy covers is the reinstatement of theaircraft to its ‘pre-loss’ condition if repairable damage isinvolved; or some other form of settlement in the eventthat more substantial damage is sustained. The form ofsettlement will depend on the policy conditions. Inpractice, an indemnity will be paid by the insurers tothe owner of the vehicle to repair for the consequences ofthe event and revert the owner to the status quo ante. Theindemnity is generally based on an agreed value or thereplacement cost of the vehicle.

Today, the vast majority of aircraft and satellite hullpolicies are arranged on an ‘Agreed Value Basis’. Thisprovides that the Insurers agree with the Insured for thepolicy period, the value of the asset and as such, in theevent of total loss, this Agreed Value is payable in full.

1.3.2. Spacecraft liabilities

1.3.2.1. Passenger. Passenger liability insurance is not re-quested under current US Federal Regulation. Under thislegal regime, potential space tourists will be flying at their‘own risk’ by signing waiver of recourse on the basis of

Page 4: Space Tourism Risks a Space Insurance Perspective 2010 Acta Astronautica

ARTICLE IN PRESS

D. Bensoussan / Acta Astronautica 66 (2010) 1633–16381636

informed consent. The legal value of these waivers isquestioned by US trial lawyers. It is likely to be challengedbefore US States courts if waiver regulation is not en-dorsed at State Law level. The definition of the criticalinformed consent requirement may also represent anunreachable objective due to the uncertain nature, extentand availability of the information to be provided to thepotential passenger and its inherent impenetrability tothe non-professional.

Faced with such eventuality and guided by a wise riskmanagement strategy, space tourism ventures wouldlikely be inclined to buy space passenger liabilityinsurance to cover for bodily injury claims in spite or inaddition of the waivers.

1.3.2.2. Third parties. The FAA, as of today the only in-stitution that has defined, within its licence framework,rules applicable to Space Tourism,9 requires a compulsoryinsurance cover for Space Tourism vehicles flying from theUnited States. Such cover will also likely be requires forvehicles flying from other countries within the licence/authorisation framework as for traditional rocket launches.

The amount of this compulsory cover may varydepending of the licensing authority assessment of therisk and the determination of the ‘Maximum Probable Loss’which is the greatest dollar amount of loss for bodily injuryor property damage that is reasonably expected to resultfrom a licensed or permitted activity. However, therequired amount will not exceed USD 500,000,000 giventhat third party claims in excess of this amount will be paidby the United States Government up to USD 1,500,000,000.

1.3.3. Spaceflight participant personal accident

This risk calls for an essential scrutiny within the spacetourism risk typology, first as a potential source of concernsfor personal accident insurers due to possibility of megaexposure during ‘VIP or high net worth flights’ featuringmillionaires and celebrities. As a result, especially if suchflights are considered, the risk of passenger personalaccident under or uninsurability due to shortage or lackof available insurance capacity should be anticipated byoperators and eventually mitigated so as not to become anobstacle to space tourism business development.

Even if not mandatory for the passengers for the timebeing — this may well changed with the first commercialflights approaching— personal accident insurance wouldbe used to offset liability waivers contracted with the

9 Under current US Law (Code of Federal Regulations, Title 14,

Chapter III, in accordance with the Commercial Space Launch Amend-

ments Act passed by Congress in 2004, the so-called ‘FAA rules for Space

Tourism’), the licence attribution process conducted by the FAA includes

a hazard analysis which aim is to assess third party liability risks

potentially resulting from Space Tourism activities. The hazard analysis

is based on the following elements:

� Likelihood of any hazard causing death or serious injury to the public

must be ‘extremely remote’.

� Likelihood of any hazard causing property damage to the public

must be ‘remote’.

� Major safety-critical system damage, reduction in safety margins or

significant increase in crew workload also to be ‘remote’.

operator and fill the passenger ‘coverage hole’. As such, itwould also represent a promising development opportu-nity for specialist insurers who currently providespersonal accident for professional and non-professionalastronauts on the International Space Stations.

The covers to be proposed to the space passengerswould be no different from existing astronaut coversand would be based on the following terms and condi-tions:

personal accident benefits would be payable in theevent the passenger dies or loses limbs or in case ofaccident during the training or expedition period(including re-entry); � provision of an indemnity for travel costs incurred due

to the inability to go on a booked spaceflight as a resultof accident or illness.

The operative time of the cover would include the trainingperiod plus the flight.

In respect of the sum insured, the insurance market cancurrently provide standard capital insured from USD2,000,000 up to USD 5,000,000 but in no event exceedingfive times the annual salary. As mentioned earlier the issueof accumulation and limitation of capital insured aboard asingle spaceflight will have to be addressed. Rates generallybased on the capital insured, will also strongly reflect in thecase of space tourism the valuation of the pure risk ofspacecraft failure during pre-flight and flight phases.

Standard exclusions would apply including the pre-existing condition exclusion clause.

1.3.4. Ancillary covers

Other risks while not directly related to space tourismmay exist in connection to the operation and trade ofsuborbital flights. They would be no different to the risksrelated to the normal conduct of a media-sensitivebusiness and covers would be generally available in theinsurance market. Within this category, the risk ofoperator loss of revenue from business interruptionappears to be of critical importance. Regulators, financiers,primary space risks insurers and operators will likely beinterested to implement such cover so as to guarantee thecontinuity of the business and the protection of theirinvestment in the event of a major accident. Political risksand terrorism risks would also qualify for this category.

1.4. What will happen in case of accident?

‘It is a matter of when, not if!’!An accident depending on the circumstances could

jeopardise the entire nascent personal spaceflight indus-try. Since the prospect of an accident should be taken as acertainty rather than a mere possibility, it is key thatforward planning directed to the prevention, managementand mitigation of the impact of such dramatic event is tobe included from the beginning in space tourism opera-tors business plans.

Page 5: Space Tourism Risks a Space Insurance Perspective 2010 Acta Astronautica

ARTICLE IN PRESS

D. Bensoussan / Acta Astronautica 66 (2010) 1633–1638 1637

2. Risk assessment and valuation

2.1. Insurability of the risk

2.1.1. Key factors

2.1.1.1. Safety figures comparison10. Available statistics forthe future space tourism vehicles are scarce and pro-spective at best at this stage of the development curve butthe most commonly referred reliability figure targeted is 1fatal accident expected for 50,000 flights.11

For comparison sake, civil airliners reliability statisticsfor the 2000–2005 period show 1 fatal accident in 8million flights for 1st world airlines on internationalroutes to 1 in 2 million for developing world airlines.12

2.1.1.2. Testing. For nascent activities based on noveltechnologies, extensive testing and qualification is ofparamount importance. It essentially allows to demon-strate the flightworthiness, safety and reliability of thevehicle and to qualify its design and processes as well asproviding useful data related to the operational reliability,robustness and tolerance of the vehicle and its compo-nents to extreme stress and conditions. Test campaigns

10 Such comparison of reliability/safety records between different

transportations systems or activities invariably leads to the vast subject

of the acceptability of the risk by the public and the related notion of

perceived risk versus actual risk. The subject has been extensively

discussed and we will not address it in this paper, however, interesting

information on what may be acceptable risk comes from a recent study

on product liability cases and jury perception before the US Courts

conducted jointly by Design News and the Chicago Law Firm of Rooks,

Pitts and Poust. Nearly half the jurors participating in the survey

believed that a product should be taken off the market if only one person

in a million is seriously injured while using it.11 Will Whitehorn, President Virgin Galactic in a keynote speech at

ESA ESCL Practioners Forum ‘Space Tourism—Legal and Policy Aspects’,

ESA, Paris, March 17, 2006.

The expected reliability of future commercial space vehicles including

Virgin Galactic’s has fuelled a vast and interesting debate which remains

so far unsettled. Various estimations have been proposed. For example,

in an article published in 2004 on the online publication Tech Central

Station titled ‘Is Space Tourism Ready for Takeoff? Probably not’,

Alexander Tabarrok, an economics professor at George Mason Univer-

sity, argues that spacecrafts are today not reliable enough to support

Space Tourism, and will not be for some time: ‘Rockets remain among

the least safe means of transportation ever invented. Since 1980, the

United States has launched some 440 orbital launch rockets (not

including the Space Shuttle). Nearly five percent of those rockets have

experienced total failure [y]’. As for the space shuttle, two have been

destroyed in 129 missions, both with the loss of the entire crew (14

astronauts) which gives roughly a 2% death rate per astronaut-flight, and

an average failure rate of nearly one in every 60 missions (the original

disaster potential was estimated during shuttle development at one

every 75 missions). Using an extrapolation based on reliability

probability of space launches, Mr. Tabarrok argues that vehicles that

would suffer failures only once every 10,000 flights will not emerge until

the 22nd century. Critics of this view have argued that it was unwise to

compare SpaceShipOne and other suborbital reusable vehicles with

expendable rockets and the space shuttle and that there is reason to

believe that due to their specific low-risk design such spacecrafts would

reach reliabilities of 1 in 10,000 or better within years, rather than

centuries.12 From ‘Airline Safety: Where are we?’, Arnold Barnett, George

Eastman Professor of Management Science, MIT Sloan School of

Management. Arnold Barnett is one of the US foremost authorities on

aviation security.

for new civil aircraft generally span over several hundredshours of flights.

Virgin Galactic and Space Adventures have announcedextensive ground and flight testings and validationcombined with 50 to 100 flight tests before 1st commer-cial flight.13 The extent, exhaustiveness and the success ofthe test campaign will play an immense role in theassessment of the primary spaceflight risk by the insurersand to an extent in the reliability and the attractiveness ofthe activity for the general public.

2.1.1.3. Flight environment control. One important condi-tion of the overall spaceflight assurability would be thepassengers health condition and their capacity to bear thephysical and psychological constraints specific to flyinginto space and the space environment. Flying to the fringeof outer space and spending few minutes in the spaceenvironment will require clear health condition and ade-quate preparation even if lighter for the private passengerthan for professional astronauts.

In this respect, when boarding the spacecraft, passen-gers should have been trained and cleared through medicalchecks and pre-flight training. It would be an essentialcondition precedent the formation of future personalaccident insurance contracts and operator liability covers.

2.1.1.4. Maximisation of the passenger safety. Operatorswould also have to demonstrate that they have taken ev-ery possible action at every step of the design, tests, op-eration of the spacecraft to ensure that passengers remainsafe and healthy during and after the flight. Safety wouldhave to be the primary focus and responsibility of theoperators and should be at the heart of the whole spacetourism business model. Safety should hold absolute swayover competing priorities like optimising performance,lower costs and reusability which should only come sec-ondary to providing the most protected and least stressfulenvironment to the amateur space traveller. This is notmerely a moral concern, but essential business practice.

This could be achieved through the implementation ofvarious active or passive protective devices and proce-dures aimed at preventing the spacecraft failure andensuring the spacecraft and passengers survivability inthe event of failure.

Safety procedures and devices could range fromtraditional cabin pressurisation and protection, g-con-strained trajectories to more innovative concepts likepressure suits, helmets, internal and external airbags,ejection capsule and parachutes.

2.2. The final underwriting frontier

2.2.1. Pricing methods and criteria of the pure space risks

There is a consensus among operators, brokers andthe insurance markets that maiden flights will beuninsurable and that premiums will remain very high

13 ‘We are planning 50 test flights before we go up so we will be

confident of getting it right’, Richard Branson, owner of the Virgin Group,

Sunday Mirror, May 18, 2008.

Page 6: Space Tourism Risks a Space Insurance Perspective 2010 Acta Astronautica

ARTICLE IN PRESS

D. Bensoussan / Acta Astronautica 66 (2010) 1633–16381638

until commercial spacecrafts produce 5 to 15 flightswithout accident. At this point only the amount of dataavailable to underwriters will allow an adequate assess-ment of the reliability of the vehicles and potentially leadto review the pricing.

The pure space risk element will be the main driver forthe assurability and the definition of the coverageconditions and price of space tourism insurance. It willbe assessed and valued by the underwriter in no differentfashion that the other traditional space risks by applyingverified methods and criteria to this new space activity:the underwriter will appreciate the intrinsic quality of therisk.

The major criteria to assess the quality of the riskwould lay on the analysis and valuation of the technicalreliability of the spacecraft. Of the multiple elements to betaken into consideration, the know-how, experience andreputation of the prime manufacturer and major sub-contractors, the heritage of the design, critical compo-nents and production methods, the rationale behind thetechnical choices and finally the results of the test andvalidation campaign will rank highest.

Other important factors will shape the space under-writer decision. While variations in respect of assurability,conditions and premium will exist between underwriters,they will essentially use the same factors pool. Thevariations will rather depend of their respective under-writing philosophy and how they perceive and weightthese factors.

Beyond expected consideration to insurance businessbasics related to securing underwriting profit and risksportfolio balance, underwriters will give specific consid-eration to the overall business sustainability due to spacetourism limited, niche market and inherent fragile nature.The incurred volatility and elasticity of the risk andrevenues and premium supply continuity will have astrong influence in the assessment.

2.2.2. Risk management strategy

Since there is no data and history for this activity,operators will have to explain to the underwriter exactlywhat they are doing, how they are doing it and justifytheir technical choices.

In this respect, which factors would help operators getbetter prices and conditions?

The capacity to demonstrate that passenger safety isthe top priority and dominates every business, design andoperational choices would be seen as very positive. Asuccessful demonstration will allow the underwriter toacknowledge the operator sound risk management philo-sophy and that a design-to-safety approach has beenadopted and supersedes every other requirement.

Other positive factors will include:

the largest possible use of proven, mature technologiesand conservative heritage designs with lots of marginsand redundancies; � an extensive test and certification campaign enabling

the collection and analysis of relevant reliability andsafety records;

� the spacecraft capacity to prevent, mitigate and

survive accidents and protect passenger safety in allcircumstances (crashworthiness);

� the prevention and limitation of the operator liability

exposure to claims through the implementation ofwaivers, disclaimers, hold harmless agreements andthe application of friendly law and jurisdiction in thespaceflight contract and the application of specificlimitations in insurance contracts, i.e. franchise, de-ductible, exclusions; and

� the limited level of the capital insured.

Space tourism is becoming a reality: within a few years,private space travel has gone from concept to near-reality.Virgin Galactic’s SpaceshipTwo suborbital spacecraft isalready taking reservations from aspiring space tourists,and hopes to start commercial flights by 2011–2012. Amazonfounder Jeff Bezos’s own space tourism craft is on a similartimeline. The prototype of Las Vegas hotel billionaire RobertBigelow’s ‘space hotel’, a private space station that could berented out to everyone from wealthy vacationers to nationalspace programs, has been in orbit since July 2006.

However, given current economic conditions, caution isadvisable as to the future development and success of spacetourism. A recent Sunday Times opinion qualified SpaceTourism as a ‘USD 200,000 trip to nowhere’, stressing itslack of business case and the penalty of its exclusiveness.

Nevertheless, for all the technological marvels, chal-lenges and risks to be mastered to make space tourismhappen, this ambitious enterprise may yet appear in-eluctable if spaceflight proves to be rooted in humannature and aspirations. William Burroughs once said that‘Man is an artifact designed for space travel’.14

Indeed if ‘Space tourism is probably unstoppable’according to Mr. Binnie from Virgin Galactic, it couldthen be seen rather than as a mere new recreation forwealthy action seekers, as a pioneering step possiblyannouncing a major evolutional and economic shift.Namely, the transition from an earth-centric to a spacefaring society with the generalisation and facilitation ofhuman access to space. Like for past Humanity risk ladenattempts to venture out of its known boundaries toexplore remote and hostile yet promising grounds,insurance would be a key enabler.

14 In ‘Civilian Defense’, 1985.