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Government Space The Almighty Buck Science Technology

Could Insurance Coverage Hobble Commercial Space Flights? 169

Posted by samzenpus
from the devil's-in-the-details dept.
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."
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Could Insurance Coverage Hobble Commercial Space Flights?

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  • by BitHive (578094) on Thursday June 07, 2012 @07:25PM (#40251177) Homepage

    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).

    • by symbolset (646467) *
      Self insurance seems a likely option. People aren't building NASA launch vehicles in their garages. Yet.
      • by rtb61 (674572)

        More likely typical corporate bullshit, will create one of companies per launch, all debt and no capital. They'll also dump all employees wages and pensions in there, corporate greed being corporate greed, any time a launch fails, meh tough, bankrupt the $2 debt ridden company, employees lose all wages and pensions (excluding the corporate executive ass hats who created the scheme, their wages and conditions are covered by another company) and screw the innocent victims. Then it's create the next company f

    • by geekoid (135745)

      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.

    • Not all launches are from Florida. We have a space facility here in California too, two if you counted Edwards AFB for the shuttle landings. Check out the proximity of the town of Lompoc to the Vandenberg launch complex. Nobody expected parts of a space shuttle to come raining down over several states. If something that epic occurred, would you be willing to be the farm that something won't *ever* go that wrong during a rocket launch?
    • Re: (Score:3, Funny)

      by Anonymous Coward

      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 som

    • It's mostly lawyers fees for working out how much money they can make from the unusual conditions of space launches.
    • So a launch from Cape Canaveral could cause $2.7 Billion in damage?

      Whoever did this study must have hired MPAA/RIAA accountants.

    • by Eskarel (565631)

      From either the launch vehicle itself or parts thereof crashing into a populated area. It's not like the entire flight path is over the ocean. When they say "launch" they don't mean just the minute or so after the rockets fire, they mean the entire trip initiated by said launch.

      9/11 cost 7 billion just in terms of victim compensation plus about 21 billion to replace the buildings. Sure 9/11 was deliberate, but that doesn't mean you couldn't have an airline accident on that scale. 2.7 billion in damage from

    • by Luckyo (1726890)

      Hitting a middle of a populated area after failure is one of the nastier scenarios. That could bankrupt even something of the caliber of AIG. Large, heavy high speed objects hitting the ground tend to cause significant amounts of damage. Consider that it's not worth it to equip a tactical ballistic anti-ship missile with an explosive warhead because it doesn't add a meaningful amount of energy to one already released on impact. Space vehicle has a potential of having similar trajectory and impact force.

      Real

  • 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

    • by geekoid (135745)

      Let me know when airliners are launching things into space that could destroy satellites, destroy the ISS, and make space harder to access.

      • by Algae_94 (2017070)
        They are flying planes all around the world that have been shown capable of destroying massive skyscrapers and thousands of lives. From a financial standpoint, I find it hard to believe that commercial spacecraft could cause significantly more damage.
        • by Hadlock (143607)

          Sure, but once the airplane + building hit the ground, it doesn't leave highly lethal debris floating in midair immediately in the approach/takeoff airspace over every airport on the globe. Space debris is there, effectively forever. Geostationary sattelites are only going to exist until the beginning of WW3, when someone launches a bunch of flak into an intersecting elipitcal orbit to take out the vast majority of spy and comm sattelites.

    • by cpu6502 (1960974)

      Apparently the government does it: "The Federal Aviation Administration (FAA) Aviation Insurance Program provides products that address the insurance needs of the U.S. domestic air transportation industry not adequately met by the commercial insurance market. The FAA currently is providing war risk insurance under two separate programs; 1) Premium War Risk Insurance, and 2) Non Premium War Risk Insurance."

      http://www.faa.gov/about/office_org/headquarters_offices/apl/aviation_insurance/ [faa.gov]
      Copied by Opera. Vis

    • Air carrier liability is partly limited by the Warsaw Convention and other legislation but they are usually still liable for acts of criminal negligence and open to civil claims. Consequently, mention the word "aviation" in a conversation with an insurer and you can be fairly certain you'll be surprised by the climb rate of premiums :)

    • 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.

      That, and failure rate for civil aviation is several orders of magnitude lower. If civil aviation failed at the average rate that boosters do - there would be over 50 crashes on take off per day at Sea-Tac alone instead of only two in nearly seventy years of operation. (And Sea-Tac is far from the busiest airport in the US, let alone

      • by drgould (24404)

        That, and failure rate for civil aviation is several orders of magnitude lower.

        Now, yes.

        But what about, for example, SpaceX Falcon boosters which are designed from the beginning for reliability and reuse? Instead of boosters which are designed merely "good enough" because they're only used once.

        SpaceX has a much different mindset than Lockheed Martin or McDonnell Douglas. They plan on making money selling launches to private and government clients. They have a strong incentive to make their boosters as rel

        • SpaceX has a much different mindset than Lockheed Martin or McDonnell Douglas. They plan on making money selling launches to private and government clients. They have a strong incentive to make their boosters as reliable as possible, and from everything I've heard, that's exactly what they're doing.

          LockMart and Boeing and the ULA make their money selling launches to private and government clients too. (McDonnell Douglas was bought out by Boeing nearly fifteen years ago.) So they also have every incentive

  • Three truths (Score:5, Insightful)

    by Caerdwyn (829058) on Thursday June 07, 2012 @07:41PM (#40251327) Journal

    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.

    • by jhoegl (638955)
      I am an old curmudgeon who doesnt believe in space. Your space shuttle debris just hit my car, my roof, and my wife after flying over for a landing.
      I sue you for the car and roof, 2.8 billion sir!
      • by bre_dnd (686663)
        Grievance over one lost life -- 2 million dollars

        One roof replacement -- 50.000 dollars

        Day value of one used car -- 10.000 dollars

        Cheque made out to the claimant, US$ 2.060.000

    • by c0lo (1497653)

      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.

      What about the lawyer of other countries? Especially patent lawyers (able to block your products based on its rounded corners?)

    • 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

      Amen, brother!

      Can you imagine if we could take all the money that the big companies have invested in patent litigation and invest that in the space program or some other scientific endeavor?

    • That's great and all. But if a satellite hits your house in order to bring the joys of Satellite TV to the masses and the enrichment of the shareholders... why should you shoulder the cost?

      People always really hate lawyers right up to the point where they've been wronged. Let's be honest. People are douche bags. Especially corporations. If they don't have to pay, they won't pay. Doing freelance work I've seen this first hand. If it weren't for contract law people would essentially just be screwing o

      • So when things go sideways--it's the stock holders that should pay. And if they don't have enough money--which they probably don't, then they should pay for insurance to ensure that someone can pay for their screw ups.

        Also, libertarians forget that the game of give-and-take has been going on for years. The stock holders are specifically protected from paying by the instrument of being a "limited liability company" -- Ltd or LLC. This instrument encourages outside investment, because if stock-holders were liable, they'd have to do a hell of a lot more due dilligence on their stocks. The stock market would crumble, because any shar trade would take about a year.

        But someone has to cover the liability, so we regulate and

    • by AmiMoJo (196126)

      You missed the point entirely. Insurance enables you to take risks. Without insurance every mistake could potentially bankrupt the company.

    • 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.

  • by GoodNewsJimDotCom (2244874) on Thursday June 07, 2012 @07:44PM (#40251345)
    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..
    • by cpu6502 (1960974)

      >>>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).

      • by Tynin (634655)

        >>>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.

        • by cpu6502 (1960974)

          >>>Math fail?

          No word fail. I meant to type: Nationwide insures me for just $110 every 6 months. Or $880 over 4 years.

      • Nationwide insures me for just $110 a month. So that would be $880 over four years

        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.

    • by AmiMoJo (196126)

      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 terrib

    • 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.

      We

  • . . . 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.

  • 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 mo

    • by drinkypoo (153816)

      The problem with mandated insurance is not that it exists but that it is a closed system. Any time you're forced to purchase a service, it should be provided at cost. As it is, the formula used to determine what each member should pay is a secret, so not only is there profit, but you're prohibited from actually knowing what the actual cost is. That's OK for something that you buy by choice, but it's utterly unacceptable for anything you're forced to purchase.

    • Well, it's not just to benefit bankers. It's to insure that if something goes wrong and people are hurt (or property damaged, etc.) those people will be able to be compensated. An uninsured commercial space carrier not only is putting themselves at risk, they're putting everyone at risk of suffering an uncompensated injury without our permission. It's the same reason drivers have to carry insurance: to make sure they don't hurt someone that they can't compensate.

  • 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.

  • ...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,
    • 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

      You must not know anybody who's had to deal with the VA or Social Security/Disability.

      Trust me, they've got plenty of warm bodies dedicated to not paying claims.

    • ...because they have the resources to deal with such a catastrophe.

      ...because they have sovereign immunity, and don't have to deal with it if they don't want to.

  • 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

    • by c0lo (1497653)

      So mexico should build some space ports

      Why not Kenya (low population density) or Congo (launch over the ocean) - both with locations closer to equator? Avoiding 2.7 bills/shot in insurance would make this a reasonable investment.

      • by Hadlock (143607)

        I'm pretty sure Brazil does space launches on a fairly regular basis. Russia has been launching from Kzyrgistan for decades, both military, civilian and commercial.

        • Why not Kenya (low population density) or Congo (launch over the ocean) - both with locations closer to equator?

          Congo? Wrong ocean. You want to launch toward the East to get the benefit of Earth's rotation - it's more difficult to reach orbit launching to the west.

          Kenya, on the other hand, could probably put together a fairly attractive package of inducements, if ITER didn't make exporting rockets to third world countries illegal.

    • I'll just leave this here. http://en.wikipedia.org/wiki/Enterprise_liability [wikipedia.org]

      For example, suppose high-risk manufacturing activities are shunted into one corporation, while a second "marketing" corporation keeps all the profits. In the case that someone was injured by the manufacturing activity, a court might apply the enterprise liability doctrine to allow recovery from the marketing corporation, which holds all the assets.

  • 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.

  • 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 pr
  • It seems.... (Score:4, Insightful)

    by Dcnjoe60 (682885) on Thursday June 07, 2012 @09:34PM (#40252211)

    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.

    • Insurance for NASA rocket launches isn't and cheaper than for private launches, so this isn't an issue of private vs. public efficiency, it's just a question of who bears the risk: the feds or the organization launching the rocket. Since those used to always be the same organization, it wasn't a complicated question in the past. It is now.
      • by Dcnjoe60 (682885)

        Insurance for NASA rocket launches isn't and cheaper than for private launches, so this isn't an issue of private vs. public efficiency, it's just a question of who bears the risk: the feds or the organization launching the rocket. Since those used to always be the same organization, it wasn't a complicated question in the past. It is now.

        That is exactly the point. The only way for the private sector to be more economical than the public sector in launching space craft is if the private sector doesn't have to bear the full cost (including insurance). The real question is whether or not it is cheaper for the government to pay somebody to launch spacecraft on it's behalf AND pay for insurance and potential damages versus just doing the whole thing itself? Chances are, without a profit motive, it will be cheaper to do it itself.

        • I think you've misinterpreted this. The insurance costs for the private and public sectors are the same. If the government insures a private launch, that's not any more expensive than insuring its own launch, so this won't end up making a difference if, say, the government is deciding whether to launch a rocket itself or hire SpaceX to do it. I think the issue here is actually whether other launch customers (e.g. companies paying to have a satellite launched) will end up on the hook for the cost of insuranc
          • by Dcnjoe60 (682885)

            I think you've misinterpreted this. The insurance costs for the private and public sectors are the same. If the government insures a private launch, that's not any more expensive than insuring its own launch, so this won't end up making a difference if, say, the government is deciding whether to launch a rocket itself or hire SpaceX to do it. I think the issue here is actually whether other launch customers (e.g. companies paying to have a satellite launched) will end up on the hook for the cost of insurance, or if US taxpayers will pick up the tab for every launch. However, if they decide that the customers have to pay, that may reduce the size of the space market sufficiently that private space launch companies like SpaceX are no longer viable, and that is the sense in which this would hurt SpaceX.

            If it really is true that they're considering making it a choice between private contractors + private insurance OR a public launch with free government-provided insurance, that's pretty much horrible policy and it would make me very sad. But TFA seems to focus more on foreign competitors using this to undercut SpaceX pricewise.

            I understand the insurance cost being the same. However, if the private launch company has to pay the insurance and therefore their launch vehicle is too costly for other businesses to use, then the private launch system is not cost effective. The government, since it does not have a profit motive, but obviously should not operate at a loss per launch, either, should be as competitive if not more so than the private company. Fuel to lift a kilogram is the same regardless (although the government may purch

            • The government, since it does not have a profit motive, but obviously should not operate at a loss per launch, either, should be as competitive if not more so than the private company

              Well regardless of what "should" be the case, SpaceX builds rockets much more cheaply than NASA does according to NASA itself [nasawatch.com].

              Chances are the insurance, liability, that is would be less for the government for two reasons. First, it's launch sites tend to be over the ocean or the middle of the desert, so there is less chance of damage to others if a catastrophe occurs

              Currently, SpaceX launches from Cape Carnaveral. That's also where NASA launches. These are the same. But clearly SpaceX could build their launch site anywhere it wanted to, and if it was paying for insurance it would surely choose a location to minimize its liability.

              Second, and probably more importantly, the government is large enough that it can safely self insure itself against the risk.

              If the government is so good at insurance, why doesn't it offer insurance to its contractors? In any case, the choice

              • by Dcnjoe60 (682885)

                I never meant to imply that it wasn't cheaper for the government to contract out to SpaceX than build it's own rockets. However, there is also nothing that would prevent the government (NASA) from using sound business practices in building their own rockets and have similar savings if built themself (still with contracting things out). It would take a change in the way the procurement policy and procedures work, but government is the only place where you sign a contract with a vendor to produce X for $Y

    • by AmiMoJo (196126)

      Look at the nuclear industry to see how this works. The cost of an accident can easily be in the hundreds of billions range and no-one can afford that kind of insurance so the government covers it. Otherwise, they argue, we would not have nuclear power, or it would be "less efficient" and somehow cost more.

      • to be more exact: it's a similar setup. the companies have to have a minimum level of insurance in the 10's of billion range but beyond that since few insurance companies have deep enough pockets to cover much more than that the government acts as the insurer of last resort.

      • by dkf (304284)

        Look at the nuclear industry to see how this works. The cost of an accident can easily be in the hundreds of billions range and no-one can afford that kind of insurance so the government covers it. Otherwise, they argue, we would not have nuclear power, or it would be "less efficient" and somehow cost more.

        It happens in other industries too; above a certain level of catastrophe, the government ends up paying. The main difference with nuclear power seems to be that there's been a long history of military meddling (e.g., that's why we use uranium as fuel in the first place) and there's a significant lobby that completely panics every time someone says "nuclear accident"; the level of safety demanded by such people following an incident is often unrealistic, so they should bear some of the costs of reaching that

      • by Dcnjoe60 (682885)

        Look at the nuclear industry to see how this works. The cost of an accident can easily be in the hundreds of billions range and no-one can afford that kind of insurance so the government covers it. Otherwise, they argue, we would not have nuclear power, or it would be "less efficient" and somehow cost more.

        A public utility is a different activity than launching a payload or people into space. Also, all of those nuclear power plants carry insurance, as do coal, hydro, etc. Lloyds insures most of them. It may be true that the government gets involved with the cleanup, but that is not because they weren't insured. They get involved with the cleanup because it is a public safety issue by that time.

        Electric companies are required to maintain insurance and/or reserves to cover power plant accidents, including nu

        • by AmiMoJo (196126)

          Also, all of those nuclear power plants carry insurance, as do coal, hydro, etc. Lloyds insures most of them. It may be true that the government gets involved with the cleanup, but that is not because they weren't insured. They get involved with the cleanup because it is a public safety issue by that time.

          In the UK each plant is only legally required to have £140m of insurance, and in the US the entire industry is only insured for $10bn. Fukushima has already cost over $200bn, and that doesn't include money spent by the government on things like re-homing people and benefits because they are now unemployed.

          • by Dcnjoe60 (682885)

            Also, all of those nuclear power plants carry insurance, as do coal, hydro, etc. Lloyds insures most of them. It may be true that the government gets involved with the cleanup, but that is not because they weren't insured. They get involved with the cleanup because it is a public safety issue by that time.

            In the UK each plant is only legally required to have £140m of insurance, and in the US the entire industry is only insured for $10bn. Fukushima has already cost over $200bn, and that doesn't include money spent by the government on things like re-homing people and benefits because they are now unemployed.

            The US cap on insurance is $12.6B per incident. The Three Mile Island, the only nuclear accident in the US cost $70 million in damages, mainly for evacuation as the containment building actually contained the accident. The insurance is not for the plant itself, that would be property insurance. The insurance is liability insurance, or damages to others basically for your negligence. So, at Fukushima, the $200B in damages would not be covered by the mandatory insurance in the first place, nor was the dam

    • 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

      • by Dcnjoe60 (682885)

        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.

        I, too, am for smaller government, but, if a business cannot be in business because the risk is too high (ie. cannot get insurance), I don't think that is the government's job to provide the insurance any more that it is the government's job to provide insurance to individuals because they cannot get it. If it is truly to high of a risk for a for-profit enterprise to enter into, then that is the type of activity that the government should be taking on, assuming it values the activity.

        We always hear about h

  • 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.

  • 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 p
  • 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.

  • by Kergan (780543) on Friday June 08, 2012 @07:20AM (#40255045)

    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?

  • 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 do

Nothing is more admirable than the fortitude with which millionaires tolerate the disadvantages of their wealth. -- Nero Wolfe

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