Accounting for Space Debris Insurance

Accounting for Space Debris Insurance: Valuation and Disclosure of

Coverage for Orbital Debris Liability

Introduction

Space debris, also known as orbital debris or space junk, refers to the discarded launch

vehicles or parts thereof and mission-related debris that float around in low Earth orbit. This

orbital junk poses a significant risk to spacecraft and satellites currently in orbit as even small

pieces travelling at high speeds can damage or destroy functioning spacecraft. The population

of space debris has grown substantially over the past decades as space activities have

intensified. While measures are now in place to limit future debris generation, the problem of

background on the growth of space debris and the risks it poses. The second section outlines

the basic structure and valuation of space debris insurance. The third section examines

accounting and disclosure requirements under existing reporting frameworks. The fourth

section proposes best practice approaches for companies to account for and disclose space

debris insurance coverage.

Background on Space Debris

Space debris refers to all non-functional human-made objects, including fragments and

elements thereof, in Earth orbit or re-entering the dense parts of the atmosphere. It includes

inactive artificial satellites, abandoned launch vehicle stages, mission-related debris,

fragmentation debris and spacecraft operating beyond their mission. The population of

While over 30,000 pieces of space junk larger than 10 cm are currently being tracked, the

majority of the millions of debris objects are not being individually monitored due to their

small size. However, even pieces smaller than 1 cm can cause damage if they collide with an

operational spacecraft at hypervelocities of up to 10 km/s. With increasing intensity of space

activities, collisions between debris objects are becoming more likely. Historical incidents

that significantly contributed to debris growth include the 2007 anti-satellite missile test by

China, the 2009 satellite collision between an active Iridium satellite and Kosmos-2251

debris, and more recent fragmentation events of rocket bodies from rocket tests without

sufficient end-of-life disposal.

The population of orbital debris is concentrated in popular orbital regions like low Earth orbit

of space activities. Modelling by NASA and ESA suggests the occurrence of collisions could

become more frequent in the coming years which exacerbates the debris problem further.

While companies take various mitigation measures like deploying into graveyard orbits at

end-of-life and passivation of residual fuel onboard spacecraft, accidental collisions remain a

liability risk associated with satellite operations. Third party property damage from debris

collisions would likely result in substantial compensation costs. The availability of space

debris insurance could help alleviate financial risks to operators from unintentional collisions

and facilitate continued growth of the space industry in a safe and responsible manner.

Commercial space activities will require risk allocation and financial certainty especially as

more countries and companies gain access to space. Space debris insurance could play an

- Insured Parties: Space agencies, satellite operators, rocket manufacturers and launch service

providers would be the primary targets. Coverage could extend to components suppliers or

contractors involved in mission design.

- Insured Risks: Coverage would be provided for statutory and common law third-party

property damage liability arising due to collision with catalogued or non-catalogued space

debris attributable to the insured party. Liability from debris generation during operational

phase as well as post-mission disposal failures would be covered.

- Policy Period: Coverage would last for the estimated orbital lifetime of spacecraft and

rocket bodies, typically 7-25 years in low Earth orbit, to account for risk of collisions over

extended periods in orbit. Policies may be renewable.

- Territorial Scope: Coverage territory would encompass approved orbital locations issued by

licensing authorities to ensure legal jurisdiction over potential claims. Geosynchronous orbits

may require additional consideration.

- Limits of Coverage: Standard per-incident coverage limits would need to be set, with

Valuation of potential future space debris liability insurance policies would involve complex

collision frequencies, assessment of expected damage from varying debris impact scenarios

and an understanding of the insured parties’ past performance and debris mitigation practices.

Models would need to consider factors like:

- Probability of the insured spacecraft/component being involved in a collision annually

based on its orbital characteristics and projected collision environment

- Probability that debris involved in a collision is attributable to the insured party based on

- Effects of economic cycles on premium affordability and underwriting cycles

- Policy period coverage corresponding to full orbital lifetime of debris

Robust actuarial ratemaking using advanced modeling techniques will be essential for

insurers to assess risks, price premiums fairly and ensure long term profitability and

sustainability of a space debris insurance market. Reinsurance will also play a supporting role

to absorb accumulation exposures.

Accounting and Disclosure Requirements

For companies to account for and disclose space debris insurance that may be commercially

available in future, existing financial reporting standards provide useful guidance. Key

requirements applicable are:

IFRS Standards

- IAS 37 Provisions, Contingent Liabilities and Contingent Assets outlines recognition and

measurement of provisions including disclosure of contingent liabilities.

U.S. GAAP

- FASB ASC 275 Risks and Uncertainties requires disclosure of nature of operations and use

of estimates in preparation of financial statements.

- FASB ASC 450 Contingencies provides guidance on when to recognize a liability for loss

contingencies from claims or litigation.

- SEC Regulation S-K requires discussion of risk factors, legal proceedings, and material

- Reconciliation of changes to insurance liabilities, recoveries and premium

revenues/receivables

- Contingent liabilities from potential disputes or gaps in existing coverage

- Concentration risks from exposure to few orbital regions/customer industries

Auditors will aim to obtain sufficient appropriate evidence that liabilities have been fairly

stated and comply with applicable accounting standards and any regulatory reporting

requirements.

Proposed Best Practices for Disclosure

Based on the above analysis, some best practice suggestions for companies to account for and

Risk Management

- Disclose major concentration risks by orbital region/customer.

- Ensure prudent underwriting based on each customer’s debris history.

Regulatory Compliance

- Adhere to national space laws and international conventions on liability.

- Robust internal controls on data quality, estimate changes and reserving.

Improved transparency on the accounting, risk assessment, compliance and governance

confidence among stakeholders and support responsible growth of the novel insurance

segment over long term. Standardized disclosure practices can be expected to evolve as

regulatory experience is gained.

In summary, space debris poses serious financial and technical risks to ongoing space

activities. While prevention and removal efforts are vital, space debris insurance could play

such insurance to develop as a viable long term solution, robust actuarial modeling, prudent

underwriting and transparent reporting practices will be key. Existing accounting standards

provide a useful base for insurers to account for and disclose debris policies. Adopting the

stakeholders and facilitate confidence in this emerging segment. Overall, judicious

pieces travelling at high speeds can damage or destroy functioning spacecraft. The population

of space debris has grown substantially over the past decades as space activities have

existing and future debris collisions remains an issue with serious financial, technical and

geopolitical implications.

This paper explores the role that space debris insurance could play in addressing the problem

through providing coverage against third-party liability risks from debris collisions. It

outlines key accounting and disclosure issues that would need to be addressed by companies

operating in space if such insurance was commercially available. The first section provides

background on the growth of space debris and the risks it poses. The second section outlines

accounting and disclosure requirements under existing reporting frameworks. The fourth

elements thereof, in Earth orbit or re-entering the dense parts of the atmosphere. It includes

inactive artificial satellites, abandoned launch vehicle stages, mission-related debris,

fragmentation debris and spacecraft operating beyond their mission. The population of

catalogued space debris has grown substantially since the dawn of the Space Age in 1957.

purposes, the amount of debris generated has also increased. Key reasons for debris

generation include explosions or collisions that damage functioning spacecraft, jettisoning

upper rocket stages after deployment and unintentional break ups of spacecraft or launch

vehicle stages.

While over 30,000 pieces of space junk larger than 10 cm are currently being tracked, the

majority of the millions of debris objects are not being individually monitored due to their

small size. However, even pieces smaller than 1 cm can cause damage if they collide with an

activities, collisions between debris objects are becoming more likely. Historical incidents

that significantly contributed to debris growth include the 2007 anti-satellite missile test by

China, the 2009 satellite collision between an active Iridium satellite and Kosmos-2251

sufficient end-of-life disposal.

spacecraft. The cascading effect of collisions, where one collision generates more space

debris in highly trafficked orbital ranges, poses a significant long term threat to sustainability

become more frequent in the coming years which exacerbates the debris problem further.

While companies take various mitigation measures like deploying into graveyard orbits at

end-of-life and passivation of residual fuel onboard spacecraft, accidental collisions remain a

liability risk associated with satellite operations. Third party property damage from debris

collisions would likely result in substantial compensation costs. The availability of space

debris insurance could help alleviate financial risks to operators from unintentional collisions

and facilitate continued growth of the space industry in a safe and responsible manner.

more countries and companies gain access to space. Space debris insurance could play an

object caused by the insured party’s defunct space object. Key elements of a potential space

debris insurance product would include:

- Insured Parties: Space agencies, satellite operators, rocket manufacturers and launch service

contractors involved in mission design.

- Insured Risks: Coverage would be provided for statutory and common law third-party

property damage liability arising due to collision with catalogued or non-catalogued space

phase as well as post-mission disposal failures would be covered.

- Policy Period: Coverage would last for the estimated orbital lifetime of spacecraft and

rocket bodies, typically 7-25 years in low Earth orbit, to account for risk of collisions over

extended periods in orbit. Policies may be renewable.

- Territorial Scope: Coverage territory would encompass approved orbital locations issued by

- Claims Administration: Claims process for assessing liability and damages in cooperation

established.

Valuation of potential future space debris liability insurance policies would involve complex

actuarial modeling based on existing debris population statistics, projections of future in-orbit

collision frequencies, assessment of expected damage from varying debris impact scenarios

and an understanding of the insured parties’ past performance and debris mitigation practices.

Models would need to consider factors like:

based on its orbital characteristics and projected collision environment

- Jurisdictional issues around attributing liability across international space activities

- Litigation and disputes risks inflating potential losses

- Effects of economic cycles on premium affordability and underwriting cycles

- Policy period coverage corresponding to full orbital lifetime of debris

insurers to assess risks, price premiums fairly and ensure long term profitability and

sustainability of a space debris insurance market. Reinsurance will also play a supporting role

to absorb accumulation exposures.

Accounting and Disclosure Requirements

For companies to account for and disclose space debris insurance that may be commercially

requirements applicable are:

for insurers to develop and apply consistent accounting policies.

measurement of provisions including disclosure of contingent liabilities.

U.S. GAAP

- FASB ASC 275 Risks and Uncertainties requires disclosure of nature of operations and use

of estimates in preparation of financial statements.

- FASB ASC 450 Contingencies provides guidance on when to recognize a liability for loss

contingencies from claims or litigation.

- SEC Regulation S-K requires discussion of risk factors, legal proceedings, and material

- Sensitivity of reported amounts to methods, assumptions and estimates underlying valuation

of insurance liability

- Reconciliation of changes to insurance liabilities, recoveries and premium

- Significant accounting policies applied and changes thereto

- Contingent liabilities from potential disputes or gaps in existing coverage

- Concentration risks from exposure to few orbital regions/customer industries

Conclusion

In summary, space debris poses serious financial and technical risks to ongoing space

an important role in financial risk management for satellite operators and space agencies. For

support safe, affordable and sustainable use of outer space.

vehicles or parts thereof and mission-related debris that float around in low Earth orbit. This

orbital junk poses a significant risk to spacecraft and satellites currently in orbit as even small

pieces travelling at high speeds can damage or destroy functioning spacecraft. The population

of space debris has grown substantially over the past decades as space activities have

intensified. While measures are now in place to limit future debris generation, the problem of

existing and future debris collisions remains an issue with serious financial, technical and

geopolitical implications.

through providing coverage against third-party liability risks from debris collisions. It

debris insurance coverage.

Background on Space Debris

elements thereof, in Earth orbit or re-entering the dense parts of the atmosphere. It includes

inactive artificial satellites, abandoned launch vehicle stages, mission-related debris,

fragmentation debris and spacecraft operating beyond their mission. The population of

catalogued space debris has grown substantially since the dawn of the Space Age in 1957.

purposes, the amount of debris generated has also increased. Key reasons for debris

generation include explosions or collisions that damage functioning spacecraft, jettisoning

upper rocket stages after deployment and unintentional break ups of spacecraft or launch

While over 30,000 pieces of space junk larger than 10 cm are currently being tracked, the

majority of the millions of debris objects are not being individually monitored due to their

operational spacecraft at hypervelocities of up to 10 km/s. With increasing intensity of space

The population of orbital debris is concentrated in popular orbital regions like low Earth orbit

which are heavily used for Earth observation, scientific research and telecommunications.

small impacts can permanently damage solar panels, thermal coatings, antennas or other

crucial systems and lead to mission failure or premature re-entry of non-functioning

spacecraft. The cascading effect of collisions, where one collision generates more space

debris in highly trafficked orbital ranges, poses a significant long term threat to sustainability

of space activities. Modelling by NASA and ESA suggests the occurrence of collisions could

become more frequent in the coming years which exacerbates the debris problem further.

While companies take various mitigation measures like deploying into graveyard orbits at

liability risk associated with satellite operations. Third party property damage from debris

Structure and Valuation of Space Debris Insurance

Space debris insurance would likely be structured as third-party liability insurance to provide

object caused by the insured party’s defunct space object. Key elements of a potential space

debris insurance product would include:

- Insured Parties: Space agencies, satellite operators, rocket manufacturers and launch service

contractors involved in mission design.

- Insured Risks: Coverage would be provided for statutory and common law third-party

debris attributable to the insured party. Liability from debris generation during operational

phase as well as post-mission disposal failures would be covered.

rocket bodies, typically 7-25 years in low Earth orbit, to account for risk of collisions over

- Limits of Coverage: Standard per-incident coverage limits would need to be set, with

options for higher customized limits. Aggregate annual limits may also apply. Deductibles

- Claims Administration: Claims process for assessing liability and damages in cooperation

with national space regulators and international liability conventions would need to be

established.

Valuation of potential future space debris liability insurance policies would involve complex

actuarial modeling based on existing debris population statistics, projections of future in-orbit

collision frequencies, assessment of expected damage from varying debris impact scenarios

Models would need to consider factors like:

- Expected property damage from collisions with debris of varying sizes and velocities based

on material properties of impacted spacecraft

- Litigation and disputes risks inflating potential losses

- Effects of economic cycles on premium affordability and underwriting cycles

- Policy period coverage corresponding to full orbital lifetime of debris

Robust actuarial ratemaking using advanced modeling techniques will be essential for

sustainability of a space debris insurance market. Reinsurance will also play a supporting role

to absorb accumulation exposures.

materiality of information.

for insurers to develop and apply consistent accounting policies.

- IAS 37 Provisions, Contingent Liabilities and Contingent Assets outlines recognition and

measurement of provisions including disclosure of contingent liabilities.

U.S. GAAP

- FASB ASC 275 Risks and Uncertainties requires disclosure of nature of operations and use

of estimates in preparation of financial statements.

- FASB ASC 450 Contingencies provides guidance on when to recognize a liability for loss

- Nature, terms and risks associated with space debris insurance policies underwritten

- Sensitivity of reported amounts to methods, assumptions and estimates underlying valuation

- Reconciliation of changes to insurance liabilities, recoveries and premium

revenues/receivables

- Contingent liabilities from potential disputes or gaps in existing coverage

Auditors will aim to obtain sufficient appropriate evidence that liabilities have been fairly

stated and comply with applicable accounting standards and any regulatory reporting

- Describe actuarial methodology and key assumptions. Outline sensitivity to changes.

- Reconciliation of insurance liabilities on balance sheet with cash flows.

Risk Management

- Outline debris mitigation practices to minimize insured risks.

- Disclose major concentration risks by orbital region/customer.

Governance Practices

- Board oversight of risk management framework for space underwriting.

- Robust internal controls on data quality, estimate changes and reserving.

Improved transparency on the accounting, risk assessment, compliance and governance

confidence among stakeholders and support responsible growth of the novel insurance

segment over long term. Standardized disclosure practices can be expected to evolve as

regulatory experience is gained.

Conclusion

In summary, space debris poses serious financial and technical risks to ongoing space

an important role in financial risk management for satellite operators and space agencies. For

support safe, affordable and sustainable use of outer space.

vehicles or parts thereof and mission-related debris that float around in low Earth orbit. This

orbital junk poses a significant risk to spacecraft and satellites currently in orbit as even small

pieces travelling at high speeds can damage or destroy functioning spacecraft. The population

of space debris has grown substantially over the past decades as space activities have

intensified. While measures are now in place to limit future debris generation, the problem of

existing and future debris collisions remains an issue with serious financial, technical and

geopolitical implications.

through providing coverage against third-party liability risks from debris collisions. It

debris insurance coverage.

Background on Space Debris

elements thereof, in Earth orbit or re-entering the dense parts of the atmosphere. It includes

inactive artificial satellites, abandoned launch vehicle stages, mission-related debris,

fragmentation debris and spacecraft operating beyond their mission. The population of

catalogued space debris has grown substantially since the dawn of the Space Age in 1957.

purposes, the amount of debris generated has also increased. Key reasons for debris

generation include explosions or collisions that damage functioning spacecraft, jettisoning

upper rocket stages after deployment and unintentional break ups of spacecraft or launch

While over 30,000 pieces of space junk larger than 10 cm are currently being tracked, the

majority of the millions of debris objects are not being individually monitored due to their

operational spacecraft at hypervelocities of up to 10 km/s. With increasing intensity of space

The population of orbital debris is concentrated in popular orbital regions like low Earth orbit

which are heavily used for Earth observation, scientific research and telecommunications.

small impacts can permanently damage solar panels, thermal coatings, antennas or other

crucial systems and lead to mission failure or premature re-entry of non-functioning

spacecraft. The cascading effect of collisions, where one collision generates more space

debris in highly trafficked orbital ranges, poses a significant long term threat to sustainability

of space activities. Modelling by NASA and ESA suggests the occurrence of collisions could

become more frequent in the coming years which exacerbates the debris problem further.

While companies take various mitigation measures like deploying into graveyard orbits at

liability risk associated with satellite operations. Third party property damage from debris

Structure and Valuation of Space Debris Insurance

Space debris insurance would likely be structured as third-party liability insurance to provide

object caused by the insured party’s defunct space object. Key elements of a potential space

debris insurance product would include:

- Insured Parties: Space agencies, satellite operators, rocket manufacturers and launch service

contractors involved in mission design.

- Insured Risks: Coverage would be provided for statutory and common law third-party

debris attributable to the insured party. Liability from debris generation during operational

phase as well as post-mission disposal failures would be covered.

rocket bodies, typically 7-25 years in low Earth orbit, to account for risk of collisions over

- Limits of Coverage: Standard per-incident coverage limits would need to be set, with

options for higher customized limits. Aggregate annual limits may also apply. Deductibles

- Claims Administration: Claims process for assessing liability and damages in cooperation

with national space regulators and international liability conventions would need to be

established.

Valuation of potential future space debris liability insurance policies would involve complex

actuarial modeling based on existing debris population statistics, projections of future in-orbit

collision frequencies, assessment of expected damage from varying debris impact scenarios

Models would need to consider factors like:

- Expected property damage from collisions with debris of varying sizes and velocities based

on material properties of impacted spacecraft

- Litigation and disputes risks inflating potential losses

- Effects of economic cycles on premium affordability and underwriting cycles

- Policy period coverage corresponding to full orbital lifetime of debris

Robust actuarial ratemaking using advanced modeling techniques will be essential for

sustainability of a space debris insurance market. Reinsurance will also play a supporting role

to absorb accumulation exposures.

materiality of information.

for insurers to develop and apply consistent accounting policies.

- IAS 37 Provisions, Contingent Liabilities and Contingent Assets outlines recognition and

measurement of provisions including disclosure of contingent liabilities.

U.S. GAAP

- FASB ASC 275 Risks and Uncertainties requires disclosure of nature of operations and use

of estimates in preparation of financial statements.

- FASB ASC 450 Contingencies provides guidance on when to recognize a liability for loss

- Nature, terms and risks associated with space debris insurance policies underwritten

- Sensitivity of reported amounts to methods, assumptions and estimates underlying valuation

- Reconciliation of changes to insurance liabilities, recoveries and premium

revenues/receivables

- Contingent liabilities from potential disputes or gaps in existing coverage

Auditors will aim to obtain sufficient appropriate evidence that liabilities have been fairly

stated and comply with applicable accounting standards and any regulatory reporting

- Describe actuarial methodology and key assumptions. Outline sensitivity to changes.

- Reconciliation of insurance liabilities on balance sheet with cash flows.

Risk Management

- Outline debris mitigation practices to minimize insured risks.

- Disclose major concentration risks by orbital region/customer.

Governance Practices

- Board oversight of risk management framework for space underwriting.

- Robust internal controls on data quality, estimate changes and reserving.

Improved transparency on the accounting, risk assessment, compliance and governance

confidence among stakeholders and support responsible growth of the novel insurance

segment over long term. Standardized disclosure practices can be expected to evolve as

regulatory experience is gained.

While over 30,000 pieces of space junk larger than 10 cm are currently being tracked, the

majority of the millions of debris objects are not being individually monitored due to their

operational spacecraft at hypervelocities of up to 10 km/s. With increasing intensity of space

The population of orbital debris is concentrated in popular orbital regions like low Earth orbit

which are heavily used for Earth observation, scientific research and telecommunications.

small impacts can permanently damage solar panels, thermal coatings, antennas or other

crucial systems and lead to mission failure or premature re-entry of non-functioning

spacecraft. The cascading effect of collisions, where one collision generates more space

debris in highly trafficked orbital ranges, poses a significant long term threat to sustainability

of space activities. Modelling by NASA and ESA suggests the occurrence of collisions could

become more frequent in the coming years which exacerbates the debris problem further.

While companies take various mitigation measures like deploying into graveyard orbits at

liability risk associated with satellite operations. Third party property damage from debris

Structure and Valuation of Space Debris Insurance

Space debris insurance would likely be structured as third-party liability insurance to provide

object caused by the insured party’s defunct space object. Key elements of a potential space

debris insurance product would include:

- Insured Parties: Space agencies, satellite operators, rocket manufacturers and launch service

contractors involved in mission design.

- Insured Risks: Coverage would be provided for statutory and common law third-party

debris attributable to the insured party. Liability from debris generation during operational

phase as well as post-mission disposal failures would be covered.

rocket bodies, typically 7-25 years in low Earth orbit, to account for risk of collisions over

- Limits of Coverage: Standard per-incident coverage limits would need to be set, with

options for higher customized limits. Aggregate annual limits may also apply. Deductibles

- Claims Administration: Claims process for assessing liability and damages in cooperation

with national space regulators and international liability conventions would need to be

established.

Valuation of potential future space debris liability insurance policies would involve complex

actuarial modeling based on existing debris population statistics, projections of future in-orbit

collision frequencies, assessment of expected damage from varying debris impact scenarios

Models would need to consider factors like:

- Expected property damage from collisions with debris of varying sizes and velocities based

on material properties of impacted spacecraft

- Litigation and disputes risks inflating potential losses

- Effects of economic cycles on premium affordability and underwriting cycles

- Policy period coverage corresponding to full orbital lifetime of debris

Robust actuarial ratemaking using advanced modeling techniques will be essential for

sustainability of a space debris insurance market. Reinsurance will also play a supporting role

to absorb accumulation exposures.

materiality of information.

for insurers to develop and apply consistent accounting policies.

- IAS 37 Provisions, Contingent Liabilities and Contingent Assets outlines recognition and

measurement of provisions including disclosure of contingent liabilities.

U.S. GAAP

- FASB ASC 275 Risks and Uncertainties requires disclosure of nature of operations and use

of estimates in preparation of financial statements.

- FASB ASC 450 Contingencies provides guidance on when to recognize a liability for loss

- Nature, terms and risks associated with space debris insurance policies underwritten

- Sensitivity of reported amounts to methods, assumptions and estimates underlying valuation

- Reconciliation of changes to insurance liabilities, recoveries and premium

revenues/receivables

- Contingent liabilities from potential disputes or gaps in existing coverage

Auditors will aim to obtain sufficient appropriate evidence that liabilities have been fairly

stated and comply with applicable accounting standards and any regulatory reporting

- Describe actuarial methodology and key assumptions. Outline sensitivity to changes.

- Reconciliation of insurance liabilities on balance sheet with cash flows.

Risk Management

- Outline debris mitigation practices to minimize insured risks.

- Disclose major concentration risks by orbital region/customer.

Governance Practices

- Board oversight of risk management framework for space underwriting.

- Robust internal controls on data quality, estimate changes and reserving.

Improved transparency on the accounting, risk assessment, compliance and governance

confidence among stakeholders and support responsible growth of the novel insurance

segment over long term. Standardized disclosure practices can be expected to evolve as

regulatory experience is gained.

Conclusion

In summary, space debris poses serious financial and technical risks to ongoing space

an important role in financial risk management for satellite operators and space agencies. For

support safe, affordable and sustainable use of outer space.

vehicles or parts thereof and mission-related debris that float around in low Earth orbit. This

orbital junk poses a significant risk to spacecraft and satellites currently in orbit as even small

pieces travelling at high speeds can damage or destroy functioning spacecraft. The population

of space debris has grown substantially over the past decades as space activities have

intensified. While measures are now in place to limit future debris generation, the problem of

existing and future debris collisions remains an issue with serious financial, technical and

geopolitical implications.

through providing coverage against third-party liability risks from debris collisions. It

debris insurance coverage.

Background on Space Debris

elements thereof, in Earth orbit or re-entering the dense parts of the atmosphere. It includes

inactive artificial satellites, abandoned launch vehicle stages, mission-related debris,

fragmentation debris and spacecraft operating beyond their mission. The population of

catalogued space debris has grown substantially since the dawn of the Space Age in 1957.

purposes, the amount of debris generated has also increased. Key reasons for debris

generation include explosions or collisions that damage functioning spacecraft, jettisoning

upper rocket stages after deployment and unintentional break ups of spacecraft or launch

While over 30,000 pieces of space junk larger than 10 cm are currently being tracked, the

majority of the millions of debris objects are not being individually monitored due to their

operational spacecraft at hypervelocities of up to 10 km/s. With increasing intensity of space

The population of orbital debris is concentrated in popular orbital regions like low Earth orbit

which are heavily used for Earth observation, scientific research and telecommunications.

small impacts can permanently damage solar panels, thermal coatings, antennas or other

crucial systems and lead to mission failure or premature re-entry of non-functioning

spacecraft. The cascading effect of collisions, where one collision generates more space

debris in highly trafficked orbital ranges, poses a significant long term threat to sustainability

of space activities. Modelling by NASA and ESA suggests the occurrence of collisions could

become more frequent in the coming years which exacerbates the debris problem further.

While companies take various mitigation measures like deploying into graveyard orbits at

liability risk associated with satellite operations. Third party property damage from debris

Structure and Valuation of Space Debris Insurance

Space debris insurance would likely be structured as third-party liability insurance to provide

object caused by the insured party’s defunct space object. Key elements of a potential space

debris insurance product would include:

- Insured Parties: Space agencies, satellite operators, rocket manufacturers and launch service

contractors involved in mission design.

- Insured Risks: Coverage would be provided for statutory and common law third-party

debris attributable to the insured party. Liability from debris generation during operational

phase as well as post-mission disposal failures would be covered.

rocket bodies, typically 7-25 years in low Earth orbit, to account for risk of collisions over

- Limits of Coverage: Standard per-incident coverage limits would need to be set, with

options for higher customized limits. Aggregate annual limits may also apply. Deductibles

- Claims Administration: Claims process for assessing liability and damages in cooperation

with national space regulators and international liability conventions would need to be

established.

Valuation of potential future space debris liability insurance policies would involve complex

actuarial modeling based on existing debris population statistics, projections of future in-orbit

collision frequencies, assessment of expected damage from varying debris impact scenarios

Models would need to consider factors like:

- Expected property damage from collisions with debris of varying sizes and velocities based

on material properties of impacted spacecraft

- Litigation and disputes risks inflating potential losses

- Effects of economic cycles on premium affordability and underwriting cycles

- Policy period coverage corresponding to full orbital lifetime of debris

Robust actuarial ratemaking using advanced modeling techniques will be essential for

sustainability of a space debris insurance market. Reinsurance will also play a supporting role

to absorb accumulation exposures.

materiality of information.

for insurers to develop and apply consistent accounting policies.

- IAS 37 Provisions, Contingent Liabilities and Contingent Assets outlines recognition and

measurement of provisions including disclosure of contingent liabilities.

U.S. GAAP

- FASB ASC 275 Risks and Uncertainties requires disclosure of nature of operations and use

of estimates in preparation of financial statements.

- FASB ASC 450 Contingencies provides guidance on when to recognize a liability for loss

- Nature, terms and risks associated with space debris insurance policies underwritten

- Sensitivity of reported amounts to methods, assumptions and estimates underlying valuation

- Reconciliation of changes to insurance liabilities, recoveries and premium

revenues/receivables

- Contingent liabilities from potential disputes or gaps in existing coverage

Auditors will aim to obtain sufficient appropriate evidence that liabilities have been fairly

stated and comply with applicable accounting standards and any regulatory reporting

- Describe actuarial methodology and key assumptions. Outline sensitivity to changes.

- Reconciliation of insurance liabilities on balance sheet with cash flows.

Risk Management

- Outline debris mitigation practices to minimize insured risks.

- Disclose major concentration risks by orbital region/customer.

Governance Practices

- Board oversight of risk management framework for space underwriting.

- Robust internal controls on data quality, estimate changes and reserving.

Improved transparency on the accounting, risk assessment, compliance and governance

confidence among stakeholders and support responsible growth of the novel insurance

segment over long term. Standardized disclosure practices can be expected to evolve as

regulatory experience is gained.

Conclusion

In summary, space debris poses serious financial and technical risks to ongoing space

an important role in financial risk management for satellite operators and space agencies. For

support safe, affordable and sustainable use of outer space.

vehicles or parts thereof and mission-related debris that float around in low Earth orbit. This

orbital junk poses a significant risk to spacecraft and satellites currently in orbit as even small

pieces travelling at high speeds can damage or destroy functioning spacecraft. The population

of space debris has grown substantially over the past decades as space activities have

intensified. While measures are now in place to limit future debris generation, the problem of

existing and future debris collisions remains an issue with serious financial, technical and

geopolitical implications.

through providing coverage against third-party liability risks from debris collisions. It

debris insurance coverage.

Background on Space Debris

elements thereof, in Earth orbit or re-entering the dense parts of the atmosphere. It includes

inactive artificial satellites, abandoned launch vehicle stages, mission-related debris,

fragmentation debris and spacecraft operating beyond their mission. The population of

catalogued space debris has grown substantially since the dawn of the Space Age in 1957.

purposes, the amount of debris generated has also increased. Key reasons for debris

generation include explosions or collisions that damage functioning spacecraft, jettisoning

upper rocket stages after deployment and unintentional break ups of spacecraft or launch

debris attributable to the insured party. Liability from debris generation during operational

phase as well as post-mission disposal failures would be covered.

rocket bodies, typically 7-25 years in low Earth orbit, to account for risk of collisions over

- Limits of Coverage: Standard per-incident coverage limits would need to be set, with

options for higher customized limits. Aggregate annual limits may also apply. Deductibles

- Claims Administration: Claims process for assessing liability and damages in cooperation

with national space regulators and international liability conventions would need to be

established.

Valuation of potential future space debris liability insurance policies would involve complex

actuarial modeling based on existing debris population statistics, projections of future in-orbit

collision frequencies, assessment of expected damage from varying debris impact scenarios

Models would need to consider factors like:

- Expected property damage from collisions with debris of varying sizes and velocities based

on material properties of impacted spacecraft

- Litigation and disputes risks inflating potential losses

- Effects of economic cycles on premium affordability and underwriting cycles

- Policy period coverage corresponding to full orbital lifetime of debris

Robust actuarial ratemaking using advanced modeling techniques will be essential for

sustainability of a space debris insurance market. Reinsurance will also play a supporting role

to absorb accumulation exposures.

materiality of information.

for insurers to develop and apply consistent accounting policies.

- IAS 37 Provisions, Contingent Liabilities and Contingent Assets outlines recognition and

measurement of provisions including disclosure of contingent liabilities.

U.S. GAAP

- FASB ASC 275 Risks and Uncertainties requires disclosure of nature of operations and use

of estimates in preparation of financial statements.

- FASB ASC 450 Contingencies provides guidance on when to recognize a liability for loss

- Nature, terms and risks associated with space debris insurance policies underwritten

- Sensitivity of reported amounts to methods, assumptions and estimates underlying valuation

- Reconciliation of changes to insurance liabilities, recoveries and premium

revenues/receivables

- Contingent liabilities from potential disputes or gaps in existing coverage

Auditors will aim to obtain sufficient appropriate evidence that liabilities have been fairly

stated and comply with applicable accounting standards and any regulatory reporting

- Describe actuarial methodology and key assumptions. Outline sensitivity to changes.

- Reconciliation of insurance liabilities on balance sheet with cash flows.

Risk Management

- Outline debris mitigation practices to minimize insured risks.

- Disclose major concentration risks by orbital region/customer.

Governance Practices

- Board oversight of risk management framework for space underwriting.

- Robust internal controls on data quality, estimate changes and reserving.

Improved transparency on the accounting, risk assessment, compliance and governance

confidence among stakeholders and support responsible growth of the novel insurance

segment over long term. Standardized disclosure practices can be expected to evolve as

regulatory experience is gained.

Conclusion

In summary, space debris poses serious financial and technical risks to ongoing space

an important role in financial risk management for satellite operators and space agencies. For

support safe, affordable and sustainable use of outer space.