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The space economy used to be dominated by governments and major entities like NASA, but things have changed. An increase in private investment, including venture capital and strategic funding, has led to many smaller companies emerging, giving rise to ‘New Space’, the growing ecosystem of commercial actors.
One of the main differences between these two types of entities is the way they manage risk. Governments and large-scale operators can afford to self-insure, absorbing losses across long time horizons and large budgets. Smaller companies operate with greater exposure to financial shocks.
Do Government Satellites Need Commercial Insurance?
Governments don’t typically purchase commercial satellite insurance like private operators do. Instead, the risk associated with launch failures, in-orbit losses, or mission anomalies is usually retained by the state.
How Does ‘Self-Insurance’ Work for Government Space Agencies?
Self-insurance involves absorbing losses within the national budget by allocating contingency funding within agency budgets or drawing on central government reserves.
Is SpaceX Self-Insured?
Dominant commercial players like SpaceX operate at a scale that allows them to retain a significant portion of their risk. High launch frequency and diversified revenue streams mean that a single failure is unlikely to threaten the company’s overall viability.
At its current scale, SpaceX effectively self-insures many aspects of its operations. Its Starlink satellites are generally not individually insured, with constellation architecture providing built-in redundancy that reduces the financial impact of individual satellite failures.
Companies like SpaceX may still purchase insurance for specific reasons, like regulatory requirements, customer obligations, or financing arrangements. For most firms in the space economy, this level of resilience and risk tolerance is out of reach.
What Insurance Does NASA Use?
NASA primarily relies on self-insurance rather than commercial coverage. A document released under a Freedom of Information Act request shows that in 2001, NASA explored the possibility of insuring the ISS through discussions with an insurance broker.
Fully ensuring the ISS was never considered practical given its immense value (over $75 billion) and the wide range of risks involved, including dockings, orbital debris, and solar activity. Instead, discussions focused on the potential insurance of specific high-value assets on board.
More broadly, the way risk is managed in government space programs has changed. Space agencies increasingly contract private companies to design, build, and operate hardware. For example, NASA now relies on commercial providers like SpaceX to deliver supplies to the ISS rather than operating its own shuttles. As a result, risks that were once retained entirely by government agencies are now transferred in part to private contractors, and in some cases onward to the commercial insurance market.
Takeaways for Brokers and Their Clients
Emerging space companies often operate with limited capital reserves. They have little margin for error, as a single launch failure or early-life satellite loss can erase years of development and hundreds of millions of dollars in value. Without access to insurance, many promising companies would struggle to survive their first major setback.
Specialized space insurance is key to enabling these firms to operate and scale. It’s a catalyst for ambition. Coverage can be tailored to different mission phases and different types of operators, including launch providers, satellite manufacturers, constellation operators, and downstream service companies. Policies may cover physical damage, launch failure, in-orbit malfunction, third-party liability, and increasingly non-traditional risks like cyber-related exposures, typically through bespoke structures.
Relm provides bespoke space insurance policies for a broad range of innovative firms. Contact us today to learn more.
