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The commercial expansion of Low Earth Orbit (LEO) is steadily increasing the probability of collision. According to the European Space Agency (ESA), there are now 54,000 objects greater than 10cm orbiting Earth, including 9300 active payloads. The total mass of all objects in orbit is over 15,000 tons and there was over 656 fragmentation incidents between 1957 and the end of 2024.
Collisions can disrupt service delivery and pose a threat to the long-term viability of space operations. Each significant fragmentation event increases collision risk and moves densely populated orbits closer to the type of self-sustaining collision cascade known as the Kessler Syndrome.
The interaction between debris management, regulatory compliance, and insurance is complex. This article answers some critical questions around space insurance and where the liability falls.
Who is Liable for Space Debris?
Under international space law, liability begins with the concept of the ‘launching state’ which is rooted in Article VII of the Outer Space Treaty and later defined in detail by the 1972 Liability Convention and the Registration Convention. The Liability Convention (in full, the Convention on International Liability for Damage Caused by Space Objects) elaborated on the original definition. A launching state is now defined as:
- “A State which launches or procures the launching of a space object.”
- “A State from whose territory or facility a space object is launched.”
Under Article II of the Liability Convention, a launching state has absolute liability for damage on Earth and to aircraft. Article III states that liability for damage in space is fault-based.
National regulatory bodies like the FAA (Federal Aviation Administration) and CAA (Civil Aviation Authority) pass liability on to companies and operators through licensing conditions. In some cases, operators are explicitly required to have third-party liability insurance up to a specific limit to get a license.
Penalties for Non-compliance with Debris Removal Rules
In 2022, the US Federal Communications Commission adopted a new orbital debris rule, under its Communications Act authority, that generally requires FCC-licensed LEO satellites to be disposed of within five years of mission completion.
In 2023, the FCC issued its first space-debris enforcement penalty. Under a 2012 modification to its license, DISH had agreed to boost its EchoStar-7 satellite to a disposal orbit about 300 km (186 miles) above the geostationary arc at end-of-life. When the time came, low propellant levels meant EchoStar-7 was only raised about 120 km (around 76 miles), falling well short of the agreed graveyard orbit. For failing to comply with its licensed debris-mitigation plan, DISH agreed to a settlement that included a $150,000 fine and a compliance plan.
Does Insurance Cover Space Debris?
As debris risk is a key operational hazard, insurers increasingly cover collisions and third-party liability. Many space insurers cover damage from collisions, including impacts with debris, as part of standard launch and in-orbit policies. However, cover for active debris-removal missions or failure to perform remediation is typically negotiated separately in bespoke wordings rather than included by default.
Who Pays if Two Satellites Collide in Orbit?
Liability for in-orbit collisions is fault-based. Determining faults is complex and the Liability Convention doesn’t provide a standard approach for doing so. The guidelines set out in ‘soft law’ are a starting point, defining responsible behavior that helps prevent collisions.
For example, the IADC (Inter-Agency Space Debris Coordination Committee) Space Debris Mitigation Guidelines discusses how to limit the amount of debris released during operations, how to manage debris during post-mission disposal, and addresses collisions with another spacecraft. It states that the program should “estimate and limit the probability of accidental collision”, which involves implementing avoidance maneuvers based on available orbital data and coordinating launch windows to minimize risk. The UNGA Space Debris Mitigation Guidelines include similar recommendations.
Space Situational Awareness (SSA) is a key concept guiding collision avoidance. It involves the sharing of data between states about the location of space objects, debris and the potential hazards they present. The ESA has an SSA program that involves monitoring space weather, detecting natural objects in orbit, and tracking active and inactive objects.
Article IV of the Liability Convention concerns joint liability when two or more states jointly launch. In these cases, the states are collectively responsible.
Does Home Insurance Cover Space Debris?
Many home insurance policies treat falling space debris as a falling object peril, so the homeowner’s first line of compensation is their own insurer. In theory, the homeowner’s State could then seek compensation from a responsible launching State under the Liability Convention and, if successful, part of that recovery might flow back to the insurer via subrogation. Launching States, in turn, can use national law and contract to recover costs from the operator.
Does the Outer Space Treaty Require Insurance?
The Outer Space Treaty doesn’t directly mandate insurance. However, Article VI requires states to authorize and supervise commercial space activities. Again, many national licensing agencies interpret this as needing to demonstrate financial responsibility, which they enforce through mandatory insurance.
Is There Third-Party Liability Insurance for Rocket Launches?
Yes, TPL insurance is available for the launch phase. It’s typically mandatory for high-risk operations. For low-risk missions, the requirement is waived in some jurisdictions.
This type of cover protects against injuries or property damage on Earth caused by falling debris during ascent or re-entry, damage to aircraft, third-party spacecraft, and contamination. Some policies cover the costs of lawsuits related to damage.
Takeaways for Brokers and Clients
The increasing congestion of LEO amplifies the risks of collision, debris generation, and regulatory penalties. The Outer Space Treaty and Liability Convention places responsibility on states, but national laws push the financial exposure onto operators, making specialized insurance essential.
Operators must secure policies that explicitly address debris collisions, third-party liability in space and on Earth, and regulatory fines and disposal obligations.
Relm provides bespoke coverage for a wide range of companies operating in the space economy. Contact us today to learn more.
