Innovation has transcended what legacy insurance models were built to handle. Traditional coverage frameworks, developed for static, terrestrial industries, struggle with the complexity and volatility of modern commercial space.
The result? Pricing that doesn’t reflect real risk, exclusions that leave critical exposures unaddressed, and limited capacity for truly novel ventures.
For brokers working with space startups, it’s critical to understand the disparity and how forward-thinking space insurance companies are bridging the gap.
Limited Capacity
Space is uniquely risky. Even when innovations like reusable launch vehicles help lower expenditure, a single satellite mission can still be the result of years of development – and millions in sunk cost. But traditional insurers often treat space like more familiar categories which don’t quite translate.
This leads to restricted capacity. Many conventional underwriters are unwilling to absorb the full risk of a launch or orbital operation, especially for unproven platforms or missions without a long history. This forces clients to either patch together multiple policies or accept significant uninsured exposure. Both options increase cost and complexity.
Misaligned Pricing Models
As mentioned, premiums in traditional markets are often based on historical loss data. But in the space economy, the data is limited, and what does exist doesn’t always apply to new mission profiles. Insurers are cautious, and clients pay for it.
According to a study by NASA, operators have said that premium rates are unaffordable and unreasonable. Why are rates so high?
Consider satellite insurance for low-Earth orbit (LEO) deployments. Historically, most satellite failures (for geostationary and medium-Earth orbit) have occurred during the first year. Traditional insurers are assuming the same patterns will apply to LEO satellites.
Because the risks are not well understood, insurers are passing on the cost of that uncertainty. In other words, pricing reflects uncertainty rather than genuine risk. And recent losses have further pushed up prices.
In turn, companies are forced to self-insure, launch incrementally or find other workarounds that slow down their progress.
Aside from space asset insurance, there’s liability insurance to consider. On-orbit accidents can lead to costly judgments. Costly enough to bankrupt ventures.
Cross-party-waivers reduce exposure – but not fully. Additional parties may be involved to which the waiver doesn’t apply. Besides, the cap is often far lower than operators would like and may only cover a fraction of the costs incurred. The Commercial Space Launch Act (CSLA) proposes some limitations on liability, but these don’t apply to commercial operations in low-Earth orbit.
Problematic Exclusions in Space Insurance
Some space insurance policies come with inconvenient exclusions. There may be limits on rideshare payload coverage or exclusions for experimental or unproven technology. Some providers may exclude space weather or in-orbit collisions.
These types of exclusions may make sense for older industries with more predictable failure modes, but not for the commercial space sector.
Appetite Mismatch for New Business Models
The space economy is expanding beyond traditional missions where satellites are deployed and left alone. We’re entering an era of on-orbit servicing and assembly, space-based manufacturing, active debris removal and commercial lunar transport
These models don’t clearly align with legacy underwriting approaches. Many traditional insurers lack the technical specialism or operational insight to accurately assess risk in these contexts. And that creates a risk-averse environment where coverage is either unavailable or fundamentally mismatched to how companies actually operate.
How New Approaches Are Bridging the Gap
The new space economy doesn’t run on yesterday’s infrastructure – and it shouldn’t have to rely on yesterday’s coverage either. Thankfully, a new generation of insurers is emerging, tailoring solutions to meet the specific needs of frontier industries like space.
At Relm, we use advanced pricing models that reflect actual mission complexity – not generalized uncertainty. And we work with specialist underwriting teams that understand the intricate details of the technologies and operations involved. This makes coverage more accurate – and more accessible to emerging companies.
