Falling Satellites? File Claims with Uncle Sam

When, where and how much, if any, damage will be caused by about 1,200 pounds worth of falling satellite debris poses some interesting questions–including for the insurance industry.

Likely coming in at No. 1 on the industry’s list: Who will pay for any damages?

Even NASA scientists don’t know precisely when or where a plummeting six-ton satellite will fall. According to the latest update on NASA’s website, made at 7 a.m. EDT on Thursday: “Re-entry is expected sometime during the afternoon of Sept. 23, Eastern Daylight Time. The satellite will not be passing over North America during that time period. It is still too early to predict the time and location of re-entry with any more certainty, but predictions will become more refined in the next 24 to 36 hours.”

A NASA spokesman on Thursday afternoon said the information on the site is the latest the space agency has to offer.

NASA’s Upper Atmosphere Research Satellite, or UARS, will break into pieces, and scientists say the chances that somebody somewhere on Earth will get hurt are 1 in 3,200, and any one person’s odds of being struck have been estimated at 1 in 21 trillion.

Considering 70 percent of the planet is water, and much of it is empty land, the odds of property being damaged aren’t too high either.

“There has never been a reported case of any human being injured or any significant property damage from space debris in the 50 years we’ve been putting things up there,” said NASA spokesman Stephen Cole.

The 20-year-old research satellite is expected to break into more than 100 pieces as it enters the atmosphere, and while most of it will burn up, 26 of the heaviest metal parts are expected to reach Earth. The largest projected piece will weigh in at about 300 pounds, and the debris could be scattered over an area about 500 miles long, according to NASA.

Insurers would likely pick up the tab for damage claims filed under home, commercial property and comprehensive coverage in auto policies. But where would someone without insurance, someone seriously injured, or an insurer looking to recover payment, turn?

Uncle Sam’s got it covered.

“Basically there’s an international treaty that has to do with liability from space debris that was signed in 1972,” Cole said.

The 1972 Convention on International Liability for Damage Caused by Space Objects sets forth rules for liability for damage caused by space objects, and since the U.S. is a party to that convention, “any United States government liability to other treaty parties for damage caused by Upper Atmosphere Research Satellite upon reentry would be determined in accordance with its terms,” Cole added.

The convention was adopted by the General Assembly of the United Nations and was signed by all participating nations. When the U.S. signed the convention, it agreed to be “absolutely liable to pay compensation for damage caused by its space object on the surface of the Earth or to aircraft in flight.”

If they don’t mind dealing with the government, and they don’t mind the wait, under the convention insurers have a year to recover damages from the U.S. government, or any government that has launched a satellite that happens to be falling back to Earth.

Private Market Coverage

However, that still leaves a coverage gap given the numerous private satellites put into orbit in the last few decades.

Tim Wright, a space underwriter for Global Aerospace, a London-based company owned by Berkshire Hathaway and Munich Re, is one of a handful of specialists in what he sees as a growing market niche.

“It’s a very small insurance market,” Wright said of space coverage, a segment that operates very much like the aerospace insurance market, and with many of the same players.

“The market has actually covered similar events,” he said.

When Mir station was decommissioned and brought down in a controlled reentry in 2001, the Soviet Union took the extra step of purchasing reinsurance, Wright said.

“The Russians didn’t exactly know where it was going to land,” he said. “The Russian operators actually went out and bought a third-party liability policy for this event.”

Space insurance policies are available for coverage up to roughly $500 million, he added.

“A number of satellite operations buy this,” he said, noting that satellites operators like DirectTV, Google Inc. and SiriusXm are insured for a variety of damages that satellites can cause, as well as malfunctions during launch and they are insured that they operate effectively once in orbit.

It may be a small sector of the insurance industry, but it’s a big business.

“Satellites are often valued at $200 or $300 million apiece,” Wright said. “And when you’re talking about charging 10 to 15 percent of the value, you’re talking about big premiums.”

Back when UARS was launched to study the ozone layer in 1991, NASA didn’t always pay attention to the “what goes up must come down” rule. Nowadays, satellites must be designed either to burn up on re-entering the atmosphere or to have enough fuel to be steered into a watery grave or up into a higher, long-term orbit.

The International Space Station is no exception. NASA has a plan to bring it down safely sometime after 2020. One of Mir’s predecessors, Salyut 7, fell uncontrolled through the atmosphere in 1991. The most recent uncontrolled return of a large NASA satellite was in 2002.

The most sensational case of all was Skylab, the early U.S. space station whose impending demise three decades ago alarmed people around the world and touched off a guessing game as to where it might land. It plummeted harmlessly into the Indian Ocean and onto remote parts of Australia in July 1979.

The $740 million UARS was decommissioned in 2005, after NASA lowered its orbit with the little remaining fuel on board. NASA didn’t want to keep it up longer than necessary, for fear of a collision or an exploding fuel tank, either of which would have left a lot of space litter.

More than 20,000 manmade objects at least four inches in diameter are being tracked in orbit. It’s mostly a threat to astronauts in space, rather than people on Earth. In June, the six residents of the International Space Station took shelter in their docked Soyuz lifeboats because of passing debris. The unidentified object came within 1,100 feet of the complex, the closest call yet.