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Insider in full: Space market facing $500mn+ in losses from new satellite losses

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Topics: Aerospace Claims & Losses Rates

Rate increases have accelerated further after major losses in 2023.

The year is already shaping up to be another one for the space market, with potential losses for 2024 already reaching around $500mn or more, according to key market players.

This includes an estimated $470mn from electrical failures on four O3b satellites this month, along with several other smaller expected claims, with sources quick to point out how easily smaller losses begin to amount to significant sums in an already fraught market.

Towards the end of last year, this publication canvassed the space market, which was facing one of its toughest periods since 2019 after being struck by a series of major losses.

In total, there were $1.2bn worth of losses in 2023, with claims of around $826mn presented to insurers in the second half of the year, according to Gallagher Re’s latest Plane Talking report.

It’s understood that premium in 2023 was less than half of the insured losses, with premium totalling around $590mn for the year.

The potential hefty losses just six weeks into this year is another grievous blow for the market.



2024: Return of the losses

Sources said at least three losses are soon to hit the market.

The largest – expected to be around $470mn – arises from the electrical failures on four O3b satellites. According to sources, the satellites have experienced total capacity loss of around 70%, 5% shy of the threshold for a constructive total loss.

Satellite operator SES and satellite manufacturer Boeing are understood to have identified the cause of the fault, which has been confirmed by sources to be power related and a distribution anomaly.

This publication understands that Aon is the broker for the O3b account.

As well as the O3b loss, this publication understands that there have been several other, much smaller losses. Given the early stage in the calendar year, some could flow through to the 2023 underwriting year.

The rates strike back

Since August there has been significant upward pressure on rates, however with the looming large losses only six weeks into the year, it’s expected that rates will increase even further.

A senior market source told this publication that in mid-January, they were seeing rate increases of around 85%, but now, they are seeing renewal rate uplift anywhere between 115% and 135%.

This publication understands that for the market to achieve an 80% loss ratio, rates would theoretically need to increase by around 160% – something which market sources think is wholly unrealistic from a commercial point of view.

The market is also taking longer and longer to make decisions on writing new business due to recent losses.

For instance, Inmarsat, which experienced a $350mn loss last year because of an “unprecedented” anomaly resulting in a failure of its telecommunications capabilities, previously had a near-spotless loss record, leaving many underwriters scratching their heads as to how to approach their appetite in 2024.

Unlike other markets, the space market does not experience attritional losses; rather it suffers from large one-off losses that can impact a carrier’s whole year and which can often make it difficult to accurately predict the best underwriting approach.

This is often reflected in loss ratio records. According to sources, 2022 and 2023 were “significantly in the red”, which was in stark contrast to 2021 which had a loss ratio of around 30%, as premiums written far outstretched claims.

A capacity void

Despite a sharp uptick of rates, many in the market are predicting that capacity will shrink in 2024, as carriers struggle to justify years of poor loss records.

In November last year, this publication revealed that Brit had pulled out of the space market.

The carrier offered more than $50mn of capacity and led the Brit Space Consortium for more than 25 years.

Brit offered coverage for launch and in-orbit risks, including for damage to or failure of satellite or launch vehicles.

Many sources said they weren’t surprised at the former market leader’s decision to exit the market, with several suggesting Brit was just the tip of the iceberg when it comes to upcoming exits by space underwriters.

Space losses are often well spread around the market across small line sizes.

But sources suggested that many players are teetering on the edge and in very fragile positions following the tough year in 2023, with many no longer able to justify writing the class to their backers.

However, sources suggested that rather than seeing a sudden exit from the market, carriers will instead begin to slowly withdraw their capacity and shrink their line sizes so as not to raise alarm.

Insurance Insider delivers global wholesale, specialty, and (re)insurance Intelligence that enables you to act first. Redeem your complimentary 14-day trial for more premium content from Insurance Insider.

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