Indian Space News and Discussion

[Arun_S]

[url="http://economictimes.indiatimes.com/news/news-by-industry/et-cetera/High-premium-deters-ISRO-from-insuring-projects/articleshow/5862418.cms"]High premium deters ISRO from insuring projects[/url]

27 Apr 2010, 0957 hrs IST,

Aparna Ramalingam,TNN





CHENNAI: Not only did the launch of the Rs 350-crore GSLV D-3 on Thursday fail, the project wasn’t insured, like the previous ones. Indian Space Research Organisation (Isro) officials said that Indian launches are never insured . “There’s no point in government money being moved from one body (PSU general insurer) to another (ISRO in this case),” they said. But the bigger question is whether government assets are well insured.



General insurers beg to differ . “Risks tend to get reinsured and the money can be recovered from the international reinsurer,” said G Srinivasan, chairman and managing director , United India Insurance.



Assets (plant, machinery, factories) of public sector undertakings are insured in the country. But bigger ones such as satellite, rocket and missile launches, nuclear assets may not be covered. “That’s because these are sovereign assets that are guaranteed by the government,” says Tarun Singh, managing director, Finexure Financial Services. Apart from the government being a self guarantor, the cost of insuring such projects can be as high as 40% of the project value, as the risks associated with such launches are extremely high as well as complex , said insurance experts.



For eg., suppose the cost of a satellite launch is Rs 500 crore, insurance would be Rs 200 crore. This would further escalate the costs taking it up to Rs 700 crore. “The government normally refrains from insuring a lot of its assets because sometimes the total premiums paid on such resources may far exceed the losses incurred,” said Rahul Aggarwal, CEO, Optima Insurance Brokers.



Space missions worldwide are replete with failures and the high risk maybe a deterrent against insurance. For instance, NASA’s first few Ranger missions to the moon failed for a variety of reasons. Similarly, in India, two of the seven GSLV mission failed. Even in the Augmented Satellite Launch Vehicle, two flights failed consecutively and two succeeded.



Organisations like NASA and the European Space Agency have an active space insurance programme. Globally too, insurance for nuclear assets, rocket and missile launches is underwritten by a consortium of a few insurers who are specialists in the field. “They have to look at various aspects such as if the technology is experimental or tried and tested to calculate risks and possible failure of the project. Only after that would the premium rate be determined ,” said Aggarwal.



Countries that have commercial satellite programmes participate in space insurance industry, either through direct underwriters or reinsurers.