India’s space economy is emerging as a competitive force in front of the world with a combined effort driven by the Indian Space Research Organisation’s (ISRO) spearheading the efforts and a growing startup ecosystem. The Indian Government has eased the norms on investment in space technology such as satellite launches, space exploration missions, and commercial payloads. As these efforts multiply, the importance of a robust space insurance ecosystem becomes undeniable. However, the question remains: are Indian startups ready to navigate the inherent risks of the space industry?
What is Space Insurance?
We are sure that you must have heard of a wide array of insurances. Cars, bikes, fire, etc. are the basic household terms that almost every person in this country knows. Some unusual insurances have also gained limelight in the past decade such as Mr. Gennaro Pelliccia, a professional coffee taster, insuring his tongue for a whooping amount of USD 14 million; Taylor Swift, insuring her legs before her 2015 tour for a USD 40 million cover and many more. But have you ever heard of the term ‘Space Insurance’? Yes, it exists.
Space insurance typically covers risks associated with space activities, including satellite launches, in-orbit operations, and potential damage from space debris. It covers pre-launch risks, launch failures, and in-orbit anomalies like malfunctioning or collisions. Sometimes, insurance policies may also include third-party liability for damages caused by falling debris. Given the high costs and uncertainties of space missions, space insurance is essential for mitigating financial losses. Globally, it is a niche market, but in countries like ours, it is still developing, driven by increasing satellite launches and private sector participation in space exploration.
Challenges in the Indian Landscape
- Limited Awareness and Expertise: While Indian startups have made impressive strides in technology, awareness about space insurance and its nuances remains low. Unlike established players in the west, Indian startups often lack dedicated teams to assess and mitigate risks through insurance policies. It is interesting to note that India’s only space think tank, Spaceport Sarabhai, has recently advocated for appropriate norms to regulate the space insurance industry as India aims for space sector contribution to reach 1% of India’s $5 trillion economy.
- High Premium Costs: Since not a lot of players are currently offering space insurance, and the ones that are offering such underwriting services are foreign companies, the extent of competition in India remains next to none. This spurs insurance premiums to be notoriously high, ranging between 5% and 20% of the insured value. For cost-sensitive startups operating on tight budgets, allocating funds for insurance can be a daunting challenge.
- Regulatory Gaps: Generally, India’s insurance space is regulated by the Insurance Regulatory and Development Authority which is a statutory body aimed towards betterment of the industry. However, the space insurance regulatory framework is still evolving. Unlike the U.S. or Europe, which have well-defined legal structures and government-backed indemnification, Indian startups operate in a relatively ambiguous regulatory environment.
Opportunities for Startups and Insurers
Despite the challenges, the Indian space insurance market presents a lucrative opportunity. Native companies can develop innovative, cost-effective products tailored to the needs of startups, such as partial coverage for specific mission phases or microinsurance for small satellite constellations.
Insurers have already started to become aware of the market that space insurance can provide. This is substantiated by the fact that India’s first satellite liability insurance was launched by Tata AIG in 2024 itself targeting the specific needs of satellite manufacturers and operators.
Mr. Sushant Sarin, president of commercial business at Tata AIG mentioned ““We are thrilled to be the first private insurer in India to offer a satellite insurance cover. …This innovative product caters to the growing needs of satellite manufacturers and operators in the Indian space sector, especially in the wake of recent solar storm that highlights the potential hazards faced by orbiting spacecraft.”
Conclusion
Thus, it is clear that as the market expands, more players will look towards entering the space insurance sector. However, to cater to the needs of Indian startups and to conform to a regulatory approach that is still in its nascent stages could be a daunting task. While Indian startups have demonstrated their readiness to tackle technological challenges, they must also prepare to address financial and operational risks head-on. Collaboration among startups, insurers, ISRO, and the government will be the key to ensuring that India’s space dreams soar safely and securely.