It’s starting to become an annual occurrence: around this time of year, people in the commercial launch industry start to wonder when—or even if—Congress wil extend the existing third-party commercial launch indemnification regime. That system requires commercial launch operators in the US to demonstrate financial responsibility, usually in the form of insurance, up to a “maximum probable loss”, or MPL, to uninvolved parties as calculated by the FAA’s Office of Commercial Space Transportation (AST) when licensing that launch. Losses above the MPL level would then be indemnified by the government up to an extremely high level (about $2.8 billion in 2013 dollars.) The indemnification regime needs to be periodically renewed by Congress; it last did so at the very end of the last Congress in January, but by only one year.
The problem for the industry is that, so far, Congress has taken almost no action on another extension. While there were hopes early this year that Congress would take up possibly a long-term extension as part of a broader reauthorization of FAA/AST, such a reauthorization has gone nowhere. The NASA authorization bill approved by the House Science Committee this summer does include a five-year extension, but that bill has not been taken up by the full House, and the Senate is strongly opposed to the overall bill. The Senate’s version of a NASA authorization bill includes a three-year extension, but it, too, has yet to be taken up by the full chamber.
“In the partisan environment we’re in, I don’t think it’s at the top of anyone’s agenda,” said Chris Kunstadter, Senior Vice President Aerospace Insurance at XL Group, during a panel session at last week’s International Symposium for Personal and Commercial Spaceflight (ISPCS) in Las Cruces, New Mexico. “It’s clearly important for fostering the US space industry. It’s crucial.” He described the last-minute, short-term extensions of the regime, as was the case at the end of last year, as “frustrating,” and noted that the FAA’s Commercial Space Transportation Advisory Committee, or COMSTAC, has long advocated for a long-term, or even permanent, extension of the indemnification system.
Kunstadter said he expects the indemnification system to be extended, but warned “there may be some issues that cause it not to be extended right away” in the current political environment. If there is a delay in an extension, he said, there is sufficient capacity in the insurance market to allow companies to purchase larger amounts of third-party coverage in lieu of government indemnification (which has never been invoked since the regime was established in the late 1980s.) “In the unlikely event that it is not extended, there will be insurance available up to a very high limit,” he said. “We hope it gets extended, it’s very important to the industry, but if it isn’t, I believe the insurance community, the insurance market, can absorb some of that.”