Provide insurance for commercial spaceflight

Reporter Chen Zhi

At the beginning of 2026, the private commercial aerospace company where Liu Yong works decided to expand its annual production capacity for low Earth orbit internet satellites to 40 units, doubling last year’s output.

However, faced with the rapid expansion of low Earth orbit internet satellites, the increasing demand for space computing power, and the strong need for high-frequency, high-precision image updates on the ground, this production capacity still struggles to meet the demands of downstream companies.

Liu Yong is the operations director of a private commercial aerospace company. He said, “It’s not that we don’t want to further expand capacity; it’s just that we need to first address the risk assurance issues before capacity expansion.” Accompanying the capacity expansion is a significant increase in the probability of research and development and launch failures of low Earth orbit satellites, as well as the likelihood of operational failures and unexpected incidents in orbit. A single launch failure or an on-orbit operational risk incident could impose tremendous financial pressure on the company.

Over the past year, Liu Yong has visited multiple insurance companies, hoping to find solutions through insurance.

Currently, there is a significant gap between the scale of the domestic commercial aerospace market and the related insurance premium scale. According to data from CCID Consulting, the domestic commercial aerospace market is expected to reach 2.5 trillion yuan by 2025. An interview with Economic Observer reporters revealed that the domestic aerospace insurance premium scale is only about 800 million yuan.

Challenges and Attempts

Liu Yong is concerned that with the expansion of capacity comes the simultaneous increase in risks across research and development, launch, and operational phases, questioning whether the company can cope with these challenges.

“What I fear most now is when a colleague suddenly calls to inform me that a satellite launch delay has caused a breach of contract, or that an accident during the launch has caused third-party losses, which would result in huge claims for the company,” Liu Yong said.

After visiting several insurance companies, he found that the domestic commercial aerospace insurance market is highly concentrated, with market shares mainly held by large insurance institutions such as China Life Insurance, Ping An Insurance, and China Pacific Insurance, and their services primarily rely on co-insurance and reinsurance cooperation models.

Meanwhile, commercial aerospace is a high-tech industry with low tolerance for technical failures, especially since the failure rate for initial research and production of rockets and satellites is relatively high. Therefore, insurance companies are more cautious when underwriting, naturally focusing their business on commercial aerospace companies with mature technologies and high historical launch success rates.

Shi Hequn, Director of the Group Business Division at Ping An Property & Casualty Insurance, stated that insurance can provide multiple protections for commercial aerospace companies. These include asset loss protection covering unexpected losses of physical assets like rockets and satellites during research, testing, launch, and operational phases; liability risk protection covering third-party damage liabilities during the launch process, signal interference or debris falling related to satellite operations; and contract performance guarantees providing risk assurance against contract breaches caused by key component supply chain disruptions or launch delays. “For start-ups like us, most insurance companies prefer to wait and see until we achieve multiple successful launches and our satellites’ reliability in orbit is fully validated before considering offering commercial aerospace insurance,” Liu Yong said.

Shi Hequn admitted that commercial aerospace insurance indeed faces multiple challenges in empowering the development of the commercial aerospace industry: rapid technological iterations in commercial aerospace make it harder for insurance companies to assess related risks, the lack of historical data affects the precision of insurance pricing, and the high coverage and high payout risk characteristics in the commercial aerospace sector limit the underwriting capabilities of individual insurance companies. These factors collectively force insurance companies to adopt a cautious underwriting strategy.

The reporter noticed that in overseas markets, insurance companies’ willingness to underwrite is also particularly cautious. Market research firm Hengzhou Bozhi estimates that under the resonance of factors such as the popularization of low Earth orbit satellite internet, strong demand for high-precision rapid remote sensing images, and the construction of commercial space computing networks, the production and launch numbers of low Earth orbit satellites will experience rapid growth in the future. However, in terms of market scale, it is expected that by 2031, the global space and satellite insurance market will reach 585 million dollars, roughly the same as in 2023.

Behind this is the fact that most property insurance companies lack interdisciplinary risk control and actuarial teams proficient in the commercial aerospace field, resulting in a relatively limited supply of commercial aerospace insurance and coverage. In addition, rules regarding space debris mitigation and liability determinations for operational accidents in orbit are still incomplete, and the cumbersome claim processes for commercial aerospace companies inadvertently affect their willingness to insure.

Liu Yong bluntly stated that currently, commercial aerospace insurance faces a situation where “high premiums lead to weak willingness to insure among companies.” Particularly in the case of third-party liability insurance during rocket launches, even with a coverage amount of 50 million dollars, the premium (approximately 1.3‰) that satellite R&D, production, and operation companies need to pay exceeds 400,000 yuan, not including rocket launch insurance premiums that often exceed one million yuan.

Due to the enormous compensation amounts for commercial aerospace accidents and the high uncertainty of risk incidents, insurance companies can only raise premiums to control payout risks, given that their premium income from commercial aerospace insurance is relatively low. However, continuously rising premiums in turn “dissuade” more companies from investing.

In 2023-2024, global commercial aerospace insurance premium income is expected to be between 540 million and 580 million dollars, but the compensation amounts resulting from commercial aerospace accidents in these two years have each exceeded one billion dollars. Consequently, global reinsurance companies and insurers have tightened underwriting thresholds and doubled premiums to mitigate business loss risks.

Currently, Liu Yong is in discussions with a domestic insurance company about whether it can design targeted insurance products around the different risk incidents in satellite R&D, testing, launching, and operational phases, such as experimental insurance during the R&D phase, launch insurance during the launch phase, operational insurance during the on-orbit phase, and income loss insurance, which can cover core risks along the entire chain, including launch failures, on-orbit failures, key component supply chain disruptions, and third-party liabilities, while also allowing companies to insure according to their needs, reducing overall premium expenses while addressing the critical issue of lacking risk incident protection.

After more than four years of validation, Liu Yong’s company has a high level of confidence in the technological reliability of low Earth orbit internet satellites. Currently, they most urgently need launch insurance, third-party liability insurance for satellite launches, and operational insurance to respond to the risks of satellite launches and operational incidents following capacity expansion.

Liu Yong said that although the premiums for these three types of insurance are substantial, by saving on expenses related to experimental insurance during the R&D phase, the company’s financial situation can also “take a breather.”

Breaking the Deadlock and Space

How to enhance the coverage and demand satisfaction of commercial aerospace insurance has become a new challenge that domestic property insurance companies urgently need to address.

As the head of the business innovation department at a medium-sized domestic property insurance company, Dong Jian is accelerating the development of pricing models for commercial aerospace insurance to enter this market as soon as possible.

Currently, this commercial aerospace insurance pricing model primarily uses static data from commercial aerospace companies as the key basis for underwriting and premium pricing, including the technological maturity and market competitive advantages of companies during the commercial satellite R&D and testing phases, shareholder backgrounds and capital strength, past satellite launch success probabilities, and the occurrence of accidents during on-orbit operations.

Dong Jian indicated that as the frequency of commercial aerospace launches increases in the future and insurance companies gather more business data, the commercial aerospace insurance pricing model will shift from static to dynamic. For example, the premium rates for satellite launch insurance, third-party liability insurance for satellite launches, and operational insurance in orbit can be dynamically adjusted based on changes in the technological maturity of satellite R&D and historical success launch records, alleviating the financial burden of insurance premiums on relevant companies.

Recently, Dong Jian has been in close communication with the Shanghai International Reinsurance Center, aiming to utilize the resources of global reinsurance institutions to facilitate a two-way circulation of underwriting capabilities between international and domestic markets, thereby expanding the underwriting capacity of commercial aerospace insurance and further reducing premium rates. “When underwriting, we plan to further optimize the commercial aerospace insurance pricing model by relying on historical data and the international reinsurance network for accurate underwriting; in the claims process, we are working on establishing a rapid response mechanism to ensure companies can resume production in a timely manner,” Dong Jian said. However, to accomplish this, it has become essential for property insurance companies to build mature co-insurance or reinsurance cooperation models around commercial aerospace insurance.

Previously, 17 property insurance institutions, 2 reinsurance institutions, and 1 insurance intermediary in the Beijing area jointly established a co-insurance group for commercial aerospace insurance. Data released by the Beijing Financial Regulatory Bureau shows that since the establishment of this co-insurance group, it has provided risk protection for 17 launch projects amounting to nearly 7.7 billion yuan.

Shi Hequn believes that the future development space of the aerospace insurance market will mainly focus on the construction of satellite internet constellations, the regular launch of commercial rockets, on-orbit services and space applications, and deep space exploration. Therefore, insurance companies need to provide broader insurance coverage for commercial aerospace companies while effectively controlling claims risks. In addition to continuously optimizing co-insurance and reinsurance cooperation models, insurance companies also need to address the pain points of commercial aerospace companies fearing failure (such as satellite launch failures, anomalies during satellite operations, third-party infringements, and contract breaches) by providing a comprehensive financial solution of “insurance bottom-line + capital infusion + capital promotion,” pushing the commercial aerospace insurance product system from a single insurance type to integrated financial solutions.

Liu Yong revealed that if commercial aerospace insurance can cover a broader range of risks related to the R&D, testing, launching, and operational phases of low Earth orbit satellites, they plan to seek a new round of funding support from banks or venture capital shareholders to expand their annual satellite production capacity to 70 units.

(At the request of the interviewee, Liu Yong is a pseudonym.)