In these credit crunched times, with the global economy in a slump and the world’s financial markets in the doldrums, it is difficult to find a sector that is upbeat.

In fact, you have to look out into space for growth. Delegates returning from the 15th International Space Insurance Conference in Venice report that everything in the commercial satellite industry is rosy.

While the newspapers have been running stories about space junk, satellites colliding or being shot down, the industry itself is doing fine. Natural replacement, as satellites approach the end of their working life, plus an increased appetite for satellite based broadband, radio and TV worldwide is driving up services and equipment revenues.

The Satellite Industry Association said in its 2008 State of the Satellite Industry Report, that worldwide revenues in 2007 were $123 billion, representing an average annual growth of 11.5% for the period from 2002-2007. That trend continued in 2008 and, looking at the busy launch schedule for 2009, the industry will continue to outperform most earthly sectors.

There are over 40 navigation and commercial satellite launches planned over the coming 12 months.

The commercial satellite industry has proved profitable for insurers too, according to Tim Wakeman, executive vice president of International Space Brokers, part of Aon. “It has been a profitable sector for insurers for the past seven to eight years,” he says. “It isn’t correlated with other lines and that makes it attractive. As a result, more capacity is coming in. But that means premium rates are declining.”

So market conditions were a hot topic in Venice. “There was a feeling among insurers that premium rates may be approaching burning point,” Wakeman told me. “And the [underwriting] cycle can be turned quickly by a major loss event.”

Wakeman reckons that the space insurance industry is currently worth around $1 billion per year in premiums. But in a worst case scenario the loss of just two satellites on one launch rocket could add up to a total $700 million loss, he says.

The message for satellite owners is clear: if you have ordered a satellite for delivery in the next two years, put your insurance deal in place now—while conditions are good.

Tags: Space

This entry was posted by Garry Booth on Tuesday, April 21st, 2009 at 9:54 am and is filed under Insurance Commentary.