THE INSURABILITY OF ENVIRONMENTAL DAMAGES CAUSED BY SPACE ACTIVITIES

S. PARADIS

Corresponding Author: Salomé Paradis, PhD candidate in law at Laboratoire en droit des services financiers, Université Laval, 2325 De L’universite Rue, Quebec, Qc G1V 0B3 Canada and Chaire SIRIUS, IDETCOM, Université Toulouse Capitole, 2 rue du Doyen Gabriel Marty, 31 000 Toulouse, France, salome.paradis.1@ulaval.ca

 

Introduction (1)

International space law stipulates that launching states may be held liable for damages caused by a public or private space object, based upon two distinct regimes. The Convention on International Liability for Damage Caused by Space Objects (Liability Convention) establishes an absolute regime for intra-atmospheric damage (2), and a fault-based regime for extra-atmospheric damage (3). In accordance with article VIII and subsequent articles, “[a] State which suffers damage, or whose natural or juridical persons suffer damage, may present to a launching State a claim for compensation for such damage” (4) through diplomatic channels (5). The principle of international liability can thus impose an obligation on launching states to provide compensation to pay for damage (6).
In the wake of developing national spatial frameworks, an increasing number of states are implementing a recourse action in case their international liability is engaged: the space insurance requirement. By establishing domestic liability norms, certain launching states have the capability to seek compensation from private actors whom they have authorized to engage in activities. Indeed, some space laws implement authorization via the grant of licenses conditional upon obtaining insurance. The recourse action is thus dependent on modalities that define parameters of the requirement, such as the minimum or maximum coverage amounts in certain cases. For instance, the French framework sets the minimum insurance coverage that a private launcher must obtain at 70 million dollars, specifically to cover the costs of an accident involving a third party (7). In the United States, the insurable amount for claims related to a launch or reentry is capped at $675 million. For damage to government property, the cap is set at $135 million (8). Although caps have been established, the insurable amounts remain flexible to provide enough leeway to encourage the growth of the industry. In the United Kingdom, the minimum coverage is $165 million (9). Insurance lies at the core of legal inquiries regarding the regime of liability for space activities.

It is important to distinguish between the meanings of “responsibility”, “liability”, and “insurability”. The meaning of “responsibility” implies fulfilling or refraining from duty or obligation, without entailing legal consequences for failing to comply. In international space law, states “bear international responsibility for national activities” (10). The term “liability” denotes being legally bound to compensate for damages resulting from one’s actions or omissions. Liability can be contractual, tortious, or statutory. National space laws usually establish a statutory liability for operators that is not open to interpretation. As for “insurability”, it refers to the willingness of an insurer to provide coverage for specific risks or liabilities. The liability of space operators is determined by law; the insurability of their activities depend on the insurer’s assessment. One can be liable for damage without being covered by an insurance policy in several cases, such as policy exclusions or uninsurable risks. The insurability of a risk thus introduces an additional layer of legal and technical mechanisms and involves another player, namely the insurer.
In its more general sense, the concept of insurance denotes “an alignment of the risk in one’s financial assets to the risk in one’s financial needs” (11). The modalities of insurance, including the definitions of risk and damage, can vary based on legislative (e.g., applicable laws) and contractual factors (e.g., clauses specified in the policy). The term «risk» usually refers to the possibility of an uncertain and random event that can cause damage (12). By subscribing to an insurance policy, the insured seeks to be protected against potential damage. Risk is therefore the object of the insurance contract, wherein the insurer agrees to indemnify the insured if the uncertain event occurs, in exchange for the payment of a premium (13). The characteristics of risk include uncertainty and the financial estimation of potential damage based on statistical probabilities (14).
The term «damage» denotes a loss or injury experienced by a person or property as a result of an insured event. Damages may be physical, such as bodily injuries; material, such as the destruction or deterioration of property; or immaterial, such as loss of income. In international environmental law, there is no universal definition of the terms «environmental damage». Nevertheless, some treaties provide specific definitions. For example, the Convention on Biological Diversity states that “environmental damage” refers to harm that has detrimental effects on biodiversity, meaning the “variability among living organisms from all sources including, inter alia, terrestrial, marine and other aquatic ecosystems and the ecological complexes of which they are part; this includes diversity within species, between species and of ecosystems” (15). In Antarctic law, “environmental damage” includes:
(i) adverse effects on climate or weather patterns;
(ii) significant adverse effects on air or water quality;
(iii) significant changes in the atmospheric, terrestrial (including aquatic), glacial or marine environments;
(iv) detrimental changes in the distribution, abundance or productivity of species or populations of species of fauna and flora;
(v) further jeopardy to endangered or threatened species or populations of such species; or
(vi) degradation of, or substantial risk to, areas of biological, scientific, historic, aesthetic or wilderness significance (16);

Legal scholars have attempted to better define the contours of the expression «environmental damage.» This is the case with Philippe Sands and Jacqueline Peel who, in their book Principles of International Environmental Law, suggest that the terms refer to damage to “four possible elements: (1) fauna, flora, soil, water and climatic factors; (2) material assets (including archaeological and cultural heritage); (3) the landscape and environmental amenity; and (4) the interrelationship between the above factors” (17).
Regarding the threshold of severity for damage, the 2004 European Directive on Environmental Liability with regard to the prevention and remedying of environmental damage is enlightening (18). Damage, defined as «a measurable adverse change in a natural resource or measurable impairment of a natural resource service which may occur directly or indirectly” (19), must be significant (20).
Some risks cannot be insured against due to factors of unpredictability and severity. Some damages caused by natural disasters may not be covered, in cases where the indemnification exceed the financial capacity of insurers for instance. Furthermore, insurance policies may contain exclusion clauses (21).
Analogies can be drawn from the development of nuclear insurance, partially marked by the American Price-Anderson Act enacted in 1957 (22). Prior to this act, nuclear risk was considered uninsurable, as nuclear activities were deemed ultra-hazardous and their consequences uncertain (23). The public–private provision of commercial nuclear insurance enabled the indemnification of potentially catastrophic first- and third-party losses. This was essential in shaping the behavior of regulators, insurers and the industry in managing nuclear risk, such as contamination of land with fission products (24). According to John E. Gudgel, without this framework, the nuclear industry as we know it might not exist (25).
Space activities are confronted to numerous risks. Technical failures, orbital collisions, and environmental hazards can lead to the loss of a space object. In this context, some entrepreneurs will take out first-party insurance, which allows compensating the insured for the losses they may have experienced. They may be required to obtain third-party insurance, which aims to compensate an external party to the contract who would have suffered damage caused by the unintentional fault of the insured. Thus, the space policy covers risks that are inherently insurable.
Space objects can pose challenges to the protection of terrestrial and space environments, particularly during the launching phase or in the event of a collision in orbit. Eventually, it is possible that space activities could pose a risk of damaging the ecosystems of celestial bodies, such as the Moon. Moreover, launching states can be held liable for environmental damages. This was the case when the Soviet satellite Cosmos 954 crashed in Canada, leaving hazardous radioactive debris (26).
Operators can be held liable when stipulated by law, and cleanup costs for environmental damage may be claimed from them through recourse actions established in some states. In light of this legal mechanism, it is therefore necessary to consider the insurability of the risk of environmental damage that their activities could cause. More precisely, how is the interaction between the space insurance requirement and environmental damage shaped? It appears that the space insurance requirement creates a triangular dynamic among regulators, insurers, and the industry, contributing to the reduction of environmental damage risk depending on the modalities of the requirement and its scope.
Drawing upon an approach from positive law, this communication aims to analyze the environmental dimension of space insurance and explore its use as a contractual tool for mitigating the risks of environmental damage. To achieve this, the interaction between the space insurance requirement and environmental damage will be dissected in two stages. First, both the general and specific modalities will be analyzed to define the requirement, highlighting its environmental aspects where applicable. Next, the scope of the requirement, particularly concerning environmental damage, will be assessed based on the three arenas where harm from a space object could occur: on Earth, in space, and in international waters. To conclude, the effects of the requirement on the role of insurers in the sustainable development of the industry will be briefly examined. This will shed light on the uncertainties related to integrating environmental considerations into the regulator-operator-insurer dynamic, a crucial component of space governance.

Modalities of space insurance requirements

The space insurance requirement is the obligation for operators to obtain an insurance policy to cover their liability. Its parameters vary depending on the regulatory framework but can be described through both general and more specific modalities. This section will therefore outline the modalities defining this requirement, highlighting environmental considerations where relevant.

General modalities

Space insurance requirements serve as a recourse action, which is established in the provisions of relevant national law. In a space activity context, this legal procedure allows the state who would have compensate for damage, which they did not cause or were not solely responsible for, to seek reimbursement from the actual responsible party for the amounts paid (27).
In France, the Loi relative aux opérations spatiales of 2008 stipulates that space operators must be covered by insurance or have another financial guarantee to “cover the risk of having to compensate […] for damages that may be caused to third parties by space operation” (28). In Japan, a launch activity must be covered by a liability insurance contract, since the operator is “liable to compensate for any launch vehicle fall damage” (29). In the United Kingdom, all licensees “must demonstrate that they either hold or are able to benefit from third-party liability (TPL) insurance for the duration of the licensed activities” (30). The purpose of this requirement is “to ensure that insurance is available to cover claims made against the UK Government under the Liabilities Convention and therefore that the indemnity to Government is insured; by uninvolved persons in the UK (‘third parties’); under common law” (31). The South Korean framework also explicitly stipulates that “[i]n cases where the Government has paid compensation for damage to a foreign government in accordance with the Convention on International Liability for Damage Caused by Space Objects, it may request the person launching a space object to indemnify such compensation” (32).
Other launching states, such as the United States, New Zealand, United Arab Emirates, and Luxembourg have implemented requirements regarding liability. Not all launching states have done so. No recourse mechanisms regarding claims for damage caused by space activities are provided in the Canadian, Spanish, Singaporean frameworks, among others, yet.
To ensure compliance with obligations under international commitments, some states have elaborated provisions foreseeing the compensatory role of the state. The Australian government may compensate in some cases, when the amount of the compensation would exceed the insured amount for the Australian high power rocket permit, among other things (33). Under the Japanese framework, operators can make an agreement with the government to compensate any cost that the insurance contract may not cover (34). The United States, and others, may also still provide coverage when claims are not compensated by liability insurance (35).
Space insurance requirements are ex-ante measures aimed at holding operators liable. According to deputy Pierre Lasbordes, the French requirement aims at ensuring the solvency of space operator holding an authorization, commensurate with the liabilities that may fall upon them in the event of damages (36).
From this requirement, other modalities are emerging, including the right of subrogation. After compensating the third party who suffered the damage, the insurer can generally seek reimbursement from the responsible party, if circumstances allow. Conditions that prevent the use of this right could be specified in the contract (37).
The implementation of the requirement thus relies on an insurance policy, a contract agreed upon between two parties: the insurer and the insured. The latter agrees to pay periodically a premium for the coverage provided. In return, the insurer commits to compensate upon the occurrence of a covered risk. A claim procedure must be initiated by the insured, who must submit the required documents in order to receive compensation. The policy can also provide specific clauses, such as a waiver clause.
The space insurance requirement imposes a third-party liability insurance on the operator. Before defining the parameters of this product and its applicability in terms of environmental damage, it is appropriate to briefly describe the other products offered in the space insurance market. A first-party insurance allows compensating the insured for the losses they may have suffered. Property insurances, in this way, cover the insured’s belongings against specific material losses. This type of product lacks practical applicability concerning environmental damage, except when considering its parameters for assessing technical risks of the object and collision avoidance, which can reduce the likelihood of it becoming debris. This possibility will be addressed in a subsequent section.
A second-party insurance refers to insurances that protect the insured against damages that a passenger might incur (38). This product has no concrete impact in terms of environmental damage. A third-party insurance aims to compensate an external party to the contract who would have suffered damage caused by the unintentional fault of the insured. All-risk insurance usually refers to policy that covers both first-party and third-party.
Could states impose clauses to cover for environmental damage? Yes. However, only the British framework explicitly provide that environmental damage must be covered by the third-party liability insurance. In the Space Industry Act 2018, the British government precises that regulations may prescribe “matters to be covered by the insurance” (39). In its Guidance on Insurance Requirements and Liabilities Under the Space Industry Act 2018, it specifies the elements that must be covered by the third-party insurance requirement: “death; injury; damage to property; business interruption associated with physical damage; economic loss arising from physical damage (e.g. the costs of moving to alternative premises); environmental damage (e.g. clean-up costs carried out by public authorities)” (40). Thus, the British government has regulated the insurability of environmental damage by requiring its coverage by the insurer (41).
The definitions of the terms «damage» and «liability» in space laws are directly linked to the insurance requirement and can significantly impact the consideration of the environment in the insurance policy. Operators may be liable for environmental damage, even though no provision explicitly requires insurers to cover it.
In other frameworks that do not impose such a clause, one would need to rely on what is stipulated in the contract to determine whether environmental damages are covered or not. When not explicitly covered, could the environment be considered a third party? That is a question that has been addressed under international environmental law and remain up to debate.
By imposing a space insurance requirement, some states have developed precise regulations and methodologies, facilitating dialogue between authorities, insurers, and insured parties. This is the case with Australia, the United Kingdom, and the United States, each of which has developed their own risk assessment methodologies for space activities. The British methodology, Modelled Insurance Requirement (42) (MIR), aims at determining the level of insurance required by considering “the probability and consequence of any failures that may arise during spaceflight activities” (43). More precisely, the MIR represents the amount of potential third-part claims that the operator might face in a realistically scenario. The amount is calculated using two parameters: “the probability of a particular launch failure mode which leads to a major accident and the financial values applied to that particular failure mode” (44). All major accidents should be considered, including numerous scenarios of debris fragments and toxic release, but only those with a likelihood greater than 1 in 10 million must be covered by the insurance (45). The financial value is calculated based on the expected outcome of the accident, which is a combination of five variables: number of injuries; number of death; property damage; damage to high value infrastructure; and damage to environment (46).
In the United States and Australia methodologies are both called Maximum Probable Loss (MPL) and are similar to the MIR. According the Australian methodology, to methods can be used to estimate the costs associated with environmental damage and clean-up:

  1. $170,000; or
  2. If there is a particular high-value asset within the 10-7 probability of impact isopleth facing an impact that would result in environmental damage, make an accurate engineering evaluation of the costs associated with restoring the environment to the condition which would have existed if that damage had not occurred (47).

Overall, general modalities define the space insurance requirement as a recourse action implemented by certain launching states to be able to claim from private entities that may be liable for damages. This ex-ante measure can include parameters related to environmental damages, as is the case in the United Kingdom, which mandates the insurability of environmental damages. Other approaches, such as the Australian methodology, consider the liability of operators for such damages without explicitly requiring insurers to cover the associated risks.

Specific space activities modalities

When implemented, space insurance requirement is one of the conditions established in the licensing process for authorizing the activity. Licences typically have different nomenclatures depending on the regulatory framework (licence, permit, authorization, certification, etc.), but they can generally be grouped into one of the seven categories identified in the research:
a. General space activities (e.g. Luxembourg “autorisation des activités spatiales” and United Arab Emirates “permit (general)”);
b. Spaceport licence (e.g. Japan “Compliance certification for launch site” and United States “License to operate a launch site”);
c. Payload licences (e.g. Australia “Overseas payload permits”);
d. Launch licences (e.g. New Zealand “Launch licence” and South Korea “Launch permits for space objects”);
e. In-space licences (e.g. France “Autorisation d’opération de maîtrise » and United Kingdom « Orbital operator licence »);
f. Return licences (e.g. Australia “Return authorisation” and United States “Re-entry license”);
g. Other (e.g. United States “Experimental permits” and United Arab Emirates “Permit for manned spaceflight activities”).

Modalities of the requirement may vary depending on the type of licence, and thus the activity, targeted. For a launch or a return to Australia, the holder of the permit must be insured for the activity and must ensure that the requirements are satisfied. For a launch or a return outside Australia, the holder of the permit must ensure that the insurance/financial requirements are satisfied. For an Australian high power rocket permit, the holder must be insured. As for the holder of the Australian launch facility license, they are not required to be insured or to demonstrate any obligation regarding liability.

In the same vein, there will be specific modalities depending on the targeted orbit, whether it is for an orbital or suborbital launch, among others. Distinctions in insurance requirements between suborbital and orbital launches are seldom observed. Typically, both types of activities are grouped under the same umbrella, categorized as «launch activities». Consequently, the same insurance requirement generally applies, regardless of the targeted orbit. Nevertheless, in the United States and the United Kingdom, there are instances where specific differentiations are made based on orbits. The British framework differentiated space, sub-orbital and associated activities (48). To launch, spaceflight activities must be authorized according to the launch operator licence criterion, which means liability requirements apply. The government can also grant an orbital operator licence: “[f]or in-orbit operations, orbital operator licensees will need to take out or have access to TPL insurance as appropriate to cover the period of in-orbit operations as specified in a licence and associated licence conditions.” Therefore, a sub-orbital activity must only meet the insurance conditions of the launch phase, while an orbital activity must also be insured throughout the in-orbit operations period.
From the insurers and brokers point of view, sur-orbital flights are “spaceflight rather tant aviation” (49). However, Harrington notes that some entities engaging both in the aviation and space sectors, such as Virgin, will likely be insured through the aviation market since they already have accounts for their aviation fleet (50).
Depending on the targeted activity, more specific modalities arise. The conditions for obtaining the license — including the space insurance requirement and all other conditions — interact within the regulatory ecosystem in which the activity takes place. For example, to obtain the Emirati permit «for the Use of Space Nuclear Energy Sources,» the applicant must justify the reasons for using this energy in their application and commit to informing about the risks they face, in addition to other conditions (51).
Of course, all these specifics vary according to the legal framework, particularly due to the definitions of key terms. The term «launch activity,» for example, is not defined the same way by different launching states. In France, the launch phase is defined as: the period of time that begins when the launch operations become irreversible and ends with the separation of the launcher and the object intended to be placed in outer space. In the United States, the launch phase starts as soon as the launch vehicle arrives at the launch site. In Japan, it is considered to begin when the payload is loaded onto the launcher.
The variations in definitions influence the validity period of the insurance coverage for said activity. In Australia, for example, they have established a liability period. For a launch license, the authorized person’s liability can be engaged for 30 days after the launch has taken place. In the United Kingdom, the validity period of liability insurance coverage is determined on a case-by-case basis, according to the duration determined by the risk assessment method. Other specifics modalities of the insurance requirements related to the type of activities targeted may include exemptions and sanctions.
In short, the space insurance requirement is defined by specific modalities depending on the activity in question. Insurance products also vary based on whether they cover launch or orbital operations. Nonetheless, these specific modalities do not seem to provide further clarity regarding the consideration of environmental damages. Having outlined the modalities of the requirement, it is now appropriate to examine its scope concerning these damages.

Scope of the requirement regarding environmental damages

The Liability Convention defines the term damage as the “loss of life, personal injury or other impairment of health; or loss of damage to property of States or of persons, natural or juridical, or property of international intergovernmental organizations” (52). Environmental damage is not explicitly mentioned. However, the second Principle of the Rio Declaration stipulates that states have “the responsibility to ensure that activities within their jurisdiction or control do not cause damage to the environment of other States or of areas beyond the limits of national jurisdiction” (53). Other international instruments confirm this environmental responsibility, such as the Convention on Biological Diversity (54). More broadly, the Corfu Cannel Case introduced the due diligence principle, which implies a liability regime “based on a state’s general duty of care” (55). Furthermore, a precautionary approach should be applied (56).
In the context of space activities, the recourse actions established by states to hold operators accountable can vary depending on the modalities and the area of operation: terrestrial, space, or maritime. It is now pertinent to analyze the scope of the requirement concerning environmental damage that could affect each of these areas.

Insurability of terrestrial damage

Article II of the Liability Convention establishes a strict liability regime for intra-atmospheric damages (57). This regime holds a party liable for their actions regardless of fault or intent, meaning no proof of fault is required by the third party in order to obtain indemnification.
The wording of article II and the subsequent articles implies that the strict liability regime applies on the territory in the airspace under the jurisdiction of the third party or “whose natural of juridical persons suffer damage” (58). Without this jurisdictional prerogative of the state of nationality or the state linked by its permanent residents to the damages suffered, the claim procedure established by Article VIII and subsequent articles can hardly take shape. Consequently, damage occurring in international waters appears to be excluded from this regime and will be addressed separately.
As previously mentioned, environmental is not stated in the Liability Convention nor the Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space, including the Moon and Other Celestial Bodies (Outer Space Treaty). Therefore, general international law could apply. In the Judgment of 2 February 2018, Certain Activities Carried Out by Nicaragua in the Border Area (Costa Rica v. Nicaragua), the International Court of Justice recognizes for the first time that general international law entitles reparation for environmental damage:
The Court has not previously adjudicated a claim for compensation for environmental damage. However, it is consistent with the principles of international law governing the consequences of internationally wrongful acts, including the principle of full reparation, to hold that compensation is due for damage caused to the environment, in and of itself, in addition to expenses incurred by an injured State as a consequence of such damage (59).

Hence, environmental damage must be the result of an internationally wrongful act (60).
In the context of a space activity, a launch or return activity could cause damage to the terrestrial environment. The plume left by rocket launch might have an impact on the environment (61). Re-entries of space object contributes to the reduction of debris by allowing its disintegration in the atmosphere. However, if the object is not entirely consumed during its passage, it can pose a risk to the terrestrial environment, as well as to people and property (62). On March 8, 2024, debris from the International Space Station struck a house in Florida, endangering the owner’s son (63).
Moreover, the fall of an object could generate harmful effects on ecosystems. This was the case when the Soviet satellite Cosmos 954, launched in September 1977, crashed in the Canadian Artic on January 24, 1978. It is worth mentioning it was a Soviet satellite with nuclear propulsion and its crash resulted in a large number of radioactive debris over an area spanning more than 124,000 km2. It is the only time the Liability Convention has been invoked for a claim for compensation. The claim in this case led to a series of negotiations, through diplomatic channels. Canada initially sought 6 million for damages, primarily for cleanup costs, from the Soviet Union, but only managed to secure 3 million through a settlement agreement reached in 1981, a few years after the crash (64).
The Inter-Agency Space Debris Coordination Committee (IADC) guidelines suggest that “ground environmental pollution, caused by radioactive substances, toxic substances or any other environmental pollutants resulting from on-board articles, should be prevented or minimised in order to be accepted as permissible” (65). Despite international guidelines, the norms for re-entry remain insufficient (66).
What would happen if terrestrial environmental damage was caused by a space object owned by a private entity? The responsible state could initiate a recourse action to seek reimbursement from the operator to whom it attributes liability, as provided for by its national framework. This mechanism would therefore be facilitated by the inclusion of consideration for environmental damages, as it is the case in the United Kingdom. In Australia, “[t]he responsible party for the launch or return of a space object is liable to pay compensation for any damage the object causes to a third party.” The operator could subsequently approach their insurer to file a claim, contingent upon the extent of coverage in their policy, especially if it includes expenses like cleanup.
It is in relation to intra-atmospheric damages that the largest number of recourse actions have been implemented.

Insurability of outer space damage

Article III of the Liability Convention establishes a fault-based regime for extra-atmospheric damages (67). This implies that the third party must demonstrate the fault, the damage and the causal connection between those two elements.
Environmental damage in space can take several forms: orbital saturation; space debris; disruption of lunar ecosystems and other celestial bodies. Among these examples, the accumulation of space debris leads to an increasing risk of collisions with potentially serious consequences, such as the Kessler Syndrome (68). Currently, hundreds of thousands of debris are polluting outer space, and their mitigation is particularly complex (69). In 2009, the collision between the Iridium-33 telecommunications satellite and a Russian military satellite alone resulted in approximately 3000 pieces of debris (70). More recently, a fragment of debris collided with the ISS, resulting in a hole in the Canadian arm (71).
The Liability Convention does not define “fault”. As mentioned by Dennerley, “[d]ue to a lack of definition of fault, there is uncertainty as to the circumstances under which a state would be liable for the damage caused by its space debris” (72). Furthermore, to show negligence or the lack of due diligence, one will have to demonstrate “that a launching state has the capacity to prevent the damage occurring in the space environment” (73). Soft law instruments, such as technical and regulatory standards, could eventually help in precising the sense of this fault-based regime (74).
These burden of proof elements imposed on the third party may partially explain why fewer insurance requirements were established for the extra-atmospheric aspect of space activities, in comparison to the intra-atmospheric aspect. States may perceive less risk of their liability being engaged and having to compensate.
France, Japan, the United Kingdom, the United Arab Emirates and Luxembourg, among others, have implemented insurance requirements for most extra-atmospheric aspect of their authorized space activities. For instance, the United Kingdom Orbital operator licence:
…authorises a person or organisation to procure the launch of a space object into orbit, operate a space object in orbit or conduct other activity in outer space. The most common example of activities that would be licensed under an orbital operator licence are the procurement of a satellite launch and the operation of a satellite. However, the licence may also cover any other activity in outer space, and is not limited to activities in Earth’s orbit. For example, an orbital operator licence would be needed for missions in lunar orbit, lunar surface missions, or deep space probes… (75)

To obtain this licence, the operator needs to take out or have access to a third-party liability insurance to cover the period of in-orbit operations (76). Under the Emirati law, any owner of a space objects must obtain an Authorization. The operator is subject to third party liability obligations and is authorization is conditional upon obtaining “an insurance contract with one of the insurance companies approved by the Agency, and he/it may provide any other guarantees approved by the Agency in accordance with the controls issued by a decision of the Board of Directors” (77).
In other countries, obtaining insurance coverage for the extra-atmospheric aspect is more at the discretion of the operator. This is the case in Australia, where the insurance requirements apply to launch, return, and foreign payload activities (78). However, it is important to specify that the law requires the insurance coverage period for the launch activity to also cover the 29 days following the launch “or such other period as is specified in the rules” (79).
In 2020, 46.5% of satellites were covered by liability insurance, and only 7% of satellites were covered by property insurance. This latter figure drops to 2% for satellites in low Earth orbit (80).
Identifying from the ground whether a spacecraft has been lost due to a technical malfunction or a collision with space debris is often infeasible (81). The ambiguous legal framework and the distant nature of space have driven the space industry to gradually favor first-party insurance (82). First-party insurance seems to offer operators a faster and more straightforward resolution when an object is lost, compared to third-party liability insurance (83).
The insurability of extra-atmospheric environmental damages appears more uncertain compared to damages occurring on terrestrial environments. It is more challenging to hold states liable; to demonstrate their fault and wrongful act in environmental matters; few recourse actions have been implemented for the extra-atmospheric aspect of private activities; and insurance contracts for outer space activities appear to focus more on property insurance products rather than civil liability.

Insurability of maritime damage

International space law does not provide a specific liability regime for environmental regime in the high sea. However, general international law teaches us that the liability of the state could be engaged if the environmental damage results from a wrongful act, as previously mentioned.
By disintegrating in the atmosphere, the re-entered objects usually contribute to the reduction of space congestion. Since 1957, approximately 24,000 objects, totaling 32,000 metric tons, have re-entered the Earth’s atmosphere, with 10 to 40 % of material resisting (84). However, the number of objects that could survive re-entry is expected to increase, especially due to the growing use of materials that do not disintegrate, such as titanium (85).
Controlled re-entry of objects expected not to fully vaporize usually follows a trajectory leading to an ocean zone (86). Upon reaching the waters, they pose less risk to states. Approximately 75 % of re-entries were dispositioned in the ocean (87). The South Pacific Ocean Uninhabited Area (SPOUA) (88) or Point Nemo is the point farthest from any landmass. It is also known to be the “spacecraft cemetery” (89). Since 1971, more than 263 pieces of debris have been submerged there (90).
Despite being nearly inaccessible to humans, its ecosystems harbor significant marine biodiversity. Oceanic re-entries, known as “splashdowns”, may generate environmental consequences (91). They represent kinetic risks to the seabed; chemical risks due to hazardous materials or substances; and radioactive risks due to nuclear reactor or radioisotope thermoelectric generators (92).
Article 1 (4) of the United Nations Convention on the Law of the Sea defines “pollution of the marine environment” as follow:
the introduction by man, directly or indirectly, of substances or energy into the marine environment, including estuaries, which results or is likely to result in such deleterious effects as harm to living resources and marine life, hazards to human health, hindrance to marine activities, including fishing and other legitimate uses of the sea, impairment of quality for use of sea water and reduction of amenities (93).

It also defines the term dumping as “any deliberate disposal of wastes or other matter from vessels, aircraft, platforms or other man-made structures at sea […]” (94). Article 212 forbids pollution from or through the atmosphere (95). An evolutionary interpretation of this provision could allow for the inclusion of space objects, in addition to the «vessels flying their flag or vessels or aircraft of their registry» already listed (96).
Are splashdowns non-compliant with international law, and consequently, could this measure engage state liability if environmental damage is observed? As explained by Vito De Lucia and Viviana Iavicoli, “[a] sunken space object can only be a form of pollution if: (1) it is introduced by man, directly or indirectly; (2) it consists of substances and/or energy; and (3) its introduction does or may result in deleterious effects to living resources or marine life” (97). The first two criteria can be fulfilled, but the third would call for a comprehensive investigation. If this criterion were to be deemed fulfilled, splashdowns could be characterized as dumping (98). Thus, under certain conditions, it could be considered a wrongful act and could potentially engage the launching state liability.
The high sea also poses the issue of claiming parties. Who would have the jurisdiction to file a claim against the responsible state, which would amount to a request to undertake cleanup? The Deepwater Horizon case showcased important transboundary litigations and private entities liabilities matters (99). However, this case – and must case regarding marine pollution – concerned environmental damage to internal waters of states that had competency to claim.
Only four states – among those analysed in the present research – have implemented an explicit recourse action for return activities that might be used in the context of marine pollution: Australia, France, the United Kingdom and the United States. In all those four states, the return activity must be insured. Under the Australian law, the Return authorisation allows “(a) the return of a space object to a specified place or area in Australia or outside Australia; or (b) a particular series of such returns that, in the Minister’s opinion, having regard to the nature of the space objects to be returned, may appropriately be authorised by a single return authorisation” (100). The period during which the liability of the operator must be covered is “beginning when the relevant re-entry manoeuvre is begun and ending when the object has come to rest on Earth, or such other period as is specified in the rules” (101). As for the American law, two licences might be required to proceed to a return activity: Re-entry licence and Licence to operate a reentry site. Insurance or other form of financial responsibility is a requirement attached to both licences (102). The validity period of the policy must generally begin upon commencement of licensed reentry until completion of the activity (103).
The insurability of environmental damages caused by space activity and occurring in the high sea appears even more uncertain than those taking place in the two previously described areas. Although splashdowns could potentially be considered a wrongful act, the question of the competency for a state to claim another in high sea remains. Moreover, only a few spacefaring nations have implemented mechanisms to seek action against an operator in the context of a return activity that might take place in international waters.

Conclusion

The insurability of environmental damages caused by space activities depends on legislative and contractual factors delineating the space insurance requirement. Due to legislative factors, some states can hold private actors liable for environmental damages. The insurability of these damages also depends on contractual factors. While some policies may cover the risk of environmental damages, others may not. Legally mandating coverage for this risk strengthens its insurability and ensures that environmental damages are considered in the authorization and monitoring process of space activities.
General modalities form the essence of the space insurance requirement: it is a recourse action implemented in certain national frameworks, aiming to hold operators accountable. Specific modalities related to the category of activity targeted further define its contours. The validity period of the required coverage can vary depending on whether it is for a launch activity or orbital operations, for example.
The scope of the space insurance requirement regarding environmental damages varies depending on the area of activity or the location of the damage: on the ground, in space, or at sea. A greater number of recourse actions have been developed for damages in the first mentioned zone. Thus, the insurability of environmental damages caused on Earth appears more tangible, unlike the other two zones. Outer space faces a more complex liability regime, and many uncertainties remain regarding the liability regime for space activities related to high seas zones.
Despite that, this space insurance requirement helps to reduce the risks of environmental damage due to the meticulous tools available to insurers and facilitates recourse actions aimed at holding operators accountable. Consequently, insurers have a key role to play in space governance, particularly regarding the protection of terrestrial and extraterrestrial environments. This role could eventually be extrapolated to the specific case of moon governance, especially if technology one day enables lunar activities, such as mining.
In their risk assessments, space insurers have evolved into genuine accident analysts and a risk avoidance specialist. Today, there are between 30 and 35 insurers worldwide that offer spacer products and services. These private entities play an important role in the authorization and surveillance process of activities.
In the context of the authorization process, insurers usually conduct a technical standards assessment. Space insurers have departments with experts in the field, such as astronautical engineers, who assist them in evaluating technological risks, for example. This assessment helps ensure that technical standards and best practices, which are key elements in accident prevention, are taken into account. Additionally, by refusing to provide insurance for activities that present too much risk, insurers play a role in filtering, which impacts the development of the space industry. Thus, the role of insurers in the authorization process helps reduce risks before the activities commence.
The role of insurers in the surveillance process can be dissected into three aspects: objects monitoring; collision avoidance; and data collect. They monitor the insured satellites to keep track of their assets. This surveillance can help prevent collisions between insured objects and other objects or debris. It also allows for the collection of data that can be used in claims processing or for statistical calculations, or, by extrapolation, in a litigation context.
The risk transfer contributes to the financial stability of the space industry by allowing the absorption of catastrophic financial losses. This economic function helps make the industry more attractive to investors. Besides, space insurers are generally cross-border players. This means they play a role in standardizing the authorization and surveillance processes. Overall, insurance services help model the risks, which has a positive impact on the sustainability of space activities.
On the long run, insurer can have a bigger role to play in the governance ecosystem. Could the greater capacity of the private sector contributes to the development of more precise surveillance technologies? Could a broader implementation of a TPL in-orbit serve as an in-orbit fee? (104) Could the salvage clause be a tool to reduce, reuse, and recycle space debris?
Nonetheless, the expansion of the role of insurers sparks criticisms and faces certain limitations. Could too much power be delegated to insurers in the space sector? Are there more effective and efficient governance models, such as governance systems based on technical standards?
A noteworthy limit is the absence of international standards aimed at regulating this cross-border actor. To address this gap, international guidelines on transparency could be developed to enhance discussions between governments, insurers, and operational stakeholders.

References

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  3. Liability Convention, art. III.
  4. Liability Convention, art. VIII.
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  88. Also called Oceanic Pol of Inaccessibility.
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  91. Ibid., p. 348.
  92. Ibid., p. 370-371.
  93. United Nations Convention on the Law of the sea, December 10, 1982, 1833 U.N.T.S. 3, art. 1 (4).
  94. Ibid., art. 1 (5) (i). See also (ii) and (b).
  95. Ibid., art. 212.
  96. Vito De Lucia and Viviana Lavicoli, op. cit., p. 375.
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  98. Ibid., p. 380.
  99. BP Exploration & Production Inc. V. United States, 136 S. Ct. 1139 (2016).
  100. Space (Launches and Returns) Act 2018, op. cit., sec. 46L (1).
  101. Ibid., definition of “liability period”.
  102. 14 C.F.R. § 440.5 (2023).
  103. 14 C.F.R. § 440.12 (2023).
  104. International Risk Governance Center, op. cit.