The U. S. Federal Aviation Administration (FAA) requires the commercial launch operator holding a license or a permit to be financially responsible within certain limits for damage to government and third party property. The launch operator must insure to a level that is termed maximum probable loss (MPL); for a license but not a permit, the government indemnifies above that amount up to an inflation adjusted limit of 1.5 USDB. The MPL is a level of loss that will not be exceeded more than either once in ten million (casualties and third party property) or once in one hundred thousand (government property). This paper addresses the methods that have been proposed for determining MPL for both expendable launch vehicles (ELVs) and reusable launch vehicles (RLVs). The general approach is to establish a method that is considered high fidelity as the reference point and then simplify from this method for cases that do not apply or for which the method is overly complex. The preferred MPL approach uses a risk profile for casualties and a damage profile for structure losses. Casualties are given a dollar value. The risk profile is a complementary cumulative probability distribution and is the equivalent to the F-N curve used widely in other industries, except that it applies to a single launch event and not over a period of time, such as a year. It is computed using thousands of simulated accidents with a debris footprint computed for each. The impact locations and impact conditions on exposed people in and out of structures are computed for each accident and collected in a histogram that is used to determine the risk profile. The procedure is required to analyze all of the behaviors of a failing vehicle and have probabilities of each event, a good description of the debris (inert and explosive), and a description of the numbers and locations of people at risk. It must also have vulnerability models for exposed people and structures due to inert debris impacts explosions and fire. Since there is considerable uncertainty in the risk analysis because of modeling limitations and variable uncertainty, uncertainty carries over to the MPL. The selected MPL for insurance purposes will be based on a statistical confidence (e.g. 75 or 90%) that the computed value exceeds the true value of the MPL, considering the uncertainty. The alternative MPL methods are also discussed as they apply to different vehicle concepts including: ELVs vertically launched or airborne launched, RLVs vertically and horizontally launch and orbital or suborbital. This work also addresses the important issue of catastrophic risk. The risk and damage profile approach offers the decision maker insight into the potential catastrophic consequences of vehicle design or mission design decision alternatives from a public risk point of view.
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