After years of bad performances, the satellite insurance sector is at a crossroad. Franco Irawan Esposito-Soekardi, Economic correspondent of Asia-Pacific Satellite, investigates. Things could have easily been better for the space insurance industry. In three of the last four years, in fact, the sector has lost money and it is likely that once year-end results are produced, 2001 as well will confirm the negative trend. In 2000, losses recorded by the space insurance sector amounted to US$1.15 billion, while premium income was $950 million. And in 2002 the total available coverage will again not exceed $1 billion. There are numerous factors that can be attributed for this negative trend. Chief among them is the fact that the space sector is a capital-intensive business. In fact, space insurance officials agree that the reason behind the downturn lies not so much with the frequency of the launches, approximately 40 a year, but with the economic value of each satellite. This means that the total or partial loss of even a single spacecraft tan have a severe impact on an insurance company's books. A multimedia communications satellite can cost up to $500 million, without considering that each launch may involve more than one satellite. A big telecommunications satellite can he insured for $250 million and sometimes more. PanAmSat's PAS-7 satellite, for example, carries a three-year insurance policy of $253 million. When the spacecraft suffered a permanent 25 per cent drop in power capacity, PanAmSat was reimbursed the full amount even though 75 per cent of the satellite continues to operate normally -however, the company in turn agreed to pay its insurers 25 per cent of PAS-7's revenues at the end of the satellite's contracted service life.
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