Call for evidence outcome

Government response: Call for evidence to inform orbital liability and insurance policy

Updated 23 June 2022

1. Introduction

The government committed to review key liability and insurance concerns and proposals raised in response to the consultation document entitled “Unlocking commercial spaceflight for the UK: consultation on draft insurance and liabilities requirements to implement the Space Industry Act” (“the Liability, Insurance and Charging consultation”). For further information, see the consultation document and the government’s consultation response. The government also committed to carrying out a review in the National Space Strategy published on 27 September 2021.[1]

The government published a call for evidence on 22 October 2021 to gather evidence, data and information that will assist in policy development.

This call for evidence sought evidence and views to inform policy consideration and development with regards to:

1.1 In-orbit operator liability limit

• seeking views on potential reduction of insurance requirements and limits of operator liability for orbital operators

• whether a fixed limit is replaced by the potential adoption of a variable liability limit, setting insurance requirements for orbital operations either in a similar way to the Modelled Insurance Requirement approach developed for launch activities from the UK, or by using a smaller number of risk criteria

1.2 Alternatives to insurance

• seeking views and examples of alternatives to traditional third-party liability insurance to cater for various spaceflight-related risks, including specific views on an industry proposal to adopt a new approach to insurance provision - any future model taken forward would need to be able to cater for any changes to the current methodology for calculating insurance requirements

• the impacts of alternatives to traditional insurance on the insurance market and space sector

1.3 Changing orbital operator liability limits and insurance requirements from €s to £s.

This document is the government’s response to the call for evidence. This document includes a summary of the responses received.

There were 29 responses received in total, received from a variety of organisations, primarily orbital operators but also insurers, legal consultancies, trade bodies and launch vehicle operators.

2. Ministerial Foreword

George Freeman MP

Minister for Science, Research and Innovation

Department for Business, Energy and Industrial Strategy

As we look to grow a strong UK commercial space sector, it is increasingly clear to me that there is a huge opportunity for the UK in building a leadership position in the appropriate regulation of the commercial satellite sector and the creation of a framework for commercial insurance of satellite risk. Given the widespread calls for better regulation of satellite launch, management, retrieval & recyclability to reduce and mitigate debris risk; and London’s strengths as the current headquarters of space insurance, I am keen to explore opportunities for establishing strategic UK commercial advantage in this area.

The UK is perfectly placed to lead the global move towards safe and sustainable space. We have a long history of pioneering space science and innovation, and regulatory leadership. The UK and Union Jack are globally respected as trusted symbols of standards and high-quality regulation. With the City of London as a global financial centre for scale-up finance, insurance and ESG funding and a place that is keen to support our high growth space companies, we have the potential to set the framework for commercial leadership in making space sustainable and safe. With our post-Brexit regulatory and procurement freedoms we can be more strategic about using policy levers to help grow our industry and help lead the global commercial regulatory environment. If we get this right, we could make the UK the best place in the world to licence, insure and finance sustainable and safe satellite launch.

With this in mind, I want three key elements of the National Space Strategy to serve as the driving force behind our developing approach to setting policy on liability and insurance for spaceflight activities, which is a vital area of interest for satellite and launch operators. These three areas are:

• a focus on an approach which incentivises and rewards improvements to the sustainability of the orbital environment and places the UK squarely as the global thought-leader on this issue

• including measures which support growth of the UK’s space sector by reducing operators’ costs, strengthen London’s role as the global leading space insurance market, taking advantage to refresh the UK’s approach to regulation now that we have left the EU, seeking out opportunities to take advantage of our new-found regulatory freedom

• developing an approach which stimulates innovation and the adoption of first-of-a-kind technologies by UK operators

I would like to thank all those who have engaged with me and my officials as we have sought to develop our thinking on this key issue. Whether it was in response to the consultation in October 2020, the call for evidence published last October, or in the roundtable that I held on 30 March, you have raised these issues with us and provided robust evidence to inform our thinking. The government has listened. You really have helped shape our direction of travel.

The roundtable I held in March on regulation, sustainability and liability and insurance really drove home to me that both the sector and Government are pulling in the same direction on these issues and that there is a real desire to get on and deliver on these key objectives. With our shared sense of passion for what we do, making use of the brilliant minds within our sector and the great British sense of innovation and ingenuity, we can create a truly ground-breaking approach which we can use to lead and bring with us our like-minded, responsible space partners.

Whilst this document sets out our emerging thinking on these issues, it is by no means the end of your involvement in moving this work forward. Yes, there is still a lot to do but to make our ambitions a reality we need to move forward together in partnership.

I have therefore tasked the members of the Roundtable to work with my officials to develop these ambitious proposals, to make sure they truly deliver for our space sector, so that we can unlock the potential within our current market but also to attract new investment and operators who recognise that UK is a science superpower and innovation nation, a place to get business done, for the benefit of our people and the planet.

As UK Minister for the civil and commercial space sector, I believe this a major opportunity for the UK to show the leadership in commercial space regulation the global sector urgently needs. We should seize it.

3. Executive summary

The government has published this document to set out the future direction of travel in response to the issues raised in the call for evidence on orbital liability and insurance requirements.

The government has discussed emerging policy development at a series of meetings in Spring 2022:

• a Roundtable on regulation on 30 March and a meeting of the Spaceflight Safety and Regulatory Council on 31 March, at which a high-level summary of the review’s recommendations was provided

• an industry plenary on 5 April, which set out the detail on the recommendations arising from the review

The high-level recommendations following the review are as follows. These include other matters not included as part of the call for evidence. Further detail on these recommendations is provided later in this document.

3.1 Section 12(2) liability limit​

The government is currently exploring options for amending section 12(2) of the Space Industry Act to make clear in legislation that all operator licences must specify a limit on the amount of the licensee’s liability under section 36.​ As set out in the guidance document ‘Guidance on insurance requirements and liabilities under the Space Industry Act 2018’ on the Civil Aviation Authority’s website, the government’s published policy is that all licences issued under the Space Industry Act 2018 contain a limit of operator liability with respect to claims made under both section 34 and section 36 of the Act. Therefore no operator faces unlimited liability. This change would provide legislative certainty on this.

3.2 Satellite operator liability limits and insurance requirements

The recommendations in this section are:

• to move to a variable liability limit approach

• this approach will reflect an orbital sustainability focus

• the government is proposing a limited number of liability bands with a minimum value of zero and maximum recommended of £50m

• the government is exploring further whether it is appropriate to use the waiver of insurance approach to support broader aims of the National Space Strategy around growth and innovation

3.3 Alternatives to traditional third-party liability approach ​

The government is exploring alternatives to traditional insurance (collective buying of insurance by industry body, mutual approach, Government-issued ‘space bond’). ​

3.4 Other issues​

The government is also looking at insurance requirements for procuring an overseas launch; end-of life requirements; re-entry insurance requirements; and the holistic overview of insurance requirements for an entire mission. Further detail on these recommendations can be found in the section ‘Key recommendations from the orbital operator liability limit review.’

There has been positive feedback to the overall principles for the direction of travel, although recognition that there is much work to do over the coming months to develop the proposals for formal consultation. In particular, the principle of using an orbital sustainability focus to set liability limits for orbital operators was very much welcomed. The government has made some amendments and clarifications to the recommendations on procuring an overseas launch and end-of-life insurance requirements following the feedback received during the meetings above.

The recommendations in the package summarised below address key issues raised by the sector and amount to a substantial change in the UK’s approach to setting liability limits for satellite operators. As well as minimising operators’ insurance costs, the package also contains proposals to align with key elements of the National Space Strategy and place the UK as a global thought leader in promoting responsible and sustainable use of space.

The government will conduct a consultation later in 2022 or early 2023 on formal proposals once developed. The government has established a working group which includes representatives from the satellite sector and academia to develop the safety and sustainability approach to setting orbital operator liability.

4. Next steps following the call for evidence

The government is grateful to all those who responded to the consultations and the call for evidence. As a result of the extensive feedback received, the government will be working with the sector over the coming months to develop formal proposals ready for consultation. In terms of key milestones, the government intends to carry out the following:

• establish a safety and sustainability approach working group to develop the methodology – this was established and met for the first time in May

• development of proposals and drafting consultation May – November

• consultation starts late 2022 / early 2023

The government intends to implement the proposals as soon as possible thereafter.

5. Summary of views and evidence received

The Government is grateful for the thoughtful responses received to the call for evidence, and values all the evidence provided and views expressed. It welcomes the views provided by the wide range of respondents.

This section provides a summary of the views received in response to the call for evidence questions.

5.1 Overview of responses to the orbital liability and insurance review call for evidence.

In summary, the key conclusions from responses received are as follows:

Section 12(2)

Issues around unlimited liability arising under the Space Industry Act were mentioned in a number of responses, although this was not raised directly in the call for evidence. This is the key regulatory ask from the sector and relates to making the limit of liability in section 12(2) of the Act mandatory in legislation. This would then align with the limit of liability arising under section 34 of the Space Industry Act 2018, where under the requirements of regulation 220(1) of the Space Industry Regulations 2021, a licence must specify a limit.

UK competitiveness

On questions around the UK’s competitiveness, it was noted that some countries do not require third-party liability insurance for orbital operations (e.g. China, Russia and the USA) and others where insurance is required but at a lower amount (e.g. Luxembourg, Netherlands).

A number of responses noted that current liability and insurance requirements directly impact UK competitiveness or have the potential to do so, with a number of companies having already left the UK or with potential to do so.

Whilst either lowering the limit of liability or amending the current insurance model approach alone was viewed as improving UK competitiveness, a combination of lower liability limits and changes to the model for providing third-party liability cover would bring maximum benefit as lowering the insurance requirement alone would not bring a linear reduction in insurance premia (i.e. reducing the limit from €60m to €20m would not reduce premia by two-thirds).

Views on a fixed or variable limit approach

There was overwhelming support for a move to a variable liability limit approach to make the liability limit proportionate to mission risks, reduce insurance premia and encourage better risk mitigation measures, with support for defining an upper insurance limit in a new approach. There were some views however that the current fixed limit approach for standard missions[2] provided clarity for operators and the sector is familiar with the requirements.

Whilst issues around orbital sustainability were not directly raised as a question in the call for evidence or in the methodology proposed for a variable limit, there was a large amount of support for taking orbital sustainability into account in developing liability limit proposals and in wider policy. This reflects wider sector awareness and actions being taken on this issue.

Alternatives to the current third-party liability insurance approach

There was overwhelming support for the sector-proposed mutual from operators, although insurers preferred the collective Government-agreed insurance approach, doubting the viability or efficiency of a newly-established mutual.

There was little or no support for the other models mentioned in the call for evidence, with respondents agreeing with the issues identified by the government with such models.

There were concerns from insurers that London is the major insurance centre for space insurance and impacts of any changes on that position due to a change of approach to insuring third-party liability requirements, although the TPL section of the market is small compared with other elements of the space insurance market.

Views on the current space insurance market

Respondents noted that whilst there is capacity in the insurance market to meet current requirements (covering the wide range of operation types and risks associated with space activities, with potential for future growth), there were concerns from operators about a lack of competition overall in the market and risk-based pricing for insurance policies.

There were more general concerns that the insurance market is fragile and susceptible to significant increase in premiums, reduction of capacity or complete withdrawal of insurers in response to a large claim or series of claims.

Changing orbital operator liability limits and insurance requirements from €s to £s.

In general respondents thought that there was not an issue in making the change to setting liability limits for orbital operations in £s rather than €s, although there were some concerns about currency exchange fluctuations for operators holding licences in more than one jurisdiction.

6. Key recommendations from the orbital operator liability limit review

This section sets out the government’s current thinking in response to the questions raised in the call for evidence and the evidence received, as well as on liability and insurance matters not covered directly by the call for evidence.

It is important to note that at this stage these are not formal proposals and that the government will be working with the sector over the coming months to develop a formal set of proposals for consultation. As a result, due to the linkages between the matters raised below, the points made below may be amended to reflect the methodology developed for setting orbital operator liability limits and any alternative insurance model adopted.

6.1 Summary of the package of recommended measures

Section 12(2)

The UK Space Agency (UKSA) and Department for Business, Energy and Industrial Strategy (BEIS) are exploring with the Department for Transport (DfT) the legislative options for including a mandatory limit of liability under section 12(2) of the Space Industry Act. This is the key regulatory ask of the space sector to provide legislative certainty for operators and investors around liability limits as the government has already announced our policy that liability will be limited in all licences for this section.

Move to a variable limit approach

The government will develop proposals to move from the current fixed €60m operator liability limit approach to a variable liability limit approach, where satellite missions are placed into one of a limited number of liability bands, based on well-defined, transparent and assessable criteria. This has the potential to reduce operators’ insurance costs, which is a key ask of the satellite sector. The government is also proposing to set a defined upper limit to provide clarity to operators on their maximum liability, although further discussion is needed on the level this will be set.

The approach would set a range of fixed insurance values to reflect each band, with a minimum value of zero and maximum recommended of £50m (which equates to the current €60m limit for standard missions). Further discussion is needed on this, including the defined upper limit, taking into account also any potential new model adopted for third-party liability insurance and the new methodology for calculating liability limits for orbital operators (see below). Liability limits for proximity missions will also be developed as policy thinking develops on this issue.

This approach will reflect an orbital sustainability focus, to incentivise and promote wider UK government policy and ambitions, to provide thought leadership on the global stage in developing a responsible ‘race-to-the-top’ regulatory approach. This will also take into account considerations around safety, as is applied to licensing currently.

The government has set up a working group with industry stakeholders to develop such a methodology;

The government is also exploring ways in which the insurance requirements can be adapted to support key themes of the National Space Strategy of promoting growth and innovation. This will consider for example whether it is appropriate to expand the current waiver of insurance approach, which can be applied to the lowest risk satellites operating below the International Space Station, to include other criteria;

The current waiver of insurance applied to the lowest risk missions launched from or operating below the International Space Station (ISS) should be retained for operations licensed within the next two years but be subject to further review as the orbital environment below the ISS changes;

Review the current insurance aggregate limits which apply and align these with the revised liability limit values, developing constellation policy and on-going space insurance market capacity.

Under a safety and sustainability approach, it is not the intention that insurance requirements would be amended annually. The Government recognises that there are budgeting issues if insurance amounts are changed in-mission, as well as administrative implications for the regulator. If there is any agreement to change bands during the lifetime of a mission as part of the agreed approach, we would anticipate that this would only be in response to significant changes in risk and any change of approach would require consultation before the change is made.

Alternatives to traditional third-party liability approach

The call for evidence sought views on alternative approaches to the current method of insuring for third-party liability, in particular looking at support for a mutual approach proposed by the small satellite sector.

The government recognises that commercial insurance is currently available and officials will work with the sector to find market-based solutions to the present challenges, noting that across all markets, any government intervention is generally considered a last resort.

On the basis of the call for evidence, the government will explore the following options for further development before consulting on formal proposals to agree the preferred approach:

• sector-led mutual – the government is assessing potential adaptations to the proposed model to consider how it could be used in conjunction with the variable limit approach

• collective insurance policy for the whole sector - this option would agree a single policy to cover all licensees and negotiated by a sector organisation in the first instance and could be used in conjunction with the proposed mutual

• government Space Bond – this option is proposed as a longer-term option for increasing funding for the UK space sector as a whole

As thinking on the safety and sustainability approach and alternative insurance models develops, we will need to consider the interactions between these two approaches, as well as wider policies covered by the review.

If a decision is taken to pursue the collective buying of insurance option, the government’s intention would be for the sector to negotiate a collective policy. Government intervention in terms of negotiating a policy would only be a last resort.

€s to £s change

The government intends to implement the proposed change to set orbital operator liability limits in Pounds sterling rather than the current Euros value applied.

As part of the change of setting liability limits from €s to £s, in cases where insurance is purchased in a non-sterling currency, the insured value will be assessed against pound sterling liability limit set out in the licence (for example a £50 million value for the current €60m insurance required for standard missions, or the relevant value required under the safety and sustainability approach moving forward). The Bank of England exchange rate on 1 April of the relevant year will be used for the assessment. For example, if the €60m policy taken out equates to a value of £48m when the exchange rate is applied, then a further Euro equivalent of £2m will be required.

We are exploring how the administrative change from €s to £s will be made to existing licences.

Review areas not covered by the call for evidence

The following topics were not included in the call for evidence. The government is proposing the following with regards to these issues:

Insurance requirements for orbital operators for the procuring of a launch overseas

The current policy when procuring a launch overseas is for the satellite operator to take out or have access to €60m of insurance for the launch. Under usual practice, the satellite operator would be included as an additional insured on the launch insurance policy. With increasing numbers of launch vehicles requiring less than the €60m the UK currently requires, this means that some satellite operators are required to take out more insurance than is necessary for the launch. We are proposing to change the approach so that the insurance required (and therefore the operator’s limit of liability) will be the same as that for the launch vehicle.

As now, this requirement could be satisfied by being named as an additional insured on the launch policy and the satellite operator will not be required to take out an additional insurance policy for this amount. If the satellite operator is not included on the launch policy, the operator will need to take out a policy for the value covered by the launch policy.

This approach then aligns with the approach to be taken for UK launches.

In cases where the level of insurance required (i.e. by the foreign jurisdiction licensing the launch) would exceed the current €60m requirement, the €60m requirement will still apply (or the £50m equivalent once the changeover is applied), so that operators are not disadvantaged by this change.

End-of-life insurance requirements

The current policy is generally that, if agreed with the regulator, once the licensed activities have been completed and the satellite has been safely positioned to the satisfaction of the Secretary of State / Regulator, passivated and switched off, the licence will be terminated. Operators are not required to hold insurance following the termination of the licence.

There is no set definition of a satellite being placed to the satisfaction of the Secretary of State as this will be mission specific. This could be for example when the parameters in an agreed end-of-life plan and / or relevant safety considerations (i.e. once the Regulator is satisfied that the safety risks from collision and/or debris generation are sufficiently low) have been met.

To be clear, the point above relates to the termination of a licence. The termination of insurance requirements is a separate decision that relates to risk mitigation around government contingent liabilities. In the past, the termination of insurance requirements has often coincided with the termination of a licence, although the former could occur earlier.

Even though the insurance will no longer be required following the termination of a licence, the requirement to indemnify the Government for any successful claims will remain, up to the operator’s limit of liability.

Moving forward, the insurance requirements for end-of-life activities will be determined by the approach taken under the safety / sustainability approach (if this approach is taken forward) and wider Government policy on sustainability. This will include recognising actions that minimise the amount of time that a satellite remains in orbit once the operations have concluded, provided these actions also meet the Regulator’s safety criteria.

Re-entry insurance requirements

Further policy development is underway to determine licensing requirements for missions where objects are designed with the intent to survive re-entry intact (for example during sample return missions). As part of this thinking the government is considering whether insurance for re-entry activities will only be required where the re-entry object is designed to survive re-entry intact and such activity would be licensed and risks modelled. In such cases, we are exploring whether it is appropriate to apply the default values of the variable limit approach (i.e. £20m and £50m) or whether a bespoke value is required.

Consider with DfT the possibility of aligning orbital and launch insurance requirements

This would simplify the requirements for orbital operators as they often make use of the launch insurance policy for the first year of their operations. This prevents such operators having to buy top-up insurance which could double their insurance costs.

7. Key Outcome Criteria and Liability Limits in Safety and Sustainability Approach

This section sets out initial thinking for developing a high-level framework for a safety and sustainability approach to setting variable liability limits. Further work is needed to develop and refine the criteria further, taking into account the Long-Term Sustainability Guidelines, as well as other emerging sustainability ratings methodologies, such as that developed by the World Economic Forum. In particular, further consideration will need to be given to the development of the criteria to ensure that the Regulator’s primary responsibilities with regards to safety are not undermined.

The government has set up an officials / stakeholder working group to finalise the criteria and scoring methodology for this approach, as well as more detailed guidance and implementation plan for this approach. The formal proposals will be consulted upon later this year / early 2023.

7.1 Potential outcome criteria [Note – these criteria will also need to take into account relevant Regulator safety criteria and the ALARP[3] principle for licensing].

The following could be included as outcome criteria.

Mission parameters which minimise the probability and severity of a collision arising during the operational phase of the satellite

This criterion could be made up of the following elements:

• population of satellites in the intended orbit, both currently and on realistic future projections

• mass and size of satellite(s)

• number of satellites proposed in the constellation (if applicable)

• length of mission / time in orbit (whichever is more appropriate taking into account de-orbiting activity) – for example recognising actions that minimise the amount of time that a satellite remains in orbit once the operations have concluded, provided these actions also meet the Regulator’s safety criteria – see below

• mission type (if applicable) – note the regulation of some mission types (e.g. in-orbit servicing, active debris removal) is subject to separate development work

Maximising trackability and manoeuvrability of satellites

This criterion could be made up of the following elements:

• use of operator or third-party capability to monitor / track satellites and debris

• level of information sharing with other operators impacted by the operators’ activities on orbital parameters and collision avoidance protocols

• collision avoidance capability of the satellite during operations and its reliability

• level of automation of collision avoidance capability

• adoption of measures to enhance trackability of the satellite

• [note – if the operator proposes to undertake certain activities with respect to this criterion but the regulator deems that such action is not appropriate for the proposed mission due to CAA safety concerns, recognition could be given in the scoring of the criterion to reflect the intention to include such actions]

Minimising potential for debris propagation / malfunction during operations

This criterion could be made up of the following elements:

• use of reliable standardised space qualified or heritage components

• use of operating systems / operator with a space qualified heritage

• in-built redundancy in the event of component failure

• use of materials and design approaches to increase probability of burn-up on re-entry

Minimising long-term impacts on orbital sustainability post-operations

This criterion could be made up of the following elements:

• active-deorbiting methods which are considered safe by the regulator

• retention of collision avoidance capability during de-orbit

• adoption of measures to actively remove or repair non-functioning / impaired satellites

• [note – if the operator proposes to undertake certain activities with respect to this criterion but the regulator deems that such action is not appropriate for the proposed mission due to CAA safety concerns, recognition could be given in the scoring of the criterion to reflect the intention to use such actions]

7.2 Potential scoring methodology (any examples provided in this section are illustrative at this stage and to be determined as part of the agreed approach)

Criterion 1

0 – constellation[4]; large satellite with a long mission in a highly populated orbit

2 – constellation; standard length missions for larger satellites in highly populated orbits

5 – low probability of collision arising (e.g. satellites operating in the lowest populated orbits, very small satellites in a higher populated orbits, larger satellite in a lower populated orbits, very short missions)

[Note – a probability methodology will also be considered as part of the model]

Criteria 2-4

0 – takes the minimum actions required to comply with UK and international guidelines

2 – adopts some measures over and above UK and international guidelines

5 – adopts a significant number of measures over and above UK and international guidelines

7.3 Liability limits (higher scores denote higher sustainability)

Zero - for scores between 15 and 20

De minimis value (e.g. £250k-£1m) for scores between 10 and 14 (if such a liability limit would lead to reduced insurance costs based on the alternative insurance model adopted)[5]

£20m – cases scoring between 6-9

£50m – for scores between 0 and 5

Re-entry insurance requirements (for objects intended to survive re-entry intact) could follow a similar assessment, with £20m and £50m applied as default values, unless the approach above were applied in its entirety.

This call for evidence response is available from: https://www.gov.uk/government/consultations/call-for-evidence-to-inform-orbital-liability-and-insurance-policy

If you need a version of this document in a more accessible format, please email enquiries@beis.gov.uk. Please tell us what format you need. It will help us if you say what assistive technology you use.

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[1] See page 31 – ‘We will also launch a review of options to consider a lower limit of operator liability for in-orbit operations and alternative insurance models to support the needs of small satellite operators.’

[2] Note – higher limits of liability can be required for higher-risk missions.

[3] ALARP (“as low as reasonably practical”) is the principle that the residual risk shall be reduced as far as reasonably practicable. The risks must also be within the overall acceptable threshold.

[4] There are currently no set definitions for constellations. As policy develops on constellations, the scoring methodology can be adapted to reflect these developments.

[5] A de-minimis value may only be viable when using certain types of insurance model.