UK Government follow-up consultation on insurance and liabilities under the Space Industry Act 2018

As we noted in our commentary on the UK Government’s main July 2020 consultation, commercial spaceflight is seen by the UK Government as an important part of its strategy to capture 10% of the global space market by 2030.  The number of UK Government departments and agencies involved in this recent follow-up consultation on the draft insurance and liability requirements – the UK Space Agency (UKSA), the Department for Transport (DfT), Civil Aviation Authority (CAA) and the Department for Business, Energy & Industry Strategy (BEIS) – reflects the interest being taken across the UK Government in commercial spaceflight opportunities, and recognises that establishing an effective regulatory framework, to manage the new type of risks presented by launch activities and satellite missions from the UK, will require cross-governmental collaboration.

What is included in this follow-up consultation?

The consultation invites respondents to provide views on the following points:

• the operability and effectiveness of the insurance proposals outlined in the consultation, including licensing conditions relating to insurance requirements; 
• the draft secondary legislation, the Space Industry (Liabilities) Regulations and associated documents, including the guidance for stakeholders; and
• evidence from respondents on the assumptions contained in the liabilities and insurance impact assessment. 

Key takeaways from the consultation

Insurance requirements

Operators engaging in launch activities from the UK and operating a satellite launched from the UK will be required to have third-party liability insurance in place. This insurance will cover both claims made by third parties for injury and damage, and the operator’s indemnity to the UK Government for claims made against the UK Government. The basis for this insurance requirement, like the insurance requirement under the Outer Space Act 1986, is to ensure that there is sufficient coverage in place in the event of damage caused by the space activity, for which the UK would be internationally liable under the Liability Convention 1972.

The UK Government does not plan to stipulate the insurance coverage requirements in secondary legislation. Instead, reflecting the current practice under the Outer Space Act 1986, the amount of insurance required will be set out as conditions in individual licences. This approach is intended to give the regulator flexibility to carry out individual assessments for each licence application, based on the level of risk of the proposed mission, and set the insurance requirement accordingly. The consultation describes what the insurance policies must cover depending on the type of licensee under the Space Industry Act 2018, e.g. the coverage required for an operator may differ from the insurance that a spaceport licensee would be required to have in place to be issued a licence.

The Government’s preferred approach to setting insurance and liability requirements for launch activities from the UK is the Modelled Insurance Requirement (MIR) approach. The UK has looked to the insurance requirements in other jurisdictions such as the US (which, of course, has a well-established launch market) and Australia, where similar approaches are taken to setting insurance requirements (the MIR is similar to the Maximum Probable Loss (MPL) approach in these jurisdictions). The  MIR approach is described in the consultation as “the amount of potential third-party liability claims that an operator could incur in a realistically possible scenario”. The benefit of this approach for the UK Government, when it comes to assessing the risk of launch activities, is that rather than setting a fixed cap of liability across the board, the regulator can assess the risk and how much insurance would be needed to cover this risk, on an individual basis. The consultation contains a further, more detailed analysis and explanation of the Government’s preference for this approach.

Liability caps

As we noted in our previous article on the July spaceflight regulations consultation, the UK Government is cognisant of the concern raised by industry on liability requirements and the risk that setting unduly burdensome insurance requirements on operators may affect the UK’s competitiveness in the space market. This concern was addressed through the amendment made by the Deregulation Act 2015 which set a limit on an operator’s indemnity to the UK Government (for activities licensed under the Outer Space Act 1986) to €60 million for standard missions. 

Of relevance to operators looking to obtain a future licence under the Space Industry Act 2018, it is important to note that the UK Government intends to maintain the policy on limiting the liability to indemnify the UK Government for launches or satellite operations from the UK. The cap on the operator’s indemnity will be set out as a separate licence condition, but €60 million will remain the default for standard missions. 

It will also be useful for applicants to note the Government’s intention, as set out in the consultation, to provide for a possible waiver from the third-party liability requirement for missions deemed low risk. Such missions are considered to be low-risk small satellite missions (those with an orbital life expectancy of less than a year and in a location clear from high-value orbital assets),deployed from the International Space Station (ISS) or otherwise launched to an operational attitude below that of the ISS. 

Charging proposals

This follow-up consultation sets out the UK Government’s proposed approach to implementing the provisions of the Space Industry Act 2018 in relation to charging schemes. For spaceport, launch and range licensing, the UK Government intends to implement a charging scheme beginning in 2024. Given the nascence of the UK launch market, the charges to be applied to applicants for these types of licences will be reviewed on an annual basis. For satellite licensing under the Space Industry Act 2018, the Government proposes to continue to charge the same amount in licence fees as are currently charged under the Outer Space Act 1986, namely £6,500 per licence. 

It is interesting to note that in 2021 the Government intends to remove one of the fee exemptions currently in place, for educational institutions. The Government’s rationale for this change is to reflect that “universities are no longer part of the public sector and have become more commercialised, through greater collaboration with industry. Academic groups now bid for contracts in the same way as industry, so an exemption could offer a comparative advantage”.

The deadline to respond to this follow-up consultation is 10 November 2020. For any queries on the Space Industry Act 2018 or for assistance in responding to this consultation, please contact Bird & Bird’s Satellite & Space Activities team.