third-party liability insurance and space launches

Third-party liability insurance and space launches

Joel S. Greenberg

This article discusses a number of issues related to the US commercial expandable launch vehicle (ELV) Indus- try and government's role In ensuring its compatitlvemms, particularly third- party liability insurance for space laun- ches. The author finds that the space insurance industry has become a major constraint on the commercial develop- ment of space. The future impllcetions are considered of US government in- volvement with the launch services Industry, initially through providing third-party Insurance Itself. The author concludes that, for a stable commercial ELV Industry, it will he necessary for the USA either to establlah fair-trade agreements with other space-capable nations, or to maintain a significant government Involvement to support the industry.

Joel S. Greenberg is President of Prince- ton Synergetics, Inc, 900 State Road, Princeton, NJ 08540, USA.

1R.W. Stevenson, 'GE-Madetta satellite deal', New York Times, 27 January 1988. aAIAA, 'US commercial space transporta- tion risk allocation and insurance: an AIAA position paper', AIAA, November 1987.

The US firms Martin Marietta, McDonnell-Douglas, General Dyna- mics, American Rocket Co, and Space Services, Inc have announced their entry into the commercial expendable launch vehicle (ELV) market. They have expressed concern over the potential 'unlimited' third-party liability that could result from an accident, and the competitive advantage gained by Ariane, Proton and other launch vehicles through government indemnification of claims in excess of a limited amount of customer-provided or paid-for insurance. As a result, the US ELV firms have appealed to the US government to provide indemnification against claims above commercially available insurance and/or to place a legislative 'cap', or limit, on maximum liability. The Space Shuttle's $500 million indemnification level and the Price- Anderson Act (relating to the US nuclear power industry) have frequently been cited as precedents in these appeals.

The debate now rages with respect to what action, if any, the US government should take to encourage the entry of US firms into the commercial ELV market. While ELV firms appeal for assistance to relieve high risk levels and 'unfair' competitive advantages, they have also indicated that, in the absence of indemnification and/or a legislative cap, they would still enter the market. Martin Marietta has already entered into an arrangement with General Electric involving multiple Titan launches.1 However, in the absence of government indemnifica- tion, ELV commercialization decisions are uncertain and US firms might choose not to compete.

The American Institute of Aeronautics and Astronautics (AIAA) has prepared a position paper entitled 'US commercial space transportation risk allocation and insurance', a The AIAA has sided with the ELV industry in calling for indemnification and/or a legislative cap on liability.

The following discussion is presented (a) to bring out facts possibly not previously considered, and (b) to broaden the current debate on third-party liability insurance to include the underlying cause of the problem, and likely future problems which might arise if that cause is not directly addressed. The underlying cause is the differences which currently exist among the ELV government/industry infrastructures employed by nations competing for ELV business.

0265-9646/88/030211-10 $03.00 © 1988 Butterworth & Co (Publishers) Ltd 211

Third-party liability insurance and space launches

Background The launching of any commercial or government payload into space involves certain risks. These include the loss of the launch vehicle and/or payload, loss and damage to property and injury to people. In addition, there are pre-launch and post-launch risks. 3

The insurance industry currently makes available a number of insurance products for the space industry, covering many aspects of space launches and space operations. Space insurance falls into three main categories: liability cover, launch cover, and on-orbit operations cover. Different types of insurance are applicable during different periods of time. The risk period has historically been broken down into the time preceeding launch operations (ie, pre-launch), the time period during launch operations, and the time period during on-orbit opera- tions. Pre-launch insurance is concerned primarily with product liability, damage in transit, and other more or less conventional forms of insurance.

Launch period insurance includes both launch and liability cover. It covers the performance of the launch vehicle, transfer stage, apogee kick motor and, until recently, the deployment and initial operation of the satellite. The magnitude of claims for damage covered by launch insurance can be well defined and controlled. Liability insurance includes cover for the two classes of liability which may arise from a launch accident: 'first and second-party' liability, and 'third-party' liability. The former is liability for injury or damage to employees and property of the government and/or the commercial space transportation provider resulting from the launch process. The latter, currently the area of major concern to the commercial launch industry, is legal liability to those individuals, corporations, or other entities that had no involvement in the launch. The potential magnitude of third-party damage and resulting claims is not known and thus potentially exposes the ELV industry to unbounded claims.

On-orbit insurance is applicable during on-orbit operations and covers loss of fuel, power or transponders. Satellite owners are indemnified for loss of revenue because of a malfunctioning satellite or for the cost to replace capability with a new satellite. Liability insurance is also provided for the on-orbit time period. This covers damage to other satellites resulting from collisions in-orbit and damage to third parties resulting from satellite return to Earth.

The commercial launch industry has indicated concern over the possibility of catastrophic third-party damage and resulting claims that may arise from space launches. 4 This concern stems from the fact that there is always a very small chance of a space launch causing very significant damage. To date no third-party claims have been filed for damage resulting from space launches, and it is estimated that there have been in excess of 10 000 space launches. The extent of possible third-party damage and claims that may result from a launch accident is limitless. Thus every time a launch takes place it is conceivable,

3Sedowick Space Services, 'Commercial although with little likelihood, that third-party claims may result and space risks: the insurance market and its future development', The Sedgwick Cen- that these claims and resulting awards could exceed the resources of any tre, September 1987. commercial launch firm. 4princeton Synergetics, Inc, 'Federal gov- The commercial launch industry has therefore turned to the insurance ernment provision of third-party liability insurance tospacevehicle users', January industry for protection. However, no assurance has been forthcoming 1985. that insurance will be available, when needed, at reasonable rates.

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SAIAA, op cit, Ref 2. SAccording to industry spokespersons. 7US Nuclear Regulatory Commission, The Price-Anderson A c t - The Third Decade, Report to Congress, December 1983; and R. Laurie Rockett et al, Financial Protec- tion Against Nuclear Hazards: Thirty Years' Experience Under the Price- Anderson Act, Trustees of Columbia Uni- versity in the City of New York, 19 January 1984.

Third-party liability insurance and space launches

Claims and resulting awards could possibly exceed the maximum amount of insurance coverage available at reasonable cost on the world market to the commercial launcher.

The historical financial performance of the space insurance industry has not been good. 5 As a result, the cost of insurance has risen dramatically in recent years and its availability has been reduced. Launch insurance cost has increased from 10% to more than 25% of launch and payload cost and third-party liability premiums have risen from $100 000 to in excess of $500 000 for $500 million cover. 6 Further, the space insurance industry will not make long-term availability and

p r i ce commitments to the US ELV industry. Even if the insurance industry were to make commitments of $500 million or more per launch ($500 million was available for individual payloads flying on the Shuttle), the ELV firms would still be liable for claims above the insured amount. In the case of the Space Shuttle payloads the problem of unlimited liability was solved by NASA indemnifying for claims in excess of the $500 million of required insurance.

A similar problem was encountered earlier by the US civilian nuclear power industry. This was solved by the Price-Anderson Act in 1957 and its subsequent amendments. This act was aimed at overcoming industry reluctance to participate in nuclear power generation due to the fear of catastrophic, uninsured claims from a nuclear accident, and to avoid delay or failure in providing compensation to the public in the event of an accident. The act requires a nuclear power operator to submit proof of financial protection (either through private insurance, private contractual indemnities, self-insurance, or other financial responsibil- ity) to cover liability claims for damages caused by nuclear materials. The government agreed to be liable for $500 million. Each nuclear facility's maximum liability was then limited to $560 million (the cap): the amount available from the private insurance market ($60 million) plus the $500 million the government would indemnify in case of loss exceeding private-sector capacity. A fee was imposed on reactor operators for the extra protection from the government.

A 1975 amendment to the Price-Anderson Act required that a secondary level of financial protection be created through payments of retrospective premiums (originally $5 million per large operating reactor) if a nuclear catastrophe occurred at one of the plants that exhausted the primary level of financial protection (that available privately). The intention was to phase out government indemnification, and this has actually been the effect of the secondary level. The amount of insurance available from the private insurance market (which grew to $160 million by 1979), together with the amount that is available in the secondary layer, now exceeds $560 million. 7

Foreign competitors to the US launch industry have followed the NASA indemnification precedent. The risk of third-party liability beyond available levels of insurance is assumed by these competitors through a combination of customer-provided or paid-for insurance, in some cases with guaranteed availability and cost, coupled with indemnification in excess of the available insurance coverage. Ariane customers, for example, are provided with third-party liability insurance coverage of approximately 420 million French francs (according to a 1985 launch agreement). Reinsurers provide this coverage. In addition, the governments of the European Community have agreed to indemnify Arianespace against claims in excess of this amount.

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Discussion

The desire of a commercial ELV firm to have a limit placed on its third-party liability is understandable. A position paper by the A I A A has concluded that

To foster and encourage a U.S. commercial space transportation industry that can be effectively competitive with European and other non-U.S, launch service providers, it is necessary to develop a commercially-tolerable approach to the allocation of these launch operations liability risks. The solution recommended in this paper would allocate these liability risks on the basis of those that are commercially insurable at reasonable premiums, as determined by Governmen- tal authority, and those that are in excess of such insurance capacity. The level of reasonably-available commercial insurance would be prescribed by the Government taking into account applicable risk factors, would be paid for by the commercial sector with the Government as a cost-free named beneficiary. The excess-of-insurance liability risks would be assumed or contained by the U.S. Government either through indemnity, a cap on liability or, possibly, some combination of Government-provided insurance of last resort and indemnity or cap of liability in excess of the insured risk. s

Thus the A I A A is asking for indemnification and/or a legislative cap. The determinat ion of the need for indemnification and/or a legislative

cap for the third-party liability claims should consider many factors, including the following.

NAS A' s indemnification of Space Shuttle commercial payloads against claims in excess of commercial ly available third-party insurance ($500 million) has often been cited as precedent for government indemnification for commercial E L V launches. It may, however, be argued that all Space Shuttle flights involved government payloads and/or experiments in addition to commercial payloads - and thus it was appropriate that government participate in the liability risk. Commer- cial ELV launches may involve only commercial payloads - a significant difference, making the precedent not totally applicable.

The Pr ice-Anderson Act has also been discussed as a precedent ." When the nuclear power industry started up (1957), little experience existed in the provision of nuclear power and little or none with respect to accidents and claim statistics. Something was indeed necessary to allay the fears of the power industry if nuclear power was to develop. Commercial ELVs are somewhat different - there have been in excess of 10 000 space launches before US ELV commercialization. Further- more, the US firms have stated publicly '° that, in the absence of government indemnification and/or a legislative cap on third-party claims, they would still intend to offer commercial launch services. (More recent statements, however, indicate a backing away from this position.) In addition, damage from nuclear accidents was excluded from the coverage of home insurance policies, whereas no such exclusion exists for damage caused by space launches.

Every individual as well as every business entity faces risk of causing damage to third parties. Auto drivers, homeowners , small businesses and large businesses face liability risk, and purchase liability insurance to the maximum amount that is deemed affordable. All parties face the same question relating to the finite amount of affordable insurance and

aAIAA, op cit, Ref 2. the maximum amount of claims that might occur against them. Nearly 91bid. all human endeavours , private and corporate , are under taken without 1°Response to questions posed at the 'US EI_V session' of the IAF Congress, Bright- having an a n s w e r to this question. on, UK, October 1987. The argument may be cited that the ELV firms are a special case

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~lStevenson, op cit, Ref 1. ~2Pdnceton Synergetics, op cit, Ref 4; and J.S. Greenberg and C. Gaelick, 'Space insurance: comments from an observer', Space Policy, November 1986.

Third-party liability insurance and space launches

because they are needed for national security reasons (is this true of smaller launch suppliers or just the major US firms?). If this is indeed the case, in itself it is sufficient justification for indemnification and/or a legislative cap.

The US commercial ELV firms have stated that they are at a significant competitive disadvantage because of foreign governments' involvement in third-party liability insurance. ELV firms market a service comprised of multiple attributes that include insurance cover, reliability, price, availability and schedule. When considering competi- tiveness, all attributes should be considered, not just insurance. US commercial ELV firms can remain competitive on the insurance issue if they offer the same insurance package as Arianespace. But in the absence of government indemnification and/or cap they will have to bear somewhat more risk than Arianespace. It appears that Martin Marietta may have decided to bear such risk, since it has agreed to launch 15 communications satellites for the General Electric Company's Astro-Space Division.11 Will Martin Marietta turn away this business if government indemnification is not forthcoming?

How has the recent softening of the dollar affected relative pricing? In the past few years, the dollar has fallen from 11 to less than six French francs. If US ELVs are not competitive under a weak dollar, what will happen if the dollar strengthens? In order to remain competitive in the short term, is it really necessary for the US government to provide indemnification and/or a legislative cap? If the answer is no, then insurance is a non-issue. If the answer is yes, then it is important to see where liability insurance considerations may be leading.

Assume that government indemnification and/or a legislative cap is undertaken in order to ensure the competitiveness of US ELVs. What happens when the ELV firms become non-competitive in the other attributes - for example price? Play out a scenario - in the short term all ELV firms will prosper because demand far exceeds supply. In the long term (perhaps five years), because of the large number of entrants into the ELV market, supply exceeds demand. Under this condition it is likely that foreign competition, because of the deep pockets provided by their government involvement, will follow price reduction policies to maintain or increase market share. US firms will then be at a disadvantage. Will they at this point again approach the US govern- ment, citing prior government involvement in indemnification as a precedent, and ask for government subsidies so that they may remain price competitive? A basic problem exists: US commercial firms are trying to compete with foreign firms that have an involvement of their governments. This is not a stable situation and is the underlying cause of the competitive problem. Rather than trying to address the effect it would be wise - this early in the US ELV commercialization process - to confront the cause directly: the differences in the government/industry structures of nations competing for the ELV launch market.

Some comments must be made with respect to the availability of third-party liability and launch (including payload) insurance. The space insurance industry has experienced great difficulty 12 that has resulted in its inability to support the needs of the space programme. The industry will not quote a price nor assure the availability of insurance for space launches until several months before a launch. Indications are that the insurance industry capacity for launch insurance may be in the range of $100-150 million per launch (if there are no accidents in the near term).

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This amount is insufficient to cover launch and satellite costs and is considerably less than the cost of proposed commercial facilities such as the Industrial Space Facility.

This combination of unknown availability and unknown capacity causes the space industry considerable uncertainty and risk. A satellite manufacturer or facility developer cannot borrow funds for a payload which takes several years to construct since the lending institution normally requires that launch insurance be in place before a funding commitment is made. Since it is not known if launch insurance wilt be available until several months before a launch, funding of new payloads and facilities and hence the commercial development of space is directly affected by the supporting insurance industry.

The President's space policy ~3 indicates government support for the commercial development of space, including a commercial ELV industry and other commercial space and related activities. The space insurance industry is clearly not currently functioning in a manner that is necessary to support the needs of US ELV and commercial payload industries. If the commercial development of space is not to be impeded by the supporting space insurance industry, it will be necessary for the US government to become an insurer of last resort. This will significantly reduce uncertainty and resulting risk associated with insurance availability and capacity. It would, at the same time, solve the third-party liability and launch insurance problems by making available (for a fee) the necessary large amounts of insurance when long-term commitments are not forthcoming from the space insurance industry~

It seems that the logical consideration of the third-party liability insurance issue leads to the conclusion that this may be but the tip of an iceberg - the iceberg being the structure of the US ELV firms in combination with government involvement. However, before arriving at this conclusion it is desirable to consider a number of US government options and to see where they may lead in order to establish the likcly implications for US policy and market success.

The market for ELVs must be considered as having both government and commercial components, where it is concluded that the government market component will be satisfied, if at all possible, by that nation's space transportation capability. Because of national security, balance of trade, technology development, national pride and other rationales, none of the nations that currently, or are soon likely to, possess a space transportation industry will pursue a policy that will place that industry in jeopardy.

In the USA, the demand for space launches is likely to be dominated by US government (civil and military) space transportation needs. It is likely that the government need will be sufficient in itself to maintain an ELV industry. ELV launches in support of government missions will probably not be required to provide third-party liability insurance - that is, the government will self-insure. Thus the issue is not whether a commercial ELV industry will exist in the USA, but whether such an industry will participate in the delivery of commercial payloads to orbit.

The following four options for the US government are considered within this context. That is, the options are concerned with the risk and competitiveness of US commercial ELVs in commercial payload

~3'The President's space policy and corn- markets, given that they are developed and maintained, as a minimum, mercial space initiative to begin the next century', Fact Sheet, The White House, 11 to support US government transportation needs. US ELVs developed February 1988. specifically for commercial needs which have little government market

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potential will obviously be at a cost disadvantage and must seek out specific market niches. They may be easy prey for foreign government- supported ELVs.

Allow the US commercial EL V industry to maintain a strictly private posture without the direct involvement of the US government

In the short term it is likely that, because of the current commercial payload backlog and continuing strong demand for additional launch services, demand for launch services will exceed supply. This will be reinforced by US government restrictions on the use of certain foreign launch vehicles by US payloads and foreign payloads utilizing sensitive US technology. If US ELV firms decide to offer commercial launch services without government indemnification or a legislative cap on third-party liability, they will participate in this market. In order to remain competitive they will, in all probability, be required to indemnify payloads against third-party claims. It is likely that US ELVs will remain price competitive because of the weak dollar and because of US government procurements.

In the longer term, additional launch capacity will be introduced by both US and foreign organizations. This could significantly increase supply to the point where supply exceeds demand, with a resulting softening of ELV prices. Because of foreign governments' involvement with their domestic ELVs, it is likely that price reductions will occur in order to maintain or increase market share. US ELV firms will come under considerable financial pressure if they are to remain competitive. Offsetting this problem is the likely sizeable US government market for US ELVs. This is likely to introduce economies of scale and reduce US ELV costs and associated prices which will, in turn, put pressure on foreign ELV organizations and the governments which support them. The long-term viability of US commercial ELVs in non-US government markets will depend both upon the level of subsidization that foreign governments are willing to provide and upon the civil and military launch needs of the US government.

If this scenario is realized, the long-term competitiveness of the US commercial ELVs is likely to be beyond the control of the ELV firms. Their future will be largely in the hands of both foreign and US governments. This is not an enviable position to be in.

Provide government assistance as needed to maintain a competitive US EL V industry

Government assistance to the ELV industry may take many forms, including: undertaking R&D, developing launch facilities, adapting pricing policies and repayment policies for use of government launch facilities and other launch services that are advantageous to the private sector, providing third-party liability indemnification and/or placing a cap on liability, providing third-party liability insurance beyond that commercially available, adopting launch priorities advantageous to the scheduling of commercial ELV flights (including reflights in case of a launch accident), placing procurements of ELVs aimed specifically at reducing their manufacturing costs, providing for the use of government tooling and other equipment/facilities at little or no cost, directly subsidizing ELV launches, providing for indirect subsidization through payment of higher prices for ELV launches in support of government missions, providing low-cost loans, and providing various tax prefer-

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ences. In short, the government has considerable flexibility with respect to the form(s) of assistance that can be provided to maintain the competitiveness of US ELVs in commercial markets. It is likely that the options available for government support may be tailored to address those specific attribute(s) which prove to be non-competitive.

The first step associated with this option would be for the US government to issue a policy statement expressing its intent and then to follow that statement with legislation. Certain policies may be easier to implement than others. For example, policies which can be contained within normal budget line items may be more acceptable than those which require the passage of specific enabling legislation (ie, indemni- fication of third-party liability).

However, legislation has more inertia than other forms of govern- ment policies. It is difficult to set in place, but once legislation is passed it is relatively difficult to undo, whereas stated policies can change almost as fast as the weather. If emphasis is placed upon policies that do not require supporting legislation, the outlook for the US ELV industry may only be as stable as related government policies.

How will the need for and the desirability of alternative govermnent policies be established? The lobbying/legislative process is now begin- ning. However, little thought seems to have been given to the long-term implications of proposed legislation and how the specific needs for government support might be ascertained,

The product attributes important in ELV competition can be identified and the competitiveness of an ELV must be judged in terms of all of its attributes simultaneously. Differences in these attributes lead to competitive advantages. When significant differences are identified and the cause of the difference established, government action can be taken to negate them. For example, it is easy to recognize differences in the third-party liability indemnification attribute. In other situations causal relationships may be more difficult to establish. How will it be determined whether price differences are specifically due to government support, or to an inefficiency or to poor choice of design on manufacturing technique on the part of the ELV suppliers? What happens if one US ELV is price competitive but another is not? When is government ELV-related R&D considered a subsidy? Answers to these questions are difficult, but made even more so by the lack of detailed information that is likely to exist between' the organizations and governments in this fiercely competitive environment.

If this scenario is realized, the long-term competitiveness of the US commercial ELVs is likely to depend upon the form and timing of support provided by the US government in response to identified competitive disadvantages. The basic question that must be addressed is whether the US government will step in to assist a non-competitive US ELV industry whether or not the lack of competitiveness is due directly to foreign government actions.

Because answers to several of the above questions are not likely to be forthcoming, it is probable that the forms of US government support will be somewhat limited. It is likely that the government will attempt to respond to specific actions of foreign governments (such as third-party liability indemnification). The government may pursue primarily low-profile 'subsidization' in the form of R&D, pricing of launch facilities, and possibly directed procurements of ELVs. In the long term this approach may prove to be inadequate to maintain the competitive-

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ness of US ELVs for commercial applications. However, this competi- tiveness will likely rely more and more upon specific US government policies aimed at satisfying government needs, with the result that the mix of available US ELVs will strongly reflect the capabilities required to satisfy government mission requirements.

Negotiate fair trade agreements The objective of this policy option is to negotiate fair trade agreements with foreign entrants into the ELV market, thereby eliminating the competitive advantage that might be gained through government subsidization.

The negotiation of fair trade agreements requires that: (a) business practices that are not fair trade are explicitly identifiable, and (b) governments are willing to exert pressure, either directly or indirectly, in order to eliminate identified unfair trade practices. This implies that the US government is willing to pursue a policy of direct or indirect subsidization if other governments do not eliminate practices deemed to be unfair.

As mentioned above, governments can have significant influence on the competitiveness of commercial ELVs through government policies, facility development, and other actions that will be difficult to identify as unfair trade or competitive practices. Certain policies - such as indemnification of third-party liability - may be easier to categorize as subsidization and therefore as unfair. Merely identifying a practice as unfair is insufficient; sufficient leverage must be available if identified subsidization does not cease. For this policy to be credible, it would require a US commitment in the form of legislation or a national policy statement that will put in place the necessary mechanisms for the application of pressure, should unfair practices be identified.

It is likely that the US government will continue to try to influence other governments to pursue fair trade practices with respect to the commercial ELV industry. Judging from the heavily subsidized pricing of several of the non-US ELVs offered for commercial flights and the third-party indemnification offered by Arianespace and others, it appears that US efforts to eliminate easily identifiable subsidization have not been successful. The situation is likely to continue until it is in the interest of other governments to change their tactics. This does not seem likely in the near term and may force the US government to react.

Alter US government~industry infrastructure Since the basic problem of potential non-competitiveness of the US ELV industry is the result of national differences in the government/ industry infrastructures, the US government could pursue an option of altering the current structure of the US ELV industry. For example, a basic approach would require the US government to set the price of ELVs. This would most likely interpose the government between the ELV user and the ELV provider, with the government receiving payment from the user (based upon prices set by the government) and making payments to the provider (based upon government/provider negotiated pricing). This would allow the government the complete freedom of establishing when and how much would be provided in the form of subsidies.

The major problem of this option is having increased government involvement in commercial endeavours at a time when the government

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is trying to reduce its involvement. For this reason, at least for the short term, alerting the government/industry infrastructure does not seem to be a likely option. In the long term it may be the only credible option if a US commercial ELV industry is to be maintained.

Conclusions

The following conclusions are based upon the general premise that in the short term demand for space launches will exceed supply, but in the long term supply will tend to exceed demand.

• For the short term, there is no need for the US government to provide indemnification or a legislative cap on third-party liability associated with space launches. This has little or no bearing on the competitiveness of the US ELV industry.

• The lack of government indemnification or a legislative cap will affect the risk associated with commercial ELV business ventures. This risk is similar to that faced by and accepted by many other important business sectors in the US economy. However, availabil- ity of insurance (both launch and liability) is uncertain and therefore leads to considerable risk. This risk may be eliminated by the US government becoming an insurer (for a fee) of last resort. If indeed maintaining a commercial US ELV industry and pursuing a space policy that emphasizes the commercial development of space are important, it does not seem reasonable to allow the 'failure' of the space insurance industry to stand in the way of achieving these objectives.

• In the long term it is likely that foreign ELV providers will establish pricing and other policies (with the support of their governments) that will cause US commercial ELVs to become non-competitive. This will require, and will likely lead to, US government involve- ment in the form of subsidization or a change in the government/ industry infrastructure for the provision of 'commercial ' ELV launch services.

• To have a stable situation it will be necessary either for the USA to establish reasonable fair-trade agreements with other space-capable nations, or to maintain a significant US government involvement to support the commercial US ELV industry. This involvement could take the form of altering the government/industry infrastructure. But, in any event, it will require continued government support such as R&D, directed ELV procurements, and favourable pricing and availability of government facilities.

• The US government should continue to try to negotiate fair-trade agreements with other nations possessing space launch capabilities_ As part of this process it may be desirable to demonstrate ~l resolve to maintain a commercial US ELV industry. This demonstration might take the form of carefully worded legislation, possibly including third-party liability indemnification, to indicate clearly the US intent to provide subsidization as and when deemed necessary.

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