TOKYO -- Private businesses offering commercial rocket launches and satellite data are gaining worldwide attention, and behind the scenes are specialists in a field unrelated to engineering. "Space insurance," covering unexpected contingencies is a crucial part of the space industry and a completely different world from that of ordinary damage insurance. How are those who specialize in its development supporting the advanced businesses of the space industry?

Only around 100 in the world

"If it has four inexpensive gyros (to control a satellite's attitude), the insurance money will be very different," Nobuo Yoshii, 58, of Tokio Marine & Nichido Fire Insurance Co. told executives of Axelspace Corp., a small satellite development startup, while looking at a model satellite in their office in Tokyo's Nihombashi district.

Yoshii is an underwriter for space insurance plans to cover accidents and other potential trouble with rocket launches and satellites. There are presumably only about 100 people in the world involved in this type of work, which requires a high level of expertise.

Insurance is crucial in many parts of space-related business. With rockets, for instance, the worst-case scenario of a failed launch and explosion is covered, as well as accidents during land transportation, and communication problems with vehicles exploring the moon's surface.

In ordinary auto and fire insurance policies, the probability of damage is calculated using a vast amount of data on past accidents and fires. Various risks are subdivided into smaller categories, and standardized insurance plans are then provided. Since many people purchase these plans, premiums are low.

Space insurance, in contrast, has little data on rocket and satellite launches to go on. If a launch fails, all is lost, and the insurance payment will be huge. A source related to a major non-life insurance company told the Mainichi Shimbun, "It tends to have an extreme outcome (in terms of losses) -- either zero or 100." Because of the high probability of accidents and the small number of firms insured, premiums are extremely high.

For example, if a company wants to receive 10 billion yen (about $65 million) in the event of trouble, it would apparently have to pay 1-2 billion yen in premiums. Since there are no standardized plans, each case is tailor-made according to factors such as the type of satellite.

In the event of launch failure and other problems, insurance payments can total several hundred billion yen. In 2023 in particular, there were many failures of communication satellites used by KDDI Corp. and other companies. Within the domestic and international space insurance market, insurance claims of about $1.8 billion were paid out, three times their premium payment income at some $600 million. This resulted in a huge deficit in the insurance industry, causing premiums to skyrocket.

Underwriters such as Yoshii are needed to assess the tremendous risk. First, they ask for detailed information about the plans and equipment to be used from the operators who want to launch rockets and satellites. If a rocket is a type that has been launched many times before and has a high success rate, premiums can be reduced, but if it has been launched only a few times, the project cannot even be insured.

"We are also working as a business, and supporting projects does not mean accepting everything," Yoshii said. The heart of underwriters' work is to examine the project by drawing on all of their knowledge and experience.

After interviewing the operator, underwriters draw up a set of terms and conditions that spell out the guarantees. Once a satellite is released into space, it cannot be fixed even if it goes out of order. Therefore, they need to decide in advance on the details of how much to pay in case of the breakage of each item, assuming a variety of cases.

Partnering with overseas insurers

In order to diversify huge risks, space insurance is often underwritten jointly by 10 to 20 damage insurance companies, and Tokio Marine partners with overseas insurers. For this reason, Yoshii travels abroad to work with local underwriters and listen to presentations by space businesses, deciding whether to underwrite their insurance policies.

Sometimes Yoshii even visits satellite and rocket factories. In the case of insurance policies for domestic companies, he prepares materials together with those in charge of the project and also anticipates questions and plans answers for interviews by overseas underwriters.

Because he rigorously analyzes the risks, he is more than happy when a project is successful. Yoshii has traveled to launch sites for liftoffs many times, and says, "Space insurance is one of a kind in which you can know (on the spot) whether insurance payments will occur."

Yoshii joined the company's predecessor, Nichido Fire & Marine Insurance Co., in 1989, and has been involved in the space insurance business since 1997. He had no particular interest in space, but was assigned to the section in a personnel transfer. He chuckled, saying, "At first, I had no idea what was going on."

Like a consultant

After intense study, Yoshii is now in a position where he is consulted by people who want to start a space business, who ask how they can get insurance underwritten. He works closely with those firms, just as a consultant would.

Tomonori Hamada, 53, who is in charge of insurance policies at Axelspace, said, "Mr. Yoshii has a lot of information about past results (of rocket launches and other projects around the world), problems and so on. He is very helpful for us to learn which parts of the satellite to pay close attention to (for insurance to be underwritten)."

In recent years, there has been a notable shift in space development from the public to the private sector. Private companies such as Space Exploration Technologies Corp. (SpaceX) led by entrepreneur Elon Musk have been launching rockets and providing governments with sophisticated satellite images. According to the Ministry of Economy, Trade and Industry, the Japanese space industry market is worth about 4 trillion yen ($26 billion). Morgan Stanley estimates that the global market will grow to $1.1 trillion by 2040.

As Japan's space industry has developed mainly through the public sector, notably via the Japan Aerospace Exploration Agency (JAXA), private businesses have not been able to monetize their operations as much as in Europe and the United States. Yoshii hopes to utilize the "risk management know-how" that general insurance companies have accumulated in the space business, where failure is a fact of life, to help promote the country's space industry.

"Insurance is all the way in the back when it comes to supporting a business, but I've cultivated knowledge through underwriting," he said. "My mission is to return that knowledge to companies."

The rockets and satellites bound for space also carry the underwriters' hopes.

(Japanese original by Aya Iguchi, Tokyo Business News Department)