Launching Liability: How Space Exploration Is Testing Legal and Insurance Boundaries

The modern space race is on. Now, more than 80 countries across the globe have a presence in space. New opportunities in space are being discovered and advancements in space resource utilization [1], telecommunications, space tourism, along with lower costs of space exploration, have resulted in exponential growth in investment in the private commercial sector over the past 5 years [2].

Innovation ahead of regulation

Innovations in commercial space activities have outpaced both the U.S. and Canada’s existing legislative frameworks [3], creating economic opportunities for private commercial operators in unregulated spaces. 

In Canada, while some aspects of space law such as satellite telecommunications are highly regulated [4], others, particularly with respect to private commercial activities, space debris, satellite launches, product liability and asset damage in space, do not yet have a specific regulatory framework [5]. In August 2024, Canada and the U.S. finalized the Technology Safeguards Agreement, paving the way for commercial space launches in Canada [6]. 

In the U.S., federal regulatory authority for commercial space activities is largely limited to the regulation of space launch and re-entry and ensuring public safety and national security by the Federal Aviation Administration (FAA), and the regulation of spectrum used by satellites by the Federal Communications Commission (FCC). 

Some of the current emerging risks policyholders face in this rapidly evolving space are the following:

1. space-specific risks such as pre-launch and in-orbit risks relating to satellites and space debris;
2. risks that are not unique to activities in space, such as cybersecurity risks, complicating further any regulatory oversight by government bodies; and
3. commercial space activities such as space stations, space resource utilization and space tourism which present their own risks and do not clearly fall within existing regulatory frameworks and, in the U.S., are being authorized by the FCC on an ad hoc basis.

Uninsured skies – liability and debris in orbit

Satellite insurance, which includes all risks and launch coverage, is nothing new. In 1965, the first commercial communications satellite was placed in orbit, and with it, the first satellite insurance coverage was placed [7]. The rapid expansion of using low Earth orbit satellite constellations, particularly by private companies, however, is new and now comprises 88% of the total satellites [8]. In one report, it is anticipated that around 20,000 satellites will launch by 2030 [9].  As satellite launches increase, a corresponding rise in satellite insurance claims have been seen [10]. In particular, risks relate to manufacturing, material damage, launch, in-orbit servicing, assembly, and remote sensing.

Satellite insurance is not a legal requirement in the U.S. or Canada (as it is in Europe and the U.K.) [11]. Practical difficulties of assigning liability and determining the amount of compensation, along with the recent uptick in large satellite claims [12],  have already prompted some insurers to exit the in-orbit satellite insurance space. Increased premiums may result in changes to the types of satellites launched, the reuse of parts, spikes in renewals, and whether insurance is secured at all. Low Earth orbit satellite constellations used for broadband communications are largely uninsured or self-insured.

In an effort to address the risks posed by space junk an overcrowding, the U.S. passed the “Orbits Act 2023” [13] that aims to reduce space debris and promote safe space activities.  Already, the FCC has issued a monetary penalty against a private entity for failing to properly dispose of its geo-satellite, highlighting additional regulatory risks that policyholders may face [14]. Taking a similar approach, in April 2025, the Canadian government consulted on the Changes to Licensing Requirements and Conditions of License on Space Debris Mitigation,  proposing that licensees of satellites submit space debris mitigation plans [15], including the requirement to deorbit within a certain timeframe, and to develop mitigation measures to reduce collisions. 

There have been international efforts to establish a liability scheme for third-party damages caused by space objects nearly since the advent of space exploration. For example, the United Nations Convention on International Liability for Damage Caused by Space Objects mandates a “a launching State shall be absolutely liable to pay compensation for damage caused by its space objects on the surface of the Earth or to aircraft in flight” and will be liable for damages caused by space objects elsewhere (for example, in space) if the damage is due to the launching State’s fault or the fault of persons for whom the launching state is responsible [16].

The Convention has been ratified by both the United States and Canada. United States law authorizes, but does not require, NASA to provide third-party liability insurance for any user of a space vehicle and permits NASA to indemnify the user to the extent that the user is not indemnified by private insurance.  51 U.S.C. § 20138(b), (c). The United States mandates liability insurance for entities seeking a launch or reentry license, but not for in-flight operators [17]. 

Digital threats to space assets

In addition to the ever-evolving space risks, we see other lines of insurance that could be impacted, such as Cyber Liability.

Recently, there has been greater international cooperation between the U.S. and Canada and other signatories through the Artemis Accords, 2020, which seeks to establish responsible and peaceful space exploration. During the meeting of the National Space Council in December 2023, risks of the use of counterspace weapons were highlighted, and it was proposed that minimum cybersecurity standards for space systems be developed in response. While these risks were discussed in the context of national security, cybersecurity risks reflect the dual-use nature of technologies that also have private sector application and directly impact policyholders’ interests.

For example, cyber-attacks may threaten satellite systems directly, potentially triggering cyber policies. Depending on the policy wording, it is uncertain whether the territorial limits of a cyber policy that covers a “loss” occurring “anywhere in the world” would be captured by acts committed in space, and, depending on the facts, whether such an attack would be captured by a cyber war exclusion.

Exploring risk in commercial space ventures

Private corporations offering commercial human space flights have gained popularity in recent years. In the U.S., the FAA regulates commercial spaceflight activities through its Office of Commercial Space Transportation (AST), which oversees licensing and permits required for commercial space launch and reentry.  It is unclear whether any of the existing traditional aviation liability legal frameworks could apply to such activities. Coverage for the launch risks, vehicle, space tourists and liability in the event of accidents may be required [18]. 

There is growing interest in investing in space resource utilization, particularly as scientific advances improve its affordability.  In the U.S., the Commercial Space Launch Competitiveness Act of 2015 (the Space Act) entitles commercial space operators to own any space resources lawfully obtained, and other countries have also enacted similar laws, although there is no international legal framework yet.  On a practical level, however, the economic viability of space mining remains to be seen – for example, 122g from the asteroid Bennu is the largest sample of celestial matter returned to Earth  suggesting that large scale operations are still in the distant future. As commercial space mining evolves, insurers will need to monitor and assess these novel risks.

The scope of space insurance

Space Insurance has grown into its own market sector over the past 50 years of Space exploration, and policies can now be written to provide coverage at the pre-launch, launch, and in-orbit phases, as well as for third-party liabilities and human spaceflight and tourism activities.  However, while insurers have grown more ambitious with their extraterrestrial coverage, a recent report indicated that only about 300 satellites out of approximately 10,000 in orbit carry insurance.  Of the satellites that did carry insurance, claims exceeded premiums in 2023-2024, and premiums were expected to rise.  The two primary issues affecting the underwriting of satellite insurance policies is the limited available data and risk pool and the pace of technological advancement.  

While the market for in-orbit satellite insurance is shrinking, the lack of regulatory oversight over many commercial activities in space continues to provide favourable conditions for innovation and investment by the private sector.  Policyholders will continue to diversify, while governments and legislatures continue their efforts to respond and regulate these activities. Other novel and emerging space risks continue to evolve, potentially triggering other lines of insurance, such as Cyber Insurance. As space exploration continues to advance and evolve, insurers will continue to adapt to evaluate novel risks.