When the SpaceX rocket exploded on a Florida launchpad Thursday, the first thought that probably came to mind was thank heavens there weren’t any astronauts on board. The second may have been: Who’s going to pay for all this?The concept of insuring a hugely expensive payload situated atop a big bomb wasn’t the foremost concern when Mercury, Gemini, and Apollo astronauts were hurtled into space in the heyday of America’s space adventure. Even during the years of the lumbering space shuttle, and the subsequent tragedies that befell the Challenger and Columbia, it was lives lost rather than the cost to taxpayers that occupied the public consciousness.

But now that the U.S. has taken a backseat to commercial interests and flashy entrepreneurs on its forays into the final frontier, the more mundane matter of insurance has become a central issue when disaster strikes.

As it turns out, there is a way to get a policy. Some of the largest firms, including American International Group Inc., Munich Re, Swiss Re and Allianz SE, have units that offer space insurance. AIG says it's one of the few insurers able to offer a policy spanning as long as five years, as well as one that begins two years prior to launch. The New York-based firm took part in a policy for Richard Branson’s Virgin Galactic spaceship, which crashed in 2014.

Space risks present “a new generation of challenges,” according to an Allianz presentation in December. In 2012, The German insurer cited data showing that insurance premiums on space shots were close to $800 million, with total losses at about $600 million the previous year. The company said that a “future challenge for insurers includes rising launch values, a decreasing premium pool and increasing risk exposures.” This means it takes just a few botched launches to hurt an insurer that’s taking in premiums for only a handful of missions every year.

Policy worth almost $300 million
SpaceX (or Space Exploration Technologies Corp.) co-founder Elon Musk, of Tesla Motors Inc. fame, didn’t buy an insurance policy for the Falcon 9 rocket that exploded at Cape Canaveral, according to a person familiar with the matter. The billionaire sought to launch a satellite named Amos 6, built by Israel Aerospace Industries, a privately-held defense company, and operated by Israeli firm Space Communications Ltd.

The satellite was backed by a policy worth almost $300 million, said the person, who requested anonymity because they weren’t authorized to speak publicly. SpaceX declined to comment.

Shares of Tel Aviv-based Space Communications fell the most since November amid a proposed deal to be acquired by a Chinese conglomerate. A successful launch of Amos 6 was a condition of the $285 million sale to a unit of Beijing Xinwei Group, according to an Aug. 24 filing. The insurance policy for Space Communication may not have triggered because it would have required a true launch, rather than a pre-launch, said Peter Elson, chief operating officer for the aerospace team at insurance broker Jardine Lloyd Thompson Group Plc.

“In terms of the shareholders, they lose out because any damage done to the satellites means a loss of customers,” said Meir Slater, head of research at Bank of Jerusalem. Space Communication didn't immediately respond to an email seeking comment.

The blast, which occurred shortly after 9 a.m. local time before a test firing of the Falcon 9’s engines, left a plume of thick black smoke and triggered a shock wave felt miles around. The failure occurred as fuel was loaded onto the rocket, Musk said in a tweet, adding the problem “originated around upper stage oxygen tank.” The Federal Aviation Administration’s Office of Commercial Space Transportation, which licenses launches, will oversee the company’s investigation into the mishap, the agency said in an e-mail.

Elson said the market will be looking for an “efficient and transparent” investigation. “To have a loss like this during routine preparations for launch will be a major irritation for them,” Elson said of SpaceX. “Before they can launch their next mission, they’re going to have to figure out what went wrong with this mission.” Elson’s company was the broker for coverage obtained by Branson’s Virgin Galatic. Brokers advise companies on the best ways to cover risks.

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