Spacecraft and/or Launch Vehicle Pre-Launch insurance

All Indians are literally ‘ over the moon’ on the successful launch of Chandrayan-3. This is part of ISRO’s prestigious moon-landing program. Chandrayan -3 has three major components — 1) The Propulsion module 2) Lander 3) Rover. The Propulsion module would carry the Lander and Rover to the lunar orbit. The Lander would get separated and make a soft landing on the moon. It will carry out certain tests and measurements while the Rover, that carries cameras and a drill will move around on the moon, clicking pictures and also drill the moon’s surface to figure out presence of water.

When one looks at the huge costs involved (estimated at USD 78 million in 2020. Now with over-runs should be higher), insurance of the project will be mandatory. Am sure ISRO would have purchased suitable insurance cover. Let us see here what coverage is available for such projects in the Marine market. Aviation markets also provide coverage for spacecraft and Launch Vehicles.

The JCC Spacecraft and/or Launch Vehicle Pre-Launch insurance policy form (JCC 2018-001) provides coverage for such projects. As the very name suggests, cover can be taken for the Spacecraft, the Launch Vehicle, both pre-launch and the launch itself, as also for the Ground Support Equipment (GSE). The policy provides for 3 phases of the project for which separate values need to be declared. It is not mandatory that all 3 phases have to be covered:

Phase 1 – Assembly Integration & Testing ( AIT) : Cover under this phase commences from the time the completed components are first moved in the supplier’s warehouse or at the Insured’s Premises, as specified in the Schedule, for the purpose of AIT. Any transits of such completed components to/from and whilst at a third-party location is also covered. Cover would terminate on completion of loading of the subject-matter insured on to the carrying vehicle/conveyance at the AIT facility for transit to the launch site.

Phase 2 – Transit: Now phase 2 begins with the transit cover comprising Institute Cargo clauses, War & Strikes and all mandatory clauses applicable to any transit policy. Cover under this phase will terminate on completion of unloading of the Subject Matter Insured from the carrying vehicle or conveyance in the initial receiving room at the launch site.

Phase 3 – Launch site: Cover under this phase commences from the time the subject-matter insured is received at the launch site. Termination of cover will be as per the Launch Service contract. However this insurance shall cease not later than Terminated Ignition or physical separation of the Launch Vehicle from the launch pad, whichever shall occur first. In respect of GSE (Ground Support Equipment), this insurance terminates on return to the AIT facility, but in no event for longer than 60 days following launch. In the event that Termination of Risk is at Terminated Ignition, coverage shall reattach under Phase 3 (launch site) once the launch site has been declared safe by the launch safety officer, with any additional premium due hereunder to be agreed by Insurers.

Additional covers available are – 1) Extra Expenses (Amounts claimed hereunder to be substantiated by the Insured and agreed by Insurers & 2) Special Indemnity under which if the subject-matter insured suffers loss/damage, the insured is indemnified for the additional re-testing & re-qualification costs/expenses to confirm the flightworthiness of undamaged components.

Basis of valuation is critical for the Spacecraft/Launch Vehicle/GSE and major components. There are two reasons for this. One, the subject-matter in question and its components are not ‘off the shelf’ products but customized. Two, this policy can be purchased either by the manufacturer or the purchaser and the basis of valuation provided, varies from one to the other. Needless to mention, deductibles will be imposed for each of the phases.

The broker plays a major role in placement and servicing of these policies and looking at the confidentiality/secrecy of these projects, a specific condition — Recording, Transmitting & Storing Information forms part of the policy — The condition reads ‘ The Intermediary may retain risk and claim data / information / documents electronically and where so done, these are to be regarded with the same legal effect as the original documents’.