"The nature of this business is very volatile," said Chris Kunstadter, senior vice president and global underwriting manager for space at XL Catlin, last year. "You don't have many losses, but when you do, they're large."
The failure of the Mexican satellite mission in May 2015 was expected to cost insurers about $390 million — the second-largest claim ever in the space insurance industry and far more than the premiums that had been collected at that point in 2015.
Not only are the potential losses huge, but there are too few launches each year to do the same sort of actuarial math as in other types of insurance. A few bad launches in an unlucky year can cause the failure rate to bounce between 3 percent and 10 percent, and accidents tend to be total losses.
But the industry has other unique upsides that have attracted investors. A company knows right away whether its coverage is a loss or a gain. Space insurance is also uncorrelated with other types of insurance, so even if a hurricane wipes out hundreds of seaside homes all at once, the space insurance market remains serenely independent. The huge premium payments are also attractive to companies.
Interest in funding space insurance was strengthening in 2015, and the extra coverage capacity had driven down rates to around 6 percent or 7 percent, compared with almost 20 percent a decade before that.
"Rates are approaching historical lows, despite the fact that we have had claims of approximately $500 million and only $250 million in premiums," Mike Vinter, executive vice president of Aon International Space Brokers, told CNBC for a report in 2015. "The underwriters are certainly in a loss position for the year."