Captive International
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The captive then reimburses the
space tourism parent company
for losses up to the amount of the
deductible. This model is often used
with workers’ compensation captives;
it obviates the need for expensive
fronting carriers and such captives
are frequently formed in Vermont and
other traditional domiciles.
However, there may be need for
a fronting company. Regulators
frequently limit the size of deductibles
that insureds may take (workers’
compensation and Federal Housing
and Urban Development HUD-
financed properties are notorious for
this). Consequently, limited deductible
amounts may preclude the application
of a large deductible buyback. In this
situation the captive may reinsure a
fronting carrier for some layer of risk,
reducing its overall insurance premium
spend. If the space tourism company
enjoys a favourable loss history (ie, few
explosions) then the captive may turn
the cost centre into a new profit centre
for the parent company.
Of course, there are other
applications via risk retention
SPACE TOURISM www.captiveinternational.com
“By utilising a proper mix of traditional
insurance and captive insurance the space
tourism market will continue to grow.”
groups or protected cell companies.
Qualified captive managers should
be able to build various types of
programmes to meet the regulatory
requirements while optimising the
risk financing costs for the parent
company. The exact structure for any
company will be a function of the risks
underwritten, whether international
treaty issues are in play, and the
overall loss history of the company.
This is where captive managers shine.
Brokers herd the opportunities while
captive managers design the self-insurance
programme.
The space industry is a highly
regulated field. The Commercial
Space Launch Act prohibits satellite
customers from suing launch
providers, but this statutory waiver
does not extend to space tourists (14
CFR §440.3 2006). Consequently, the
space tourist operator retains a large
exposure in the event of a catastrophe.
Space flight operators may demand
tourists to sign liability waivers, but
these contracts are unlikely to survive
judicial scrutiny as waivers are not
favoured by courts in general.
Virginia and Florida generally prohibit
any legal action against commercial
space providers under state law
except for cases of gross negligence
or wilful misconduct, but these state
law prohibitions on suits against
space tourism operators do not apply
in federal court. These considerations
only heighten the necessity for quality
paper that will protect the insureds in
federal court.
In a sense, space tourism is no
different from any other heavily
regulated industry. The steep learning
curve associated with various state,
federal, and international regulations
requires the risk management
professional to craft very specific
policies for every insured. This regime
is where captives shine because they
are absolutely flexible to the owner’s
specific needs.
The final frontier is exciting. Risk
management professionals have a
large role to play in helping humans
reach for the stars. By utilising a proper
mix of traditional insurance and captive
insurance the space tourism market
will continue to grow. l