April 30, 2013 by Daryl Angier
Back in 2004 when Sir Richard Branson, the billionaire entrepreneur and mad dreamer behind the Virgin brand, announced that he was forming Virgin Galactic to take regular people into space, many wondered if the high costs and a potential market limited to only the ultra wealthy would prevent the company, and space tourism generally, from ever getting off the ground (pun intended). But as more commercial space vehicle companies and tour operators enter the market, space travel is starting to look a little more viable. Virgin Galactic now has over 500 people signed up and the fledgling Space Expedition Corporation (SXC) has taken reservations for another 200. Slowly but surely, the space tourism industry is building, and the insurance industry has taken notice by developing new products to help it along.
Make no mistake, space tourism will still be very expensive for quite a while. Virgin Galactic’s packages start at US$200,000 whereas SXC looks like a relative bargain with packages from US$95,000, all for a few hours of flying time up to a sub-orbital altitude to briefly experience a bit of weightlessness and look down at the planet before coming home again. Just getting to space also means travelling to a spaceport such as the ones in New Mexico and Curacao.
“That’s obviously a big commitment,” says Mike Vinter, executive vice president of the International Space Brokers (ISB) division of global brokerage Aon. “You put that kind of money up, you want to make sure you get your trip, and if you don’t, you want your money back.”
Both ISB and another global insurance brand, Allianz Global Assistance, have seized this opportunity to customize standard travel insurance products for this unique market. In November 2011, Allianz Global Assistance announced a partnership with the International Space Transport Association (ISTA—formed in 2010) whereby Allianz would develop customized travel assistance and insurance products for companies in the space tourism and commercial space flight industry. And last fall, ISB announced it had developed a specialized product specifically for SXC.
According to Erick Morazin, Allianz Global Assistance’s chief sales officer for Asia-Pacific, the idea of getting into the space market was first floated five years ago as “a joke.” Allianz serves as the back-end travel insurance provider for around 70 different airlines globally. Virgin Airlines was an Allianz customer in several countries already. Morazin’s sales colleagues were considering where else they had prospects for more business with Virgin when someone joked “why not Virgin Galactic?” says Morazin. But in 2011, Morazin and his team started to take the possibility seriously, leading to the partnership with ISTA.
Similarly, the Netherlands office of International Space Brokers already had a relationship with Dutch-based Space Expedition Corporation when the company came to ISB with a need for a cancellation product it could build into the $95,000 fee, in the hopes it might convince more people to sign up.
Aborting Your Mission
Space travel insurance is in fact not much different from the standard cancellation insurance product that airlines offer when you book a flight online. ISB’s Vinter points out that while most space policies are manuscript, the product developed for SXC had an earthbound starting point.
“There is a market for non-appearance and cancellation,” he says. “Using that as a benchmark got us in the general range and we negotiated the best we could. It is a slightly riskier profile than your typical cancellation coverage.” The premium will be about 1-1.5% of SXC’s fee for the flight.
Similarly, for Allianz, the space travel product will be just another iteration of what they already do for their airline clients around the world. “For us, space travel is another customization,” says Morazin. “It could be the same choices we offer for Air France or Delta.”
For example, if a Virgin Galactic client demands a refund of their $200,000 fee, Virgin will refund 95% and the insurance product would refund the remaining 5%, based on a premium of about $500-$700. Allianz will also offer options for standard travel buy-ups such as lost baggage coverage and emergency medical assistance. There will also be cancellation coverage for the necessary and expensive space training required before a flight. But Morazin says the main market will be for cancellation of the actual space flights.
The Future of Space Travel
Morazin says that Allianz has yet to write a single policy but predicts that sales will get started once people have actual seats reserved on actual flights. He points to analysis that anticipates there will be up to 25,000 space travelers over the next four-to-five years and perhaps as many as 300,000 by 2020.
“This is a huge market, not just for insurance but all the ancillaries around space,” he says. “One of the main space operators is currently in discussions with a lot of different providers. They are recruiting a few partners in each area they want to develop. Insurance, food and beverage, accommodation etc. Allianz as a brand wants to be one of the key insurance partners of the space operators and spaceports or shuttles or any operators. If space travel starts to develop, we need to be there.”
Morazin is dreaming big. He foresees a future where going into space will be the next development in point-to-point travel to spaceports around the world.
“If you go a few kilometers out of the Earth’s rotation, you can basically go back to another continent in a very short period of time. New Mexico to Singapore in less than three hours will be feasible.”
For his part, Vinter has been in the commercial space business for over 10 years and is a bit more circumspect. “I’m guardedly optimistic that this will be a successful industry, but I still think it’s going to be niche,” he says about space tourism. As for point-to-point travel, Vinter points out the Concorde once offered something similar in the way of speedy intercontinental travel. “But they had difficulty closing that business case and they were flying a lot more frequently.”
Guarded though he may be, Vinter nevertheless reveals his own impatience to see the first flights go up and thus generate some momentum for the industry.
“People will come back and tell what a great adventure it was, you’re going to get people talking about it. So that way instead of interviewing the insurance guy, you can interview the person who actually went up there and they can tell you great things about the flight.”
Copyright 2013 Rogers Publishing Ltd. This article first appeared in the February 2013 edition of Canadian Insurance Top Broker magazine.
This story was originally published by Canadian Insurance Top Broker.