The destruction of the space shuttle Challenger is the latest in a string of disasters that have shaken the young space-insurance industry, driving rates up sharply and reducing the amount of coverage available for new satellites.
As a result of this trend, more satellites may be launched with no insurance or only partial coverage, space-insurance brokers and underwriters said yesterday.
Although the Challenger's loss was an immediate psychological blow, the full impact on the industry will not be clear until NASA determines the cause of the midair disaster, they said.
"The community is just in a state of shock over the loss," said John Horner, a vice president of Corroon & Black Inspace Inc., an insurance broker based in the District. "The satellite market is emotionally driven as well as financially driven, and the confidence level now is very, very low."
The Challenger explosion followed the loss of eight satellites in the last two years, a trend that had already driven insurance rates into the range of 20 percent to 30 percent of the insured value of a satellite. The insured value, or replacement cost, of satellites currently averages $80 million to $100 million, he said.
"Prices are totally unacceptable at the present time," said Michael Lyons, a vice president with Satellite Business Systems, a McLean-based subsidiary of International Business Machines Corp. SBS has four satellites in orbit, and hopes to launch two in 1987. Current insurance rates "fall somewhere between destroying a company's business plan and making a company insure the satellite itself," he said.
Insurance industry officials estimate they have paid out roughly twice the amount in claims that they have collected in premiums since 1975. Horner estimated that the industry has lost about $850 million in paid claims, compared with about $400 million in premiums charged.
Some industry officials have estimated that space insurers have already lost $633 million since February 1984. Since then, four satellites failed to function in orbit after being delivered into space successfully by U.S. space shuttles. Another satellite, Intelsat 5, was lost before it reached orbit because a launch vehicle misfired. Two satellites were lost in the explosion of Europe's Ariane rocket last September. Hughes Communications Corp.' Leasat 4 satellite is not working.
Before the Challenger explosion, these losses had pushed insurance rates up and coverage availability down to the point that an RCA Corp. satellite was launched in November without any insurance.
Corroon & Black placed the only insurance policy covering the fatal Challenger mission. The firm gave Sharon Christa McAuliffe, the high-school teacher aboard, a $1 million personal accident policy.