SpaceX's Starship Explosion Shows the Need for Robust Commercial Space Insurance

SpaceX and experts in the space industry are engaged in a debate regarding whether the April 20 Starship rocket explosion was a failure or a necessary learning opportunity. Residents of nearby Port Isabel, Texas, however, experienced broken windows, damaged cars, and dust and debris the effects of which are still unknown.    

The complex set of waivers contained in the Commercial Space Launch Act (51 USC 509 et seq.) when properly executed do a great deal to limit liability among the participants to a commercial space launch. These waivers do not, however, change the potential liability to third parties due to the launch. The financial responsibility regulations contained in 14 CFR part 440 require up to $500 million in insurance coverage for Federal Aviation Administration (FAA) licensed activities, including launches. The FAA prescribes the insurance requirements for a launch based on the maximum probable loss. Thus, it is likely that SpaceX, through the required insurance, will compensate nearby residents for property damages or personal injury damages that resulted from the launch. While big risks in the space industry may come with big rewards, they also come with big insurance policies.