Adriana Simões

Mattos Filho, São Paulo

adriana.simoes@mattosfilho.com.br

Marcelle Fazzato Lopes

Mattos Filho, São Paulo

marcelle.lopes@mattosfilho.com.br

Felipe Kotait Buchatsky

Mattos Filho, São Paulo

felipe.buchatsky@mattosfilho.com.br

Introduction

With the technological and scientific development that has been achieved in recent times, the space sector has undergone relevant transformations, thereby drawing increased attention.

According to the considerations stated by the Brazilian Space Agency (BSA) in a public call for contributions regarding its newly enacted regulation, a significant part of the investments in the aerospace industry is concentrated in the United States, which can be attributed to the best practices adopted by the Federal Aviation Administration (FAA), as the regulatory body responsible for receiving applications and issuing space launch licences and requests.^[1]

Concerns over the development and, consequently, the safety of this industry have reached worldwide levels. Following the example of other international players, in November 2022 space explorer ispace Inc bought the first commercial lunar insurance policy from Mitsui Sumitomo Insurance Co Ltd, a Japanese insurer, with coverage from launching to landing on the moon.^[2]

With the aim of standardising Brazilian rules at the international level and the continuity of the development of initiatives in the space sector, the BSA enacted Part 03 of the Brazilian Space Regulation (BSR), (by means of Ordinance No 1,019, published in the Federal Official Gazette on 28 December 2022) to establish insurance requirements for space launches in Brazil.^[3]

The Ordinance came into force on the date of its publication and follows the enactment of Parts 01 and 02 of the BSR, in August 2021, on ‘the operator’s licence for space launch activities in Brazilian territory and the concession of launch authorisations by the BSA’.^[4]

As a complement to Parts 01 and 02 of the BSR, the new regulation establishes rules for mandatory insurance for private companies starting and conducting launch or re-entry activities from Brazilian territory that require a space launch authorisation. BSA’s main goal in enacting Part 03 of the BSR is to protect the Brazilian State from eventual losses and damages arising from space launch activities.

General provisions on coverage amounts

As provided under the Public Call for Part 03 of the BSR, the main goal is to set the amounts of the insurance policies to be contracted, based on a compilation of data obtained through the licences already issued by the FAA.^[5] The use of data coming from the FAA, BSA explains, stems from the difficulty of defining the probability of the occurrence of failures, since Brazil has not yet developed its own launch history.^[6]

In this sense, reference amounts will be adopted, considering launches in low orbits, calculated from the US’s history of determining associated risks, from, for example, the calculation of the maximum probable loss (MPL), which means the maximum amount of loss for damages reasonably expected as the result of an authorised launch activity.

These reference amounts are set out in the new norm and, even though they may not serve to limit the range of amounts of the insurance, they will be considered by the Licensing Commission in its prescriptions, by means of comparison with the real circumstances under analysis. The amounts established by the BSA consider the maximum payload and may reach up to US$500m for payloads over 25,000kg. The minimum range established by the BSA is between USD 10m and 40m for up to 300kg of maximum payload.

Insurance requirements

The new regulation mentions a number of requirements that must be met by companies in order to be granted a launch authorisation, such as obtaining and maintaining liability insurance for additional insured parties, covering not only the authorised company, but also its customers, contractors, subcontractors and the respective employees involved in the authorised activity. In addition, such liability coverage shall be extended to government officials, as well as comprise potential liability against third-party claims for damages arising from an authorised activity.

The company must also obtain insurance policies to compensate claims for damages to the facilities and public infrastructure, and for the actions and omissions of the Brazilian state and its agencies, as well as its contractors and subcontractors involved in the launching activity, except in situations of misconduct.

As an alternative to the contracting of insurance established under the new regulation, Part 03 of the BSR provides the alternative for applicants to present evidence of financial responsibility as proof of its financial capacity to honour all claims required by the regulation. In this sense, it is necessary to provide such evidence at least 60 days prior to the beginning of the authorised activity, except in cases where the Special Licensing Commission may grant a different timeframe.

It is worth mentioning that, for the establishment of the insured amount, it is necessary to submit to the BSA the documents relating to the launching vehicle, as well as its payload and operations, as determined by the BSR Part 02.

Contractual standards

The contractual conditions for establishing insurance coverage also need to be aligned with the standards set forth in the regulation. For example, the policy limits must apply individually to each event and each policy must fully cover the value of the incurred damage, as low as it may be.

Regarding the hypotheses of invalidation or exclusion of any coverage, Part 03 of the BSR states that no policy may be invalidated, even in case of a payment default regarding the policy by the authorised party, and any part that may be excluded from the insurance policy must be specified.

Furthermore, the company must demonstrate the conformity of the insurance, as well as its existence, certifying to BSA that the contracted policies meet the requirements required by the Ordinance and filing one or more certificates of insurance, with proof of coverage by one or more insurers, that are in force and whose policies are adequately endorsed.

From the insurer company’s standpoint, Part 03 of the BSR establishes that the insurer shall be licenced to run its business in any state or territory of Brazil, as well as include in its respective policies a clause agreeing to be subject to the jurisdiction of national courts and designate an authorised agent in the country as a process agent, if needed.

Final considerations

As mentioned, with the publication of the new regulation, the Brazilian commitment to the adoption of international practices for space launches brings a promising perspective regarding the results aimed at. The ratification of the 1972 Convention on International Liability for Damage Caused by Space Objects further demonstrates the desire of the Brazilian State to protect its territory and engage with the practices adopted by the international community.

Even though the effects of the regulation are yet to be discovered and further developments may arise – such as future regulation that will take into account the Brazilian experience to establish more assertive insurance amounts – the evolution that Part 03 of the BSR represents is fundamental to show Brazil’s commitment to grow its space sector and, hopefully, to attract international investors to develop its well-known potential.