The space insurance aspect of the Intelsat 708 launch failure focuses on the exchange of controlled technical information within the insurance community. Insurance underwriters and reinsurers for the Apstar 1A satellite program — the next scheduled satellite to be launched on the Long March 3B after the Intelsat 708 failure — were concerned about the reliability of the Long March rocket, and the fate of future launch insurance programs in the PRC.

Immediately after the Intelsat 708 launch failure, space insurance underwriters for the Apstar 1A insurance program pressured the PRC to create an international and Independent Review Committee (IRC). These underwriters and reinsurers insisted on this arrangement to ensure that an adequate assessment of the risks of future Long March rocket launches was made.

Representatives from J & H Marsh & McLennan, an international space insurance brokerage firm, were adamant about obtaining a report from the Independent Review Committee for the benefit of the reinsurers of the Apstar 1A satellite insurance program. Members of the space insurance community were invited to attend a meeting on April 15 and 16, 1996, in the PRC. The purpose of the meeting was to build confidence in the Long March rocket, and to discuss the status of the Apstar 1A insurance program.

The space insurance acquisition and underwriting process includes the dissemination of technical information, the consideration of market conditions, capacity, and participants, and the involvement of insurance brokers, underwriters, and reinsurers. This chapter identifies several issues relating to procedures for the disclosure and handling of sensitive information by the insurance community.

It is unclear whether, or to what extent, the transmission of controlled technical information to and from the space insurance industry is reviewed in advance or monitored by U.S. Government officials.

The Role of Commercial Space Insurance In Technology Transfer to the PRC

Aspects of the Long March 3B-Loral-Intelsat 708 Failure

The Intelsat 708 satellite was destroyed in a Long March 3B crash on February 15, 1996.1 It was the second in a series of nine Intelsat satellites for which International Space Brokers was the sole insurance broker.2

Intelsat had arranged for the People’s Republic of China (PRC) to launch three of the nine satellites (Intelsat 707-9, Intelsat 708, and Intelsat 801-6) on the PRC’s Long March 3B rocket.3

The Intelsat satellite 708 was insured for $204.7 million.4

Intelsat obtained space insurance for the launch phase only. The launch phase extended from intentional ignition of the rocket to separation of the satellite from the rocket.5 Under the terms of the policy, risk transferred from the pre-launch insurers for the manufacturer of the satellite, Space Systems/Loral (Loral), to Intelsat’s insurers at the intentional ignition of the Long March 3B rocket carrying Intelsat 708.6

There were approximately 15 to 20 insurance underwriters and many reinsurers for the package that included the Intelsat 708 satellite.7 The lead underwriters were Marham Space Consortium8 and Munich Re of Munich, Germany.

Other insurance underwriters who participated in the coverage of the Intelsat 708 satellite were:

U.S. Aviation Insurance Group

AXA Reinsurance Company

La Reunion Spatiale

AGF Reassurances

Reliance Assurances

The Sumitomo Marine & Fire Insurance Company, Ltd.

Great Lakes9

The Intelsat 700 Series satellite insurance package was negotiated approximately six months prior to the first launch, when a data package including technical information on the Long March 3B was submitted to the underwriters.

After the launch of the Long March 3B rocket carrying the Intelsat 708, Intelsat reassigned the remaining two launches that had been slated for the PRC’s Long March 3B to French Ariane rockets.10

Intelsat documents indicate that the decision to procure launch services from the China Great Wall Industry Corporation was based on the size of the Intelsat 708 satellite and the fact that the price was significantly below that of an Ariane launch. Intelsat documents revealed:

At issue are the agreements regarding commercial satellite launches negotiated by the PRC and the U.S. in January 1989 which deal with trade issues and market entry, technology safeguards, and liability.

Under these agreements introductory or promotional prices are allowed for the first or, in extraordinary circumstances, the second successful commercial launch of a new launch vehicle.11

A Loral program manager was on-site at Intelsat during the Intelsat 708 project, and an Intelsat program manager was on-site at Loral. Intelsat insurance issues with Loral were coordinated through a Loral office located at Intelsat.12

Prior to the first launch of an Intelsat satellite on a PRC rocket, Intelsat requested that its broker submit a data package on the Long March 3B to underwriters because it was a developmental rocket.

The data package for the Intelsat 708 launch included a relatively large quantity of data on the Long March 3B, because of the rocket’s then-recent developmental status.13

Michael Hewins, then Chairman of the Space and Telecom Group for J & H Marsh & McLennan,14 says that both his firm and Asia Pacific Telecommunications Satellite Co., Ltd. were interested in the reliability of the Long March after the Long March 3B-Intelsat 708 failure. Hewins says that Professor Bao Miaoqin, Chief Engineer at the PRC-controlled Asia Pacific Telecommunications Satellite Co., was told by his superiors to use the Long March, for the upcoming Apstar 1A launch, but but Hewins does not have any specific information about this request.15

China Great Wall Industry Corporation provided the requested data in order to demonstrate that the Long March 3B’s development was complete. Intelsat used China Great Wall Industry Corporation’s data in its presentation to underwriters. The data covered both the Long March 3B and the PRC launch facility.16

Terry Edwards, Manager of Intelsat’s Launch Vehicle Programs Office, supervised the Intelsat 708 assessment team, and interacted with Intelsat’s insurance brokers. For its part, Loral provided data directly to China Great Wall Industry Corporation on the satellite-rocket interface, while Intelsat instructed Loral to take all steps necessary to demonstrate a proper interface.

Intelsat officials say that Intelsat was aware of export control requirements and complied with them, and that the Defense Technology Security Administration monitored technical meetings among the satellite owners, rocket owners, satellite manufacturers, and insurance representatives.17

Intelsat’s business considerations were the basis for the cancellation of the two scheduled PRC launches following the February 15, 1996 Long March 3B crash.18 Intelsat documents stated that:

There is an unreasonable and unacceptably high technical and safety risk in proceeding with additional [Long March 3B] launches of Intelsat spacecraft until [China Great Wall Industry Corporation] has accomplished a sufficient number of successful operational launches of the vehicle demonstrating a reliability equal to other major providers of launch services to Intelsat.” 19

Intelsat has not used a PRC rocket since the failure of the Long March 3B

carrying Intelsat 708.

According to Mark Quinn, former Vice President at J & H Marsh & McLennan, there were no J & H employees on-site in the PRC for the Long March 3B-Intelsat 708 failure. Quinn says he does not recall any specific discussions, and says he did not have any conversations with underwriters or reinsurers regarding that failure. Nor did Quinn discuss specific issues regarding insurability for that program with anyone. Quinn says that he contacted his clients regarding the Long March 3B-Intelsat 708 failure and also called contacts at Loral. Quinn does not recall the content of the calls, other than to ask whether market conditions had changed.20

The Treasurer of Intelsat, Randall Bonney, has primary contact with Intelsat’s insurance brokers for insurance-related issues. Bonney is responsible for submitting the Notice of Loss to the insurance companies in the case of a failure, and he prepared the Summary Report of Loss for Intelsat 708. Intelsat’s Launch Vehicle Program Office is the insurer’s point of contact for technical information. Most launch service questions from insurance underwriters come through this office at Intelsat, but some may not have done so.21

J & H Marsh & McLennan’s Hewins, then Chairman of the firm’s Space and Telecom Group, recalls that Loral President Bernard Schwartz projected a broad intent to “get it right” regarding satellite launches in the PRC. However, Hewins says he had no specific discussions of the subject with Schwartz.22