Almost all  spaceport operators currently licensed by FAA are state or municipal  government entities. Although commercial activity has traditionally been from federal ranges,  as of July 2016 there were 10 FAA-licensed spaceports to support private  sector involvement in space-related activity. Because the companies own and operate these sites using their own  vehicles exclusively, a launch site license is not required. U.S. Indemnification Regime

CSLAA created a three-tiered approach for sharing liability between the  federal government and the private sector for damages to third parties— known as the indemnification regime—to encourage the development of  the U.S. commercial space launch industry and promote a competitive  environment (see fig. 3). Operators of spaceports that are located on federal government  properties, however, could have federal contracts or agreements that  require them to have insurance to protect their own property from damage  resulting from space launch mishaps. Spaceport Insurance Coverage Varies among Spaceport Operators with Recent Commercial Activity, and Views Differ on the Affordability of Insurance

Three of the 10 spaceports FAA has licensed for commercial activity— MARS, Mojave Air and Space Port, and Spaceport America—have had  commercial activity in the last 5 years, and their insurance coverage  varies. Even though FAA does not require spaceport operators to hold  insurance, representatives of these three commercially active spaceports  told us that they have both property and liability insurance coverage to  protect themselves from losses resulting from space launch mishaps. Several of  these spaceport operators said they plan to evaluate options for insuring  their property against launch-related damage if they host commercial  space launches in the future. As a result, this spaceport  operator, in negotiations with the launch company that operates from their  site, pressed for a provision in their contract specifying that the launch  company would include the spaceport operator as an additional insured in  its insurance policy to protect the spaceport infrastructure against any  damage resulting from the launch company’s activities under the contract. Because of Confusion about Financial Responsibility Regulations, Spaceport Operators May Not Obtain Adequate Protection

FAA has not clearly communicated its interpretation of financial  responsibility regulations to spaceport operators, and spaceport operators  may not have adequate protection as a result. As previously discussed,  CSLAA and its amendments require launch companies to purchase  insurance to cover damage to third parties in case of a launch mishap. However, several spaceport operators we interviewed reported that they  find the financial responsibility regulations to be ambiguous. Specifically,  they said they are unsure whether they are considered third parties or  involved parties to launches. Federal internal control standards state that  managers should communicate information externally to achieve the  entity’s objectives. Stakeholders Are Divided on the Need to Change the Current Insurance Approach and on Support for Potential Options

Stakeholders we interviewed were divided in their opinions on the need to  revise the current insurance approach, which constitutes the first tier of  the existing indemnification regime. Similarly, they expressed differing  views about the options we identified for revising the approach: (1)  requiring launch companies to purchase insurance to cover spaceport  property, and (2) requiring spaceport operators to purchase insurance for  their own property. Stakeholders identified some positive aspects and  also raised concerns about each option. Greater flexibility. Stakeholders Had Differing Views on Potential Options for Revising the Insurance Approach

Based on interviews with FAA, spaceport operators, launch companies,  and insurance industry stakeholders, we identified two primary options for  implementing a revised insurance approach as it relates to state and  municipal spaceports:
Require launch companies to purchase insurance to cover  spaceport property against damage resulting from launch accidents. Most spaceport operators we interviewed favored  the option to require launch companies to purchase insurance, while most  launch companies favored continuing the current approach. In general, stakeholders tended to oppose options where the  burden of purchasing the insurance was on them. Increased certainty. Specifically, some stakeholders said that investors and  owners would have greater assurance that the assets they have  invested in would have adequate protections in the event of a launch  mishap. Higher costs. Some stakeholders also noted that one or both options  could increase costs or shift them to certain participants, depending  on which option was implemented. Gaps in  insurance protection can result in uninsured losses, which can, in turn,  hinder the development of space-transportation-related infrastructure that  supports the commercial space launch industry. Recommendations for Executive Action

To better ensure spaceport operators’ understanding of FAA’s financial  responsibility regulations for commercial space launches, we recommend  that the Secretary of Transportation ensure that the FAA Administrator  provides additional communication to clarify FAA’s interpretation of the  financial responsibility regulations for commercial space launches. Agency Comments

We provided a draft of this report to the Department of Transportation for  its review and comment. Appendix I: Scope and Methodology

The report examines (1) the insurance coverage spaceport operators  have in place to protect themselves from losses resulting from space  launch mishaps and (2) stakeholder views on the need to change the  current insurance approach and options for revising it.
Why GAO Did This Study

The U.S. commercial space industry has expanded, conducting eight launches in 2015 compared with none in 2011. These launches have traditionally been from federal facilities, but as of July 2016, there were 10 nonfederal FAA-licensed spaceport operators supporting both private and federal space activity. Almost all of these spaceport operators are local government entities. The complexity of the arrangements at these spaceports, and a mishap in October 2014 where the spaceport was not adequately insured, have raised questions about insurance coverage for spaceport assets, including potential federal involvement.
Congress included a provision in statute for GAO to report on the potential inclusion of local government property in the existing indemnification regime for commercial space launches. This report examines (1) the insurance coverage spaceport operators have in place and (2) stakeholder views on the need to change the current insurance approach and on options for revising it. GAO reviewed key documents; interviewed FAA and NASA officials and representatives of FAA-licensed spaceports, launch companies, insurance brokers, and insurance companies; and selected two spaceports to visit based on launch activity.

What GAO Found

Of the 10 spaceport operators (entities that host launches from their property) that are currently licensed by the Federal Aviation Administration (FAA), 3 have had commercial activity in the last 5 years, and all 3 told GAO that they have both property and liability coverage to protect themselves from losses resulting from space launch mishaps. Federal laws and regulations do not require spaceport operators to have insurance, but operators of nonfederal spaceports that are located on federal property could have federal contracts that require them to have insurance to protect their own property from damage resulting from space launch mishaps. Moreover, for launches licensed by FAA, since the Commercial Space Launch Act Amendments of 1988, FAA has required launch companies (firms that conduct or will conduct the launch of vehicles and payloads) to purchase insurance to cover damage to the uninvolved public, as well as damage to federal government property, in case of a launch mishap. Launch participants may also choose to negotiate additional insurance coverage through launch-specific contracts. However, spaceport operators said that they find the regulations that determine financial responsibility for commercial space launches to be confusing. Specifically, several spaceport operators GAO interviewed said that, based on their interpretation of the financial responsibility regulations, they were unsure whether their property would be covered under a launch company's insurance policy or whether they would need to purchase their own insurance for their property to be covered. FAA's mission includes encouraging, facilitating, and promoting commercial space launches by the private sector, among other things. Furthermore, federal internal control standards state that management should externally communicate the necessary quality information to achieve the entity's objectives. Unless spaceport operators have a clear understanding of FAA's financial responsibility regulations, a risk exists that they may not obtain adequate insurance against losses in the event of mishap. Uninsured losses, in turn, could potentially cause delays in resuming commercial launches following a mishap and unnecessary costs to the federal government, both of which could hinder the development of the domestic commercial launch industry.
Stakeholders in the space launch industry are divided on the need to change the current insurance approach, in which insurance for spaceports is not required but can be negotiated through contracts between launch companies, which operate launch vehicles, and spaceport operators, which run spaceports. Stakeholders identified some positive aspects of the current insurance approach—for example, some said that negotiating contracts specific to each launch allows for greater flexibility. However, they also raised concerns, including a lack of certainty about coverage for potential damage. GAO identified two potential options for requiring protection for spaceports: (1) requiring launch companies to purchase insurance to cover spaceport property and (2) requiring spaceport operators to purchase insurance to cover their own property. In general, stakeholders tended to oppose the option in which the burden of purchasing the insurance was on them. Specifically, most spaceport operators GAO interviewed favored the first option, while most launch companies favored continuing the current approach. Stakeholders discussed benefits associated with both options—for example, they said that both options could increase certainty by specifying which party was required to insure spaceport property. However, they also noted challenges, such as higher costs for the party required to purchase the insurance and decreased flexibility to customize their use of insurance depending on the details of a particular launch.

What GAO Recommends

GAO recommends that FAA provide additional communication to clarify its interpretation of the financial responsibility regulations for commercial space launches. The Department of Transportation provided technical comments.