IN-SPACe proposes to require private launch operators to carry third-party liability insurance, reportedly subject to a ceiling of around ₹500 crore (approximately USD 52 million) per launch.
For India’s emerging private space sector, this raises some obvious questions. Can startups realistically obtain and afford this cover? Why should a private operator insure against liabilities that ultimately arise under treaties signed by India? How should the required cover be calculated? And if ₹500 crore is the insurance ceiling, who bears the risk of a truly catastrophic accident that causes losses beyond it?
The answer begins with international space law.
Under the Outer Space Treaty, 1967, States bear international responsibility for national activities in outer space, including those undertaken by non-governmental entities. The Liability Convention, 1972 creates a related liability regime for damage caused by space objects. If an Indian private company launches a rocket and an accident causes third-party damage, the fact that a private company conducted the launch does not necessarily insulate India from international liability. This explains the logic behind IN-SPACe’s approach. India needs a domestic mechanism for allocating the financial risk created by private space activity. If a commercial operator creates the risk, the Government may not want the resulting exposure to rest entirely with the taxpayer.
Is India unusual in doing this?
No. Third-party liability and financial-responsibility requirements are well-established features of commercial space regulation internationally. The United States, for example, requires licensed launch and re-entry operators to demonstrate financial responsibility for third-party claims, with the required amount generally determined through a maximum-probable-loss assessment. The United Kingdom similarly uses third-party liability and insurance requirements as part of its licensing regime.
The models differ considerably between jurisdictions. But the underlying principle is similar: private space activity can create public liability, so the private operator should carry an appropriate share of the financial risk.
Why now?
For decades, Indian space activity was overwhelmingly State-led. As long as ISRO was effectively the only entity flying, requiring it to insure the Government against the Government’s own exposure made little sense. Private launches change that arithmetic.
The Government is now potentially exposed internationally to accidents caused by companies it neither owns nor operates. Insurance is one way of shifting an appropriate part of that exposure back to the entity actually flying the vehicle.
The real policy question, therefore, is not whether India should require financial protection against third-party space risks. The harder questions are how much an Indian operator should be required to insure, how that amount should be calculated, and who should bear the residual risk of an exceptionally large accident.
Getting that calibration right matters if India wants to build a competitive private launch industry. Properly designed, mandatory insurance should make the sector more investable, not less: a defined and insurable exposure is easier to price, finance and explain to a board or investor than an open-ended one.
The half that is missing
The more developed international regimes do not merely tell operators to buy insurance. They also address what happens when a catastrophe exceeds the amount the operator was required to cover.
The US system is a good example. The operator is required to demonstrate financial responsibility up to a calculated level of probable loss. Beyond that, federal law provides a mechanism for government payment of certain excess third-party claims. The UK regime also allows operator liability to be limited, although its structure is different from the US model.
India presently does not have a comprehensive statutory indemnification regime comparable to the US framework for allocating catastrophic losses above the operator’s required financial responsibility. That leaves the most difficult risk insufficiently resolved: the low-probability, very-high-consequence accident.
There is a structural reason for this gap. Requiring insurance is a regulatory condition that IN-SPACe can impose through its authorisation framework. Creating a comprehensive statutory liability cap or committing the Government to bear specified losses above that cap is a much larger legal and fiscal step. It requires a clear legislative foundation. India still does not have a comprehensive space activities statute. A Space Activities Bill was first proposed in 2017, but no such legislation has yet become law.
That is therefore the next piece of India’s commercial-space liability architecture that deserves attention.
Authored by Anirudh Rastogi, Managing Partner at Ikigai Law. Anirudh leads the Aerospace and Aviation practice at the firm.
Image credits: Unsplash
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The firm’s space sector work includes advise on Axiom Research Lab / Team Indus’ lunar mission, Pixxel Space’ negotiations with Momentus for launch with SpaceX, Piersight’s JV negotiations to form a Public-Private Partnership to build India’s first fully indigenous constellation of earth observation satellites at an estimated project cost of more than $130 million, and QOSMIC’s USD 3.33 million seed round led by Accel and Prosus, South Park Commons and ARTPARK to build laser-based optical communications for space.
