Synopsis
The paper titled “Estimating Satellite Insurance Liabilities” by Allen J. Gould and Orin M. Linden was published in 2000. It discusses how to estimate insurance liabilities for a portfolio of satellite insurance contracts.
Key points:
- Satellite insurance liabilities consist largely of unearned premium liabilities, with smaller contributions from reported and unreported losses.
- There is high probability of loss at launch and early operation, low risk during majority of operation, and high risk late in satellite’s life – similar to human mortality.
- Paper describes risks covered under satellite policies and using a simulation model based on active life approach to estimate expected losses related to unearned premium exposure.
- Model allows evaluating adequacy of unearned premium reserves, impact of reinsurance programs, and pricing treaty reinsurance contracts.
- Paper provides background on satellite insurance industry, including brief history, market evolution, risks covered, and common causes of satellite failure.
- Discusses data and assumptions needed for model such as launch failure rates, post-separation and in-orbit failure frequencies, severity distribution, etc.
- Model simulates losses on individual satellites, attaches insurance coverage, incorporates reinsurance, and produces loss distributions and profitability metrics.
In summary, the paper provides an actuarial framework for modeling satellite insurance liabilities and evaluating the profitability of unearned premium reserves. The simulation approach allows assessing the impact of reinsurance and other risk management strategies.
