Need regulatory framework for financial risk coverage of Indian space industry: Report

Published - April 20, 2024 12:30 am IST - Bengaluru

India urgently needs a comprehensive insurance strategy, combining regulatory clarity, financial market development and alignment with industries to ensure the success of India’s space sector, said Eshaan Bansal, Young Graduate Research Fellow at Spaceport SARABHAI.

Mr. Bansal is the author of the report, Financial Risk Coverage of India’s Commercial Space Launch Industry: Need for Developing Insurance and Reinsurance Capabilities, which was released on Friday by Spaceport SARABHAI a dedicated space think tank based in Bengaluru.

Existing body of space law

The report examines the need for a regulatory framework for the financial risk coverage of the space industry in India and looks at the existing body of space law, including a comparative analysis of the global best practices for risk governance in the space industry.

The report states that though India came out with the Space Policy in 2023 with a vision to encourage and develop a flourishing commercial presence in space, the policy falls short of comprehensively addressing space insurance and liability.

The report said that States tend to adopt two different approaches when addressing the issue of insurance, with the first approach involving regulating and describing the extent of the insurance obligation in the legislation and the second approach is to leave the specifics to be mentioned in the license.

“The end objective of both approaches involves creating the need for the licensee or the operator to take out an insurance policy. Both approaches have their respective merits, and both address the need for creating a stable regulatory environment. While the two approaches address the issue of liability and allow institutions to make suitable insurance arrangements, India should ideally aim to adopt the first approach,” the report states.

Two broad reasons

It further said that India should adopt the first approach for two broad reasons.

“The first reason is that by regulating and describing the specifics of the insurance obligation in the national legislation itself, the state provides the private sector with the exact nature of the expectations for them. By doing so, private sector entities will have certainty about their liability obligations, which would be enshrined in the legislation itself and would thus be enforceable in a court of law,” it stated.

It added that the second reason is very specific to India as it draws its relevance from India’s historical experience with red-tape and bureaucratic apathy, infamously referred to as the ‘license-raj’.

“Creating a system where the specific conditions of liability and insurance would be devised by government officials for each specific license, would create room for bureaucrats to make excessive and rigid rules,” it added.

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