Space startups seek insurance for AI orbital data centers

Space companies have spoken to insurers about coverage for orbital AI data centers, a sign of early progress for an experimental sector backed by Elon Musk's SpaceX and Jeff Bezos' Blue Origin.

The concept of data center satellites - designed to bypass Earth's energy limitations - has attracted increasing attention since Musk described them as the future of artificial intelligence development, ahead of SpaceX's record IPO this month. Obtaining insurance is crucial for companies trying to transform orbital data centers from concept to reality. Without coverage for the expensive hardware and risks involved, attracting the financing needed to expand such ventures would be difficult.

Blue Origin and several space startups, including Orbital, Starcloud, Lonestar Data Holdings and Cowboy Space, have also signaled their intention to launch space-based data centers.

Reuters spoke to four brokers and insurers, as well as three companies in the space sector, who said negotiations had taken place regarding coverage for orbital data centers, although they are still in the preliminary phase.

Insurance broker Marsh said a number of companies had contacted insurers to understand what future coverage for orbital data centers could encompass, without revealing the names of the companies.

"We are already starting to see data center-focused companies and digital infrastructure-focused companies seeking support from the insurance community," said Patton Kline, U.S. aviation and space leader at Marsh.

Lonestar said it recently held an information meeting at the Marsh offices for the Lloyd's of London insurance market, attended by around 25 insurers.

SpaceX and Blue Origin did not respond to requests for comment.

New for insurers
Insurers already cover launch failures, satellite malfunctions, orbital debris and space weather in a global space market that brings in about $500 million in annual premiums, according to industry executives and insurer Axa XL. But while insurers have decades of experience covering satellites, they have little data on orbital AI infrastructure.

"Discussions in the market are focused on whether the risk can be modeled, rather than what the premium should be," said Kasey Roh, US director at Upstage AI, a company that develops AI tools for insurers.

Part of the challenge is placing value on rapidly evolving AI chips, which can be vulnerable to the harsh conditions of space, said Euwyn Poon, chief executive of Orbital.

David Wade, space insurance analyst at Atrium, pointed out that venture capital-backed startups would need to expand before there was a significant insurance market for orbital data centers.

"Until we get past this initial round of financing and start to see some of these companies expand by raising debt, I think the insurance needs are very limited right now," he highlighted.

Source: CNN