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Gaelick, Institutional and Policy Issues Affecting Private Sector Research in Space, Princeton Synergetics, Inc., princeton, N.J., July 1987.
Leadership in Space Transportation, Space Policy,
and C. Gaelick, Evaluating Satcom Investment Decisions, Satellite Communications, January 1988.
13. Gaelick, C., Federal Government provision of Third Party Liability Insurance to Space Vehicle Users, Princeton Synergetics, Inc., Princeton, N.J., January 2, 1985.
14. Greenberg, J.S., and C. Gaelick, Simulation to the Rescue of Space Insurance, Aerospace America, August 1986.
and C. Gaelick, Space Insurance: Comments from an Observer, Space Policy, November 1986.
and C. Gaelick, Development of a Third-Party Liability Insurance Algorithm for Joint Endeavor Agreement Payloads, Princeton Synergetics, Inc., Princeton, N.J., May 1987.
and C. Gaelick, Space Insurance: An Issue Paper, Princeton Synergetics, Inc., Princeton, N.J., July 1987.
18. U.S. Commercial Space Transportation Risk Allocation and Insurance: An AIAA Position Paper, AIAA, November 1987.
19. Commercial Space Risks the Insurance Market and Its future Development, Sedgwick Space Services, The Sedgwick Centre, September 1986.
Government Provision of Third-Party
21. The Price-Anderson Act - The Third Decade, Report Congress, U.S. Nuclear Regulatory Commission, December 1983.
22. Rockett, Laurie, R. et. al., Financial Protection Against Nuclear Hazards: Thirty Years' Experience Under the PriceAnderson Act, Trustee of Columbia University in the City of New York, January 19, 1984.
23. Response to questions posed at the "U.S. ELV Session" of the IAF Congress, Brighton, England, October 1987.
24. Stevenson, R.W., G.E.
Times, January 27, 1988.
Marietta Satellite Deal, New York
900 STATE ROAD PRINCETON, NJ 08540 TELEPHONE (609) 924-2020
JOEL S. GREENBERG
Joel S. Greenberg has more than thirty years of experience in
Mr. Greenberg was a frequent guest lecturer for the American
Mr. Greenberg has been responsible for a broad range of studies
Most recently he has participated in the development of launch
Mr. Greenberg holds an M.E.E. degree from Syracuse University, a
ECONOMICS • FINANCIAL ANALYSIS SYSTEMS ANALYSIS • POLICY STUDIES TECHNOLOGY ASSESSMENT
Mr. NELSON. Thank you, Mr. Greenberg. We're delighted to have you here from the State of New Jersey.
Mr. English, would you like to respond to any of Mr. Greenberg's comments?
Mr. ENGLISH. Ten words or less, Mr. Chairman?
Mr. ENGLISH. I think that, of course, Mr. Greenberg represents a point of view. It is not the point of view of the AIAA, in terms of its position paper, which I might point out passed the test of a 40member Policy Committee of the AIAA before being referred by that Policy Committee to the Board of Directors for its review and consideration. The report does represent an official position paper of the AIAA, approved by the Board of Governors, even though I am sure every member doesn't necessarily agree with it, but I don't think that's the point.
The position of Mr. Greenberg is I think certainly a point of view. It's what I'll call a laissez-faire approach. It's highly dependent on the industry taking the risk of uninsurable levels of liability, and I think one can make no mistake that the potential risks, when you look at the accumulation of insurable risks in a launch process, can exceed available insurance. That is the position of the insurance industry and I don't think it can really be challenged. So the question is will the industry proceed ahead if the Government does not take steps to contain the uninsurable risk? The AIAA's position is the Government should not run the risk that the industry may not proceed or stay in for the long pull and that we'll go back to a single-thread system. It's position is don't take that risk. Mr. Greenberg may be right, but I don't think it will be determinable in the near term.
Mr. NELSON. Mr. Greenberg, as I understand it, your company did a report back in 1985, entitled "Federal Government Provision of Third-Party Liability Insurance to Space Vehicle Users."
Mr. GREENBERG. That is correct.
Mr. NELSON. Is that correct? What did it recommend as to an appropriate Federal role?
Mr. GREENBERG. Well, that report indicated that at that point in time third-party liability insurance, which was being offered for approximately $100,000 for a $500 million policy, was priced way out of line, and the insurance industry really made a gross mistake as to the pricing policies. We concluded that those prices were out of line by a factor of 5 to 10 times with other comparable kinds of risks, namely, the nuclear power industry, the aircraft and maritime industries, and so forth.
Subsequent to that the rates rose quite rapidly, by a factor of 3 to 5 times, and now they are basically not being quoted anymore. We did not conclude a desirable course of action for the Government. We suggested some various alternatives and I don't recall exactly what all the alternatives were that we suggested.
Mr. NELSON. Were any of the alternatives where there would be a Federal Government sharing arrangement?
Mr. GREENBERG. I believe some of the alternatives we suggested included that; yes.
Mr. NELSON. Would any of those alternatives apply to this situation?
Mr. GREENBERG. Well, again, the situation is such that I do not believe that third-party liability insurance per se is necessary at this point. At the International Astronautical Federation Congress in Brighton in October there was a session where all of the ELV companies were represented; either their vice presidents or presidents or chairman of the board were included in the panel. They all spoke their piece for a number of minutes. I stood up and asked the question in front of about 500 people in the audience. The question was: In the absence of Government indemnification and/or a legislative cap would you still launch commercial ELV's?
Mr. Brackeen, from Martin-Marietta, jumped up, took the microphone and stated publicly-Yes, the Board of Directors has already made that decision-and the other ELV firms agreed with him.
Mr. NELSON. All right. We're going to, we'll have an opportunity-Mr. Brackeen will be here tomorrow and we'll ask him that question.
Now I want you to understand that the framework in which this whole thing is coming up is the question of international competition and international launchers. Do you have a position as to taking American-made satellites and launching them on foreign launchers?
Mr. GREENBERG. I don't think that should occur and, in fact, that's why I go much beyond the considerations of the third-party liability insurance. Because it's my opinion that the U.S. ELV firms, if they are allowed to continue as privately owned organizations without any form of Government support, are going to head for a very, very rough road ahead of us because they are competing in the international marketplace with firms which have their government's financial support and I don't think that's a stable situation. I think in the long term the U.S. has to face up to the fact that it may be called upon, if it does want to have a commercial U.S. ELV industry that it's going to have to do an awful lot more than just third-party liability insurance.
I'm not against third-party liability insurance per se. I don't think it's necessary at this time. But I do think that it's the tip of the iceberg. The iceberg being the difference between the structures of industry and government in the competitive ELV countries. I think that's where the problem is and that's where we're heading. And we should lay the groundwork now in anticipation of where the problems may come.
Mr. NELSON. I want to make sure that the record clearly-that I understand your approach here. You said that, and I think you accurately described the situation, that other nations, including the Chinese, the Soviets, have the essence of the government subsidy in one way or another——
Mr. GREENBERG. Yes, sir.
Mr. NELSON [continuing]. Including the third-party liability question.
Now what are you saying, then, with regard to the American ELV? That they should or should not have that kind of indemnification on third-party liability?
Mr. GREENBERG. The U.S. ELV industry must be competitive with foreign ELV's.
Mr. NELSON. Right.
Mr. GREENBERG. Now I'm not quite sure what competitive means today. As far as I'm concerned, the ELV firms can be competitive today. They certainly are competitive with the weak U.S. dollar at this point in time as far as I can tell. Only nobody will discuss that. It's not a matter of being competitive in insurance, it's not a matter of being competitive in price, it's not a matter of being competitive on availability-it's the total package that is being offered. When one sells a refrigerator one doesn't say, I'm competitive because I have a white refrigerator. It's the total package.
Mr. NELSON. That's correct. And we're trying to dissect this package, and one element of the package that we're looking at is this question of, Lord forbid, if a rocket went out of control and a range safety didn't control it sufficiently and there was some liability. And what the manufacturers are articulating is that that's a part of the competitive package. That if they had to buy insurance to that level to cover that liability that it would be too expensive and they couldn't be competitive.
Mr. GREENBERG. Well, I'm in-
Mr. NELSON. And your response to that is what?
Mr. GREENBERG. Yes. I'm in business also and I have third-party liability insurance. My third-party liability insurance does not cover the maximum possible event; it covers a maximum probable event. And we all face that, when we buy insurance for our automobiles, liability insurance, or any other business. I don't know how the chemical industry could afford to cover a probable maximum event. It's not possible to cover unknown kinds of events.
The launch vehicle industry has a history. They have over 10,000 launches behind them-in fact, it might be closer to 15,000 launches. There has never been a third-party liability claim filed. So the risk is relatively small.
Now it's true that the risk can be quite large. How large? The sky is the limit. No matter how much insurance you have that amount of insurance might always be exceeded, and I think that's what everybody is worried about. But on the other hand, we all go about our normal lives facing untold liabilities.
Mr. NELSON. Well, I thank you, gentlemen. It has been an enlightening discussion. We have had a good hearing today, a very good hearing. And it's my hope, in the course of the hearing tomorrow that it will start to round out this subject as we get ready to put the final touches and massaging on this piece of legislation as we start to move it forward. Thank you. Have a good day.
The meeting is adjourned.
[Whereupon, at 4:15 p.m., the subcommittee was adjourned, to reconvene subject to the call of the Chair.]