UK to cut liability limits for satellite operators that meet security and sustainability tests

The British government will take on more of the financial risk of satellite accidents under a new system of liability limits for space operators. A written ministerial statement published on November 12 by the UK Space Agency and Baroness Lloyd of Effra says a departmental minute has been laid before Parliament setting out the contingent liability created by the changes. The government announced them on September 8, alongside its new UK Space Strategy.

The statement sets out the legal chain. Under the UN space treaties, the UK government is ultimately liable for damage its space objects do on the ground or to aircraft in flight; for damage in orbit, it is liable only if found at fault. Under the Outer Space Act 1986 and the Space Industry Act 2018, which put those obligations into UK law, UK-licensed operators must indemnify the government against third-party liability claims. Today that liability, and the insurance operators must hold to cover it, is capped at €60 million (£50 million equivalent), and the cap can be raised for riskier missions. Above an operator's limit, the government must pay.

Three tiers from December

The new approach applies to orbital operations license applications received after December 1, 2026. Licenses will carry a default limit of £50 million unless an operator shows evidence that it meets the government's criteria: one criterion brings the limit down to £20 million, and both bring it to zero. According to the consultation outcome published in September, the initial tests are whether an operator has completed the UK Space Agency's cyber and physical security assessments, and how operators “educate themselves on space sustainability.” Licenses from applications received after December 1 will state their limits in pounds sterling instead of euros. A next version, possibly with other criteria and more tiers, is to be considered for late 2027 or early 2028.

Separately, the government is waiving operator liability for in-orbit servicing, assembly and manufacturing missions and for lunar missions launched before the end of 2030, to support what it calls high-potential technologies. The waiver will be written into licenses issued after December 1. The September outcome links it to a recommendation from a regulatory sandbox on rendezvous and proximity operations, and gives the cutoff as missions launched “before 2030,” a slightly different wording from the minute's.

What it could cost the state

The minute says the changes could add at most £50 million to the government's exposure on any single claim, in cases where an operator reaches a zero limit or qualifies for the waiver. Using a method developed with the Government Actuary's Department, it estimates an expected cost of about £700,000 a year, plus about £900,000 a year for an application covering a large constellation under the variable limits alone. Because such claims are considered remote, it adds, the cost would be expected to be zero in nearly every year, and no claim has yet been made for damage caused by a UK-licensed space object.

The Treasury has approved the proposal in principle. Departments present such minutes for contingent liabilities above £300,000 that have no specific statutory authority. If a member raises an objection in Parliament within 14 sitting days of the minute being laid, final approval is withheld until the objection is examined.

Why the rules are changing

The government says it acted after feedback that the UK's current approach is uncompetitive, and that it wants to reward responsible operators, cut their costs, support new kinds of missions and grow the City of London's insurance market. The changes follow a consultation that ran from September 2023 to January 2024, which drew 46 responses from satellite operators, insurers, trade bodies, lawyers and academics, and further consultation since.

The same package ends decommissioning funds, which were set up to deorbit a constellation's satellites if its operator became insolvent; existing funds will be wound up, and the Civil Aviation Authority is to take a more proportionate approach to deposits and security. The government also endorses alternative insurance models such as voluntary mutuals and collective sector policies, and proposes to explore the merits of a “Space Re” concept like the models used for flood and terrorism insurance, while stressing that it has made no commitment to one.