From Policy To Protection: Third-Party Liability And Insurance In Indian Space Exploration

There are around 300 space-tech startups in India as of 2025, making the space sector account for an estimate of $8.4 billion. According to the World Economic Forum, with this current pace of the Indian space industry, the sector is expected to hit a size of $47.3 billion by 2032, making itself a significant contributor in the global market.

Following this, in May, 2024, Tata AIG introduced India's first insurance scheme tailored specifically for the rising space industry. The company unveiled its insurance plans to cover damage to property and bodily injuries related to satellite in-orbit third party liability. This step is crucial as India's space industry is projected to capture a significant share of the global launch market. In support of this, the Government through its policies and schemes is playing a vital role in bringing a value addition to this industry. Besides, the GST Council decided to possibly create an exception for private players who offer satellite launch services.

While there are multiple pros to initiative, this article will specifically focus on the regulatory framework and legal landscape of the sector which is a blank paper that is yet to be written on. It also seeks to draw inferences from best practices around the globe and how India can enhance itself by learning from them.

Legal framework governing space exploration in India

The Indian Government for the first time opened space sector for private players in 2020, and simultaneously, the Indian National Space Promotion and Authorization Centre (IN-SPACe) was established in June of the same year to regulate the private entities' action. IN-SPACe is an autonomous, single-window nodal agency under the Department of Space (DOS) with the primary mission to promote, enable, authorize, and supervise space activities of Non-Governmental Entities (NGEs). From a legal perspective, IN-SPACe majorly ensures and regulates the following – (1) compliance with Indian space laws, international treaties, and national security regulations, (2) granting approvals for private participation in satellite launches, manufacturing, and space-based services, (3) private entities adherence to liability norms, (4) governs IP rights related to space technologies developed through private collaborations.

This regulatory authority of IN-SPACe was conferred by the Indian Space Policy, 2023 which was implemented to open up India's space sector to private players by enabling them to independently develop, launch, and operate space-based services. It also encourages foreign investment, international collaborations, and Public-Private Partnerships (PPPs), and emphasizes space sustainability. Though the government implemented the Notified Guidelines for the Indian Space Policy 2023 for addressing the concept of insurance and liability in space sector, it still is relatively underdeveloped.

Landscape of the Insurance Initiatives for Space Sector

The global space insurance market is shaped by international treaties that govern liability and risk in space activities. The Outer Space Treaty (1967) establishes that states are responsible for national space activities, whether conducted by governmental or non-governmental entities. Alongside, the Liability Convention, 1972 mandates that launching states are absolutely liable for damage caused by their space objects on Earth or to aircraft, and liable based on fault for damage elsewhere.

As given under the Liability Convention, it is imperative to understand two liability types as per the international conventions. First, fault-based liability comes from negligence, if a company skips proper tests and causes harm due to a failure. Second, absolute liability means no need to prove fault wherein it's automatic.^[1]

Given this, in India, the space insurance landscape is in its early stages but is gaining momentum with the rise of private space players. The Space Policy 2023 encourages private participation but does not explicitly mandate insurance. However, the “Norms, Guidelines and Procedures for Implementation of ISP 2023” streamlines this ambiguity under Chapter X (Liability Related Aspects) where it mentions the requirement for third-party liability insurance, if found necessary by IN-SPACe and addresses any potential damages or risks arising out of space activities.

Legal Implications and Liabilities to the Players

The legal framework for the space sector in India is a mix of international treaties, national policies, and any upcoming laws. Focussing specifically on national policies, unlike the Indian Space Policy, the Notified Guidelines for ISP 2023 aims to resolve the gap in third-party liability insurance with updated and apt rules. This covers liability types, require insurance, and importantly, gives oversight powers to the autonomous agency, IN-SPACe.

Inspirations can be drawn from, first, the US Commercial Space Launch Competitiveness Act (2015) that stresses on the aspect of maximum probable loss (MPL) methodology for any third-party claims to ensure that operators do not purchase excessive insurance but only what is adequate. Additionally, to promote growth of the industry, the Act also extended the government indemnification for any excess liabilities up to $3 billion. Implementation of the Act and overseeing is done by the Federal Aviation Administration (FAA), which is an agency tangentially similar to the working of IN-SPACe with respect to launches. Second, India can also refer to the proposed EU Space Act which intends to bring uniform registration, liability and insurance standards across EU, hence neutralising various other national liability schemes.

Inferring from both the jurisprudence, it would be preferable if India can enhance its NGP by adopting certain US's validated ways like the MPL calculation for better cap prediction, introduction of indemnification by the Government for any excess claims which reduces burden on the operator. Importantly, setting standardized exclusions as per global practices can invite more investments and compete with international competitiveness. India could also adopt EU's ways like standardizing risk thresholds and sustainability obligations, mandating proof for all operators on their financial capacity, and combining orbital safety protocols to minimize liabilities.

India can also draw incites from the 2019 European rocket launch failure which destroyed UAE's Falcon Eye 1 satellite. The insurance claim hit a high of €368 million which was insured by Munich Re and AIG. This incident together with other recent failures, caused a strained space sector budget, increased premium trends and a 20-30% surge in insurance rates, thus emphasising the necessity for better risk management and diversified launch options. For India, with its nascent space sector and the insurance market, this case underlines the need for tailored insurance products, promoting global reinsurance partnerships, and implementing pre-launch protocols to mitigate financial risks.

The above-mentioned case of Vega Rocket also underlines another major aspect – cross border claims. India lacks better policies to handle foreign claims which can assist companies to avoid huge rising costs; nevertheless, call is being made for the same. We can also take cues from EU's unified insurance framework that allows companies to provides services and set-up branches across member states without a need for separate authorization. This upholds the principles of Freedom of Service and Freedom of Establishment. The framework brings a uniform incident reporting and liability rules which reduces legal uncertainties and increases indemnity among stakeholders. With increasing private launches in India, it is essential for us to learn from these jurisprudences and make the sector more appealing to investors.

By taking guidance from the US, and EU frameworks, India needs to work on its insurance frameworks for the space sector to foster innovation and attract investments. Ultimately, these learnings and improvements will place India at a competitive stance across the world.

At this pace, India's space sector is enroute to rapid growth, driven by private players and supported by government initiatives. International treaties like the Outer Space Treaty and Liability Convention impose significant obligations on India, and essentially the private companies. The upcoming draft Space Activities Bill, if enacted, could help bridging current gaps, giving clarity on liability regimes and regulatory requirements along with the existing Notified Guidelines for ISP 2023. Additional collaborative efforts, like the Microsoft-ISRO partnership, also empower nascent space sector with technology and mentoring.

As India is treading to capture a larger share of the global space market, striking a balance between innovation and risk management through law and insurance will be essential. The initiative by Tata AIG is a crucial step, yet, it can only be fully realized with necessary legal framework to define liabilities and mandate insurance. This along with an aspiring insurance market, will ensure that India's space sector thrives, contributing to advancements in space technology.

Author is a 4th year student at NALSAR University of Law, Hyderabad. Views Are Personal.

1. Peter Gailhofer, David Krebs, Alexander Proelss, Kirsten Schmalenbach & Roda Verheyen, Corporate Liability for Transboundary Environmental Harm ch. 11, at 523–36 (2022), https://link.springer.com/chapter/10.1007/978-3-031-13264-3_11. ↑