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 That loophole is likely to disappear, slowly, after the fatal
crash last week of a test flight of a Virgin Galactic space ship
designed to take tourists into space.
The loophole exists because U.S. life insurance policies don't ask
about space tourism or exclude it from coverage, meaning insurers
most likely would have to pay if the holder died on a space trip,
insurance industry veterans said.
Insurance companies, which say they are considering what to do about
space tourists after the Virgin crash, are likely to start adding
questions about space travel and may even explicitly exclude space
coverage, the industry observers said.
The companies themselves are taking a cautious approach.
"If we had an applicant with such plans, we would postpone any
underwriting decision until they returned," Prudential <PRU.N>
spokeswoman Sheila Bridgeforth said.
Northwestern Mutual said that it is paying close attention to the
issue after the crash, but that there is too little safety data to
assess the risk of space tourism. U.S. life insurer MetLife <MET.N>
said it doesn't have imminent plans to offer space tourism
insurance.
 Still, the industry is starting to gear up for space tourists, just
as they cover satellite launches. Pembroke Managing Agency offers a
policy that pays up to $5 million per space passenger or up to $20
million per trip, according to parent Ironshore International, which
announced the policy in June.
"I suspect in insurance company offices all over the country right
now - as a result of what's happened to the Virgin Galactic plane -
it's being discussed," said Burke Christensen, former insurance
lawyer and chief executive who has authored or edited three
textbooks on insurance law.
It would take time, perhaps years, for those changes to be approved
by all U.S. state insurance commissioners, he noted.
In deciding what to charge, insurers are likely to look at satellite
policies, which range between 2.5 percent and 10 percent of insured
value, Neil Stevens, a space insurance expert and member of the UK's
Satellite Finance Network advisory board.
At that rate, a policy paying a million dollars would cost $25,000
to $100,000.
"Getting on a space flight is a material change in risk," he said,
akin to strapping rocket boosters onto a car and asking for a new
policy. "Put yourself in the place of the insurer. Would you charge
the same premium?"
But the data on human space travel is much more favorable, if
limited. There have been no fatal suborbital manned flights and
three fatal orbital space shots, including the U.S. space shuttles
Challenger and Columbia with 14 deaths, and a Soyuz flight that
killed one, according to the Seradata SpaceTrak database. That puts
the risk of fatal accident on a manned orbital or suborbital
spaceflight at 3 in 306 or just under 1 percent, the company said.
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Given those numbers, and the few people who are likely to fly on
rockets, "you come up with a very, very, tiny, tiny probability" of
death, Christensen said, and the company might conclude it is not
worth charging extra. RISKY BUSINESS
Virgin Galactic's SpaceShipTwo broke up after its release from a
launch plane high over the Mojave desert on Oct. 31, killing one of
two pilots. The craft is designed to carry six passengers on
two-hour suborbital flights, including a few minutes of
weightlessness.
Virgin's space program, backed by founder Richard Branson and Aabar
Investments, a United Arab Emirates investment fund, is the most
developed of several projects to develop space tourism, with about
800 deposits for a ride into space at up to $250,000 a seat. Singer
Lady Gaga and actor Ashton Kutcher have signed up.
Other companies developing space ships include privately owned XCOR
Aerospace and Blue Origin, a startup owned by Amazon.com Inc
<AMZN.O> founder Jeff Bezos.
While current life policies probably would pay in the event of
death, applicants for new policies should disclose space plans or
risk a dispute with an insurer, said Steven Weisbart, chief
economist at the Insurance Information Institute, a non-profit trade
association.
Insurers typically have up to two years after a policy is written to
contest the application, allowing them to investigate whether the
insured person has misrepresented facts.
So it's possible an insurer could avoid paying if someone bought a
policy and died in a rocket crash during the two years period.
"You know that insurers are going to look for some way to invalidate
the claim if you had a ticket," said Glenn Daily, a fee-only
insurance adviser based in New York.
 (Fixes typo in Prudential spokeswoman's first name, Sheila)
(Reporting by Alwyn Scott and Carolyn Cohn in London, editing by
Peter Henderson)
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