Commercial Space Launches: FAA Should Update How it Assesses Federal Liability Risk, Report to Congressional Committees [open pdf - 492KB]
"A catastrophic commercial launch accident could result in injuries or property damage to the uninvolved public, or 'third parties.' In anticipation of such an event, a launch company must purchase a fixed amount of insurance for each launch and reentry, per calculation by FAA [Federal Aviation Administration]; the federal government is potentially liable for claims above that amount up to an additional $1.5 billion, adjusted for inflation and subject to congressional appropriations. As of 2012, the inflation-adjusted amount is about $2.7 billion. CSLAA [Commercial Space Launch Act Amendments of 1988] provides for this payment, called indemnification. The indemnification provision, unless reauthorized, expires this year. GAO [Government Accountability Office] was asked to address, among other things, (1) the U.S. government's indemnification policy compared to policies of other countries, (2) the federal government's potential costs for indemnification, (3) the ability and willingness of the insurance market to provide additional coverage, and (4) the effects of ending indemnification on the competitiveness of U.S. launch companies. GAO reviewed FAA data and documents and relevant literature and conducted interviews with officials from FAA and the National Aeronautics and Space Administration, insurers, brokers, launch companies, launch customers, risk modelers, and experts. GAO recommends that FAA periodically review and update as appropriate its methodology for calculating launch providers' insurance requirements. The Department of Transportation provided technical clarifications, which GAO incorporated."
Government Accountability Office: http://www.gao.gov/