Commercial Space Launches: FAA's Risk Assessment Process Is Not Yet Updated, Statement of Alicia Puente Cackley, Director, Financial Markets and Community Investment, Testimony Before the Subcommittee on Space, Committee on Science, Space, and Technology, House of Representatives [open pdf - 314KB]
"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, 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, subject to congressional appropriations. As of 2013, the inflation-adjusted amount is about $3 billion. CSLA [Commercial Space Launch Act] provides for this payment, called indemnification. This testimony is based on a July 2012 report and January 2014 updates to FAA launch data, FAA progress on implementing GAO [Government Accountability Office] recommendations, and insurance industry capacity. It discusses (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 continues to believe that its July 2012 recommendation that FAA periodically review and update as appropriate its methodology for calculating launch providers' insurance requirements has merit and should be fully implemented."
Government Accountability Office: http://www.gao.gov/