scorecardYour life is worth about $3 million in a rocket accident, according to the FAA. Here's how the agency got that number - and why auditors say it's a problem.
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Your life is worth about $3 million in a rocket accident, according to the FAA. Here's how the agency got that number - and why auditors say it's a problem.

Dave Mosher   

Your life is worth about $3 million in a rocket accident, according to the FAA. Here's how the agency got that number - and why auditors say it's a problem.
LifeScience7 min read
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  • The commercial space industry is ratcheting up the frequency of rocket launches and the sizes of its vehicles.
  • Elon Musk, who founded SpaceX, hopes to see more 1,000 launches per year of the company's new 39-story Starship rocket system.
  • But before any company can launch a rocket in the US, they must work with the Federal Aviation Administration (FAA) to obtain a launch license. One factor is accident insurance, and the amount is mostly determined by the risk to lives on the ground.
  • The FAA uses a $3 million amount as the value for each casualty in a hypothetical worst-case accident. The number was chosen in 1988, based on airline crash lawsuits, but has not budged since despite inflation and other factors.
  • Click here to read more BI Prime stories.

WASHINGTON - With the meteoric rise of the commercial spaceflight industry, which has seen nearly $30 billion in private investments over the past decade, the world could soon see far more rockets - and much, much bigger ones - launching and landing on the regular.

But with any boost in access to space comes increased risk, and the Federal Aviation Administration (FAA), which issues rocket-launch licenses, has for years avoided a serious reckoning of calculating the value of a human life, according to government auditors.

SpaceX, the aerospace company founded by Elon Musk, is on track to launch about two dozen Falcon 9 rockets in 2020. But Musk recently said Earth may soon see more than 1,000 launches per year of Starship, a planned 39-story rocket system that's designed to slash launch costs perhaps 1,000-fold. Each spaceship could ostensibly ferry 100 people to Mars and pack up to 100 tons of payload.

"Megatons per year to orbit are needed for life to become multiplanetary," Musk tweeted this month.

Rocket launches can't happen willy-nilly from US soil, though; SpaceX and other companies must get clearance from the FAA. Accident insurance is a core requirement of a launch license, and to calculate the coverage needed, the agency simulates the unthinkable: a worst-case accident that has a 1-in-1o-million chance of occurring.

The damage and death resulting from such an unlikely nightmare is called "maximum probable loss," or MPL, and its priciest - and most controversial - component is called "cost-of-casualty amount." In short, the figure attempts to estimate the value of a human life brought to a premature end on the ground by an explosion, falling debris, or some other lethal consequence of a launch or landing failure.

"It sounds strange when you think about it. How can you put a value on human life?" George Nield, a former FAA associate administrator who led its Office of Commercial Space Transportation (AST) for more than a decade, previously told Business Insider. "But you want to make sure people and families are compensated if something happens that's not their fault."

Currently, the FAA ascribes what it has called a "conservative" value of $3 million per hypothetical victim. But federal auditors within the Government Accountability Office (GAO) have hammered this figure over the years for being much too low.

"[B]y not prioritizing this weakness FAA may be exposing the federal government to excess risk. By continuing to use the $3 million cost-of-casualty amount in its MPL calculation methodology that we and others have noted is outdated, FAA may not be requiring launch companies to have sufficient insurance to cover all losses that can be reasonably expected," the GAO wrote in March 2017 report.

Why the FAA says one life is worth $3 million in a spaceflight accident

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When the AST (the commercial space transportation office) formed in 1984, Nield said Congress gave the new FAA division two central and seemingly contradictory missions: keep the public safe, yet also "encourage, facilitate, and promote commercial space transportation."

Instead of simply saying "no" to every launch, Nield says the AST works with companies to think through their launch vehicle's hazards, model possible accident scenarios, establish safety zones, and then calculate if the overall risk is acceptable.

"The probability of an expected casualty has to be less than 100 in a million, otherwise you're not going to be able to fly," Nield said.

In the case of SpaceX's most recent Starship-related launch - the flight of a stubby, six-story prototype called the Starhopper - the FAA said the risk of one casualty was about 1-in-1 million, or 100 times less. The rocket launched from a pad located about 1.5 miles east of Boca Chica Village at the very southern tip of Texas, where SpaceX is building out a private spaceport amid a few dozen homes.

"To put this extremely remote chance in perspective, if SpaceX was to launch this same exact mission every day, we would statistically expect one serious injury or fatality at Boca Chica Village between 720 B.C. and today," an FAA spokesperson previously told Business Insider.

For that launch, the FAA mandated that SpaceX obtain $100 million in worst-case-scenario insurance - nearly all of which was tied to 33 estimated casualties, valued at $3 million each.

But as the GAO and other federal entities have indicated, that figure is likely "outdated" and "insufficient."

In the mid-1980s, when AST was formed, there was - and still is - no on-the-ground death resulting from a commercial space launch. The office eventually settled on the $3 million figure in 1988, basing it on legal judgements and settlements that arose from airline crash lawsuits. The number was more like $1 million per death, but GAO auditors said the office wanted to be "conservative" and tripled the number.

The FAA contracted the Science and Technology Policy Institute (STPI) in 2015 to reevaluate the figure and make a recommendation - but it couldn't. The reason, said government auditors, is that many airplane crash lawsuits ended privately, and thus STPI "was only able to access very limited information on settlement awards," the GAO wrote in its 2017 report. "As a result," the report said, "a reliable estimate of the average loss per casualty" could not be made.

The $3 million has not budged since, even though that amount of money in 1988 dollars - when adjusted for inflation - is now worth more than double that amount.

"STPI's study indicated that a cost-of-casualty amount of approximately $6 million per casualty might be appropriate, but the study did not make a recommendation of what amount ths FAA should use," the GAO wrote.

When the price of a life might go up

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A follow-up report by GAO officials in January 2018 noted some progress on the matter, but found the FAA still under-prioritizing the matter and, as of publication, the agency is still using the $3 million figure.

The GAO, which in part aims to keep the government from shooting itself in the foot financially, is concerned about the figure because a real-world accident could see claims that exceed the insurance taken out by an aerospace company.

Nield explained the MPL insurance - for example, the policy SpaceX obtained for its Starhopper launch in August 2019 - is only the first part of a three-tier system to soak up liability. A company's insurance requirement maxes out at $500 million. If, in the event of a very unlikely incident, the liability exceeds that amount, he says the FAA can move to the second tier: asking for up to $1.5 billion in additional cash to compensate victims.

"What if it's a really, really, really bad day, and the losses add up to more than that amount?" Nield said of the total $2 billion.

The third tier of liability moves back the company: "Then the losses and responsibility reverts to the launch operator. Unless it's a very large and stable company, that's going to put them out of business."

In its 2018 report, the GAO said the FAA was working toward revisiting the $3 million figure, but intended to consult with private launch and insurance companies, as well as a then-recently reestablished Commercial Space Transportation Advisory Committee. At the time, the FAA hoped to get to the matter in mid-2018 - but the GAO noted that deadline was unlikely to be met.

More than two years after the GAO filed what appears to be its latest report, the FAA is still using $3 million as its cost-of-casualty amount as other upcoming launch systems, like Starship and Blue Origin's New Glenn and New Armstrong rockets, move toward reality.

The FAA likely will not begin to revisit the cost-of-casualty amount until this fall at the earliest, according to an email sent by a spokesperson to Business Insider, adding that those discussions later this year "would only be the beginning of the process."

"The top priority is to streamline launch and reentry licensing requirements overall," the spokesperson said, noting that the agency is working to submit a package of new regulations for launch and reentry of commercial spacecraft, called SLR2. "The current proposed rule is designed to consolidate and streamline multiple regulations, as well as allow performance based regulations that give more flexibility to the license applicants while still protecting public safety."

Speaking at the agency's 23rd annual Commercial Space Transportation Conference here in Washington, DC, Wayne Monteith, who heads the FAA's AST office, said that those new regulations likely won't be completed until the fall.

For his part, though, Nield says it's important to highlight the current safety record of the more than 335 commercial launches licensed by the FAA.

"There has never been a member of the public ever killed or had property damage by a commercial space flight," Nield said last year. "This is because the industry and the government have done a good job of ensuring public safety."

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