Space startups seek insurance for orbital AI data centers

NEW YORK/LONDON, June 18 (Reuters) – Space companies have spoken with insurers about coverage for orbital AI data centers, a sign ‌of early progress for an experimental industry backed by Elon Musk’s SpaceX (SPCX.O), opens new tab and Jeff Bezos’ Blue Origin.

The concept of data center satellites — designed to bypass Earth’s power constraints — has drawn growing attention since Musk described them as the future of artificial intelligence development ahead of ​SpaceX’s record‑breaking public listing this month. Securing insurance is critical for companies trying to move orbital data centers ​from concept to reality. Without coverage for the costly hardware and risks involved, attracting ⁠the debt financing needed to scale such ventures would be difficult.

Blue Origin and a host of space startups, including ​Orbital, Starcloud, Lonestar Data Holdings and Cowboy Space, have also signaled their intention to launch space-based data centers.

Reuters spoke ​to four brokers and underwriters and three space firms who said talks had taken place about orbital data center coverage, although they remain preliminary.

Insurance broker Marsh said several companies have approached insurers to understand what future coverage for orbital data centers might entail, without ​naming the firms.

“We’re already starting to see companies that are focused on data centers and companies that are ​focused on digital infrastructure looking to the insurance community for support,” said Patton Kline, U.S. aviation and space practice leader at Marsh.

Lonestar ‌said ⁠it recently held a briefing at Marsh’s offices for insurance marketplace Lloyd’s of London, attended by about 25 insurers.

SpaceX and Blue Origin did not respond to requests for comment.

Insurers already cover launch failures, satellite malfunctions, orbital debris and space weather in a global space market that collects roughly $500 million in annual premiums, according to industry ​executives and insurance firm ​Axa XL.

But while insurers have ⁠decades of experience covering satellites, they have little data on orbital AI infrastructure.

“The conversations in the market are focused on whether the risk can be modeled, rather than what ​the premium should be,” said Kasey Roh, U.S. head of Upstage AI, which develops ​AI tools for ⁠insurance companies.

Part of the challenge is valuing rapidly advancing AI chips, which could be vulnerable to harsh conditions in space, said Orbital CEO Euwyn Poon.

David Wade, space underwriter at Atrium, said venture-capital-backed startups would have to expand before there would ⁠be ​a major insurance market for orbital data centers.

“Until we get past that ​early round of financing and start seeing some of these companies expand by raising debt, I think the insurance needs are very limited at ​the moment.”