When the FAA licenses, or issues a permit for, a launch or reentry of a launch or reentry vehicle, the FAA requires that the licensee or permittee obtain insurance coverage for damages that may arise out of the FAA-authorized activity. This coverage would apply to third party liability and to government property.
Title 14 of the Code of Federal Regulations, 14 C.F.R. §§ 440.11 and 440.12, require that coverage extend for longer than the duration of the ordinary meanings of launch and reentry. For a launch, insurance must attach when the licensed launch or permitted activity starts, and the insurance must remain full force and effect until either 1) completion of licensed launch or permitted activities at a launch or reentry site; and 2) for orbital launch until the later of: a) 30 days following payload separation, or attempted payload separation in the event of a payload separation anomaly; or b) 30 days from ignition of the launch vehicle.
For a suborbital launch, insurance must continue until the later of motor impact and payload recovery; or the FAA determines that risk to third parties and Government property as a result of licensed launch or permitted activities is sufficiently small that financial responsibility is no longer necessary. The FAA makes that determination through the risk analysis it conducts before the launch to determine maximum probable loss.
For reentry of a reentry vehicle, which includes a reusable launch vehicle, insurance must remain in effect as follows: for ground operations, until completion of licensed reentry at the reentry site; and for other licensed reentry activities, 30 days from initiation of reentry flight; however, in the event of an abort that results in the reentry vehicle remaining on orbit, insurance must remain in place until the FAA’s determination that risk to third parties and Government property as a result of licensed reentry is sufficiently small that financial responsibility is no longer necessary, as determined by the FAA through the risk analysis conducted to determine maximum probable loss.
Note that because the statutory definition of launch is very broad, the requirements for insurance coverage apply to what 14 C.F.R. part 417 calls “launch processing,” namely, preparations for launch. Specifically, 51 U.S.C. § 50902(7) defines launch to include “activities involved in the preparation of a launch vehicle or payload for launch, when those activities take place at a launch site in the United States.” Note as well that 14 C.F.R. § 401.5 defines launch differently depending on whether a launch takes place under license or permit.