Risk transfer modeling among hierarchically associated stakeholders in development of space systems

UnrestrictedResearch develops an empirically derived cardinal model that prescribes handling and transfer of risks between organizations with hierarchical relationships. Descriptions of mission risk events, risk attitudes, and conditions for risk transfer are determined for client and underwriting entities associated with acquisition, production, and deployment of space systems. The hypothesis anticipates that large client organizations should be able to assume larger dollar-value risks of a program in comparison to smaller organizations even though many current risk transfer arrangements via space insurance violate this hypothesis. A literature survey covers conventional and current risk assessment methods, current techniques used in the satellite industry for complex system development, cardinal risk modeling, and relevant aspects of utility theory. Data gathered from open literature on demonstrated launch vehicle and satellite in-orbit reliability, annual space insurance premiums and losses, and ground fatalities and range damage associated with satellite launch activities are presented. Empirically derived models are developed for risk attitudes of space system clients and third-party underwriters associated with satellite system development and deployment. Two application topics for risk transfer are examined: the client-underwriter relationship on assumption or transfer of risks associated with first-year mission success, and statutory risk transfer agreements between space insurance underwriters and the US government to promote growth in both commercial client and underwriting industries. Results indicate that client entities with wealth of at least an order of magnitude above satellite project costs should retain risks to first-year mission success despite present trends.; Furthermore, large client entities such as the US government should never pursue risk transfer via insurance under previously demonstrated probabilities of mission success; potential savings may reasonably exceed multiple tens of $millions per space project. Additional results indicate that current US government statutory arrangements on risk sharing with underwriting entities appears reasonable with respect to stated objectives. This research combines aspects of multiple disciplines to include risk management, decision theory, utility theory, and systems architecting. It also demonstrates development of a more general theory on prescribing risk transfer criteria between distinct, but hierarchically associated entities involved in complex system development with applicability to a variety of technical domains