Commercial space transportation is carried out using launch vehicles operated by private companies. In February 1984, Executive Order 12465 designated the Department of Transportation (DOT) as the lead federal agency for enabling private-sector launch capabilities. In October 1984, the Commercial Space Launch Act (CSLA) gave DOT the authority to, among other things, license and monitor the safety of commercial space launches and promote the commercial space industry. Regulatory oversight of the commercial sector was delegated to the Office of Commercial Space Transportation, within FAA, whose primary means of authorizing space launch activities is through its licensing process. Specifically, FAA’s Office of Commercial Space Transportation is responsible for licensing launch and reentry vehicles and spaceport operations carried out by U.S. citizens or within the United States, except for operations carried out exclusively by and for the federal government. In an informal guidance, FAA defines commercial space launches as those that are licensed by FAA, among other characteristics. During an FAA-licensed launch, several key parties are involved: The spaceport operator is the entity that hosts the launch (or reentry, or both) of the launch vehicle from its launch site. Almost all spaceport operators currently licensed by FAA are state or municipal government entities. The launch company is the entity that conducts the launch of a vehicle and any payload, such as a satellite, a probe, or a spacecraft carrying humans or cargo. The customer is the entity that pays the launch company to carry a payload into space. CSLA and its subsequent amendments require launch companies and spaceport operators to obtain licenses. To obtain a launch or reentry license, a launch company must meet safety and financial responsibility requirements, among other things. FAA finalized its regulations related to financial responsibility and allocation of risk requirements for launch companies for licensed launches in August 1998. Similarly, a spaceport operator must also meet safety requirements to receive an FAA launch site license. FAA’s regulations related to spaceport licensing, which were finalized in October 2000, require spaceport operators to demonstrate the level of safety of the spaceport, including information on trajectory, debris dispersion area, flight corridor, and if necessary, a risk analysis for populated areas. In the following year, FAA issued its first spaceport operator license under these regulations. Although commercial activity has traditionally been from federal ranges, as of July 2016 there were 10 FAA-licensed spaceports to support private sector involvement in space-related activity. Three of the 10 were colocated with federal ranges at an Air Force base or a NASA facility: California Spaceport at Vandenberg Air Force Base, Cape Canaveral Spaceport at Cape Canaveral Air Force Station, and MARS at NASA’s Wallops Flight Facility (see table 1). FAA licenses the operation of spaceports for vertical takeoffs or landings, horizontal takeoffs or landings, or both. Four sites are dedicated to vertical launches, four conduct horizontal launches only, and two can host both types of operations. Figure 1 illustrates examples of vertical and horizontal spaceports. In addition to these sites, there are three private spaceports where individual companies may conduct FAA-licensed or permitted launches. Because the companies own and operate these sites using their own vehicles exclusively, a launch site license is not required. Also, as of July 2016, FAA had conducted pre-application consultations for seven additional sites. Figure 2 illustrates the location of existing and proposed commercial spaceports as of July 2016. CSLAA created a three-tiered approach for sharing liability between the federal government and the private sector for damages to third parties— known as the indemnification regime—to encourage the development of the U.S. commercial space launch industry and promote a competitive environment (see fig. 3). All FAA-licensed commercial space launches and reentries by U.S. companies, whether unmanned or manned and whether from the United States or overseas, are covered by the indemnification regime for third-party damage that results from launch or reentry. Third parties include persons that are not involved in launch or reentry services—those other than the federal government, the launch company, contractors and subcontractors of the federal government or the launch company, and customers of the launch company. The U.S. indemnification regime has a three-tier approach for sharing liability between the federal government and the private sector to cover third-party claims, from when the launch vehicle arrives at the spaceport to the end of a launch. The first tier of coverage is an insurance policy the launch company is required to purchase for an individual launch or set of launches. As part of FAA’s process for issuing a license for a commercial space launch or reentry, the agency determines the amount of insurance a launch company is required to purchase so the launch company can compensate third parties for claims and the federal government for any damage to its property that occurs as a result of activities carried out under the license. FAA calculates the insurance amount to reflect the maximum probable loss that is likely to occur because of a mishap that results in (1) third-party damage, including deaths and injuries on the ground and damage to property caused by anything that resulted from a launch or reentry, and (2) damage to government property. The liability insurance obtained by the launch company also protects its customer(s) (i.e., the entity(ies) paying the launch company to bring a payload into space), the federal government, and their respective contractors and subcontractors from claims by a third party. Launch companies must purchase coverage to meet FAA’s maximum probable loss amount, up to the maximum amount of coverage available in the world market at a reasonable cost, as determined by FAA. This first tier of required insurance coverage is capped at a maximum of $500 million for third-party damages. Additionally, the required insurance coverage is capped at a maximum of $100 million for any potential damage to government property. The second tier of coverage—which is adjusted for inflation and is capped at $3.06 billion in fiscal year 2016 dollars—may be provided by the U.S. government and covers any third-party claims in excess of the specific first-tier amount. For the federal government to be able to make payments for these claims, Congress would need to appropriate funds. The second tier of coverage has never been invoked because to date, no mishaps have resulted in third-party claims in excess of the first tier. The third tier of coverage is for third-party claims in excess of the second tier. Like the first tier, this third tier is the responsibility of the launch company, which may seek insurance above the required first tier amount for this coverage. Unlike the first tier, no insurance for this third tier is required under federal law. Another component of the U.S. indemnification regime for commercial space launches and reentries is cross waivers. A cross waiver provides that each party involved in a launch agrees not to bring claims against the other parties and assumes financial responsibility for damage to its own property or loss or injury sustained by its own employees. FAA officials we interviewed said that the launch company, its customer(s), and FAA (on behalf of the federal government) must sign each cross waiver. FAA verifies these parties’ signatures on each cross waiver as part of the licensing process. These waivers include their respective contractors and subcontractors, who must sign them as well. FAA can also issue permits—rather than licenses—for certain launch activities, such as launch or reentry of a reusable suborbital rocket. Launch companies operating under an FAA-issued permit must purchase insurance under the first tier of the indemnification regime, but they do not gain coverage under the second tier of the indemnification regime. Therefore, permitted activities are excluded from the federal indemnification. Similar to launch companies operating under launch licenses, launch companies operating under permits are not required to purchase insurance under the third tier of the indemnification regime. Launch companies that receive permits for launch activities, rather than licenses, are also required to sign cross waivers as part of the permitting process. According to FAA, no FAA-licensed commercial space launch since CSLAA was enacted has resulted in casualties or substantial property damage to third parties that exceeded the amount of insurance coverage FAA required the launch company to provide. According to FAA officials, in the event of a third-party claim that exceeded the launch provider’s first-tier coverage, FAA would be involved in any negotiation of the federal government’s potential payment, and the Secretary of Transportation would have to approve any settlement to be paid out of the congressional appropriations. Federal statute does not give FAA the authority to require spaceport operators to obtain insurance, but spaceports colocated with federal ranges may be required under federal contractual agreements to insure their property against damage resulting from space launch mishaps. Spaceport insurance coverage varies among the spaceport operators we interviewed, and the stakeholders we spoke with had differing views on the affordability of insurance. Several spaceport operators we interviewed found the financial responsibility regulations for commercial space launches confusing, which could potentially result in their failure to obtain adequate insurance protection. Unlike launch companies, spaceport operators face no federal statutory or regulatory insurance requirements. Specifically, FAA’s spaceport licensing process includes safety requirements for spaceport operators but does not include any insurance requirements. FAA officials stated that their focus is on ensuring public safety and that spaceport operators are responsible for protecting their own property against the risks associated with spaceflight. Operators of spaceports that are located on federal government properties, however, could have federal contracts or agreements that require them to have insurance to protect their own property from damage resulting from space launch mishaps.