Cargo insurers can expect to face a large exposure value after the recent tanker attacks in the Gulf of Oman.
Galileo – a Risk and an Opportunity?
01 June 2018 | Blog Post
In 1633, an Inquisition led by the Catholic Church condemned Galileo Galilei as “vehemently suspected of heresy” and banned his Dialogue on the Two Chief World Systems, that stated the earth and planets orbited the sun, challenging conventional wisdom at the time.
Fast forward to 2018 when the UK is charged by some with the heresy of leaving the European Union, Galileo is once again the centre of controversy, as the UK’s involvement in the EU’s GPS project, Galileo is facing an entirely different kind of inquisition – one that is fraught with geopolitical risks, consequences and opportunities.
The project, a new 26-satelite navigational system valued at €10 billion (£8bn) has been created to rival the dominance of the US military-founded Global Positioning System (GPS). The system was launched in 2016 but was 17 years in the making as it navigated the labyrinth of European legal and legislative processes.
Galileo is already being used by UK smartphone users, with UK smartphones built to run off both GPS and Galileo. Proponents of Galileo believe that it offers a more accurate version of GPS with an accuracy of between 50 metres and 100 metres in the built-up areas and less than one metre in the best possible conditions. In addition, as The Guardian reports, it does not leave the EU at the mercy of the US military, who may turn off GPS for military reasons.
Galileo is the latest project that has fallen victim to the political storm generated by the UK’s decision to leave the European Union in 2016. The European Union vehemently believe that the UK should not benefit from the system going forward, while the UK Government believe that they should continue in the project. In leaked figures, the UK cites €1bn in cost of the EU undergoing the task alone. Similarly, the Chancellor of the Exchequer, Philip Hammond announced that the Government was considering kick-starting a project with Australia, with the cost of such a project being valued at around £5bn, which potentially opens up a new world of risk and opportunity.
Putting the politics aside, what the are repercussions for corporate and insurers? Well, Airbus who are in the process of bidding for a €200 million contract with the European Space Agency, have recently announced they are likely to relocate to France or Germany, should they win the contract.
However, the most telling comment comes from Colin Paynter, managing director of Airbus, who told a committee of MPs, that: “because March 2019 is just tomorrow, and that’s the problem in the industry of Galileo, we’ve been caught in a timing trap. If renewal of the contracts was three years’ time, there wouldn’t be a problem”. Clearly, what has been forgotten in the political cross-fire, is that many corporates are trying to set their strategy for the next few years, a goal that is difficult to achieve in such a volatile political environment.
In other words, what corporates and insurers are seeking is a life raft in these turbulent times: stability.
Four hundred years ago, Galileo’s telescope changed the world. He made money building and selling his telescope to his early adopter customers, until his designs were overtaken in a relatively short time by more sophisticated explorers of the cosmos.
UK businesses will now be making a risk assessment as to whether they will continue to be able to make money as part of the E.U. project or exploit the potential opportunity to build a more sophisticated version of their own making.
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