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 TIME on politics Congressional Quarterly CNN/AllPolitics CNN/AllPolitics - Storypage, with TIME and Congressional Quarterly

Commercial Space Insurance

page 3

The Space Insurance Industryís Involvement In the Release of the Independent Review Committeeís Interim Report

J & H Marsh & McLennanís Vice President Timothy Rush says that his firmís office in Washington, D.C. did not receive the Independent Review Committee report, nor had anyone at that office reviewed it. Insured parties are required to provide underwriters with claim-related information, but Rush says that underwriters were not provided with the Independent Review Committee report in the Intelsat 708 case.70

Richard Hewins, then Chairman of J & H Marsh & McLennanís Space and Telecom Group, says he does not recall reviewing the Independent Review Committee report of the Long March 3B-Intelsat 708 failure, although he recalls seeing it come across his desk in the spring of 1996. Hewins says he does not know what happened to the report and does not recall the process by which he obtained it.

Furthermore, Hewins does not recall whether the report was distributed to other J & H Marsh & McLennan offices, although he says that it may have been sent to Jacques Masson in the J & H Marsh & McLennan office in Paris, and to the firmís London office. Hewins does not recall any discussions with underwriters or re-insurers after the Intelsat 708 failure.71

On May 7, 1996, J & H Marsh & McLennanís Vice President Paul OíConnor advised Professor Bao Miaoqin of the PRC-controlled Asia Pacific Telecommunications Satellite Co.: "It is in APTís best interests that the interim IRC report be released by J & H Marsh & McLennan to Asia Pacific Telecommunications Satellite Co.ís reinsurers first, before China Great Wall Industry Corporation releases it to other customers and underwriters." 72

On May 13, 1996, OíConnor wrote to his colleague at J & H Marsh & McLennan, Diane Dwyer, that: "Lim has approved release of the IRC interim report to J & H Marsh & McLennan so we can release this to all non-PRC reinsurers. Asia Pacific Telecommunications Satellite Co. has agreed with this as well. The report will be delivered to our office today. Nick [Yen] will be faxing a copy of the 30 page key part today . . . ." 73

On May 13, 1996, OíConnor advised Yen:

We understand the release of the report is subject to the restrictions on use contained in the export regulations affecting the satellite and the IRCís review of the failure investigation. J & H undertakes to release copies of the report only to organizations or individuals of subscribing countries.

J & H further undertakes not to release a copy of the report or any extracts to PRC nationals or organizations, or to APT.74

On May 13, 1996, Loralís Dr. Lim contacted OíConnor:

Attached please find a copy of the IRCís Preliminary Report regarding the investigation of the [Long March 3B] launch failure and the [Long March 3] isolation evaluation. This report is currently under the review of our legal consul [sic] and the U.S. technology export panel.

Prior to obtaining the proper export license, the IRC was advised that this report can be used strictly only by the U.S. companies and European companies as long as they are registered within the ITAR member countries.

This report will not be delivered to [China Great Wall Industry Corporation] and its launch service agencies until the export license or an equivalent authorization is obtained.75

On May 14, 1996, Franceska O. Schroeder, an attorney for J & H Marsh & McLennan, advised Loralís Lim:

Paul OíConnor of Johnson & Higgins Space & Telecom Group has asked me to contact you regarding the proper procedures for releasing the interim Independent Review Committee (IRC) Report dated May 10, 1996.

I understand from Mr. OíConnor that in a communication from you to him dated May 13, 1996, you explain that the Report currently is under review by the "U.S. technical export panel." You further explain that the IRC has been advised that prior to obtaining proper export licenses, the Report is to be used "only by the U.S. and European companies" that are "registered within the ITAR-member countries."

Because we do not know the identity of the "ITAR-member countries" to which you refer or the specific export control requirements imposed by the U.S. government relative to this project, we have advised Mr. OíConnor not to release the Report until we clarify with you how to proceed.76

On May 14, 1996, J & H Marsh & McLennanís attorney Schroeder communicated to her clients OíConnor and Dwyer:

[T]he ITAR [International Traffic in Arms Regulations] governs the export of certain sophisticated U.S. communications satellites and associated technical data. This means that any such satellites and technical data may be exported or exported only pursuant to a license issued by the U.S. Department of State.

Even if the phrase "ITAR-subscribing country" was replaced with "Missile Technology Control Regime (MTCR)-subscribing country" (I have the list of such countries) a U.S. license still would be required for the export of ITAR-controlled satellites and technical data.

The U.S. satellite manufacturer usually bears the responsibility for obtaining such a license[s].77

On May 14, 1996, Loralís Yen reported to J & H Marsh & McLennanís OíConnor: "The IRC may require a technical export license for the subject matter which may result in an [sic] revised version in wording. However, the technical contents and assessment in the report as faxed in this package remain valid." 78

On May 31, 1996, OíConnor advised China Great Wall Industry Corporation:

[T]he US State Department has issued a formal decision that the release of the IRC Interim report is not allowed and that the IRCís chairman, Dr. Wah Lim[,] is no longer allowed to offer public comment on the report or its contents.79

In June 1996, Masson of J & H Marsh & McLennanís Paris office wrote his firmís OíConnor:

The discussions with the French underwriter, LRS [La Reunion Spatiale] and AGF [AGF Reassurances] were very lengthy and difficult. As you might know, the main problem is the IRC report availability and we had to try to find a compromise. The French do not appreciate the decision from the US government, and most importantly because France has signed the ITAR agreement with the US.

The main spirit which prevails is that [the PRC-controlled Asia Pacific Telecommunications Satellite Co.] shall not pay for the political dilemma and to some extent, that since J & H has made a great effort to solve the problem, it should be not

fair that J & H should pay as well.

Any decision taken by the Underwriters will be highly political and commercial.80

On June 5, 1996, Masson, on behalf of the French insurance community, proposed a way in which to circumvent U.S. export policy regarding the release of the Independent Review Committee:

Some of the IRC members are European and to that extent they could be approached directly without going first through US officials.

My recommendation will be that [the China Academy of Launch Vehicle Technology] and [China Great Wall Industry Corporation] which mandated the IRC, asks to one or all the European IRC member to sign this certification. The certification shall state that the IRC member certifies that the conclusion of the IRC interim report is not in disagreement with the conclusions of the report RA1-3-4 on the [Long March 3 and Long March 3B] isolation analysis.81

On June 6, 1996, Lim advised OíConnor:

I have been instructed by our legal counsel to retrieve all IRC-generated documents which the IRC has transmitted to you by fax, express mail or by distribution at any meetings.

In addition, please confirm that no derivative copies of these documents were made or distributed, or that any such copies have been retrieved and returned to us.

The above is necessary to comply with U.S. Government requests.82

On June 19, 1996, Dwyer reported to Lim:

[W]e have gathered all photocopies and all documents relating to the Independent Review Committeeís Interim Report. They are being shipped to you by Airborne Express overnight courier service.83

Included in the package were 22 copies of the Report, copies of all correspondence relating to the release of the Report and the decision not to release the Report, and copies of all correspondence relating to the need to return all copies.



Chronology of KEY Events


February 15 The Loral-built Intelsat 708 launch fails.

February 21 A confidential agreement for risk management advisory services is reached between J & H Marsh & McLennan, insurance broker for the Apstar 1A program, and China Great Wall Industry Corporation.

Paul OíConnor, J & H Marsh & McLennan Vice President, suggests that China Great Wall Industry Corporation implement an aggressive public relations campaign for underwriters. "Quick and decisive action is required."

February 22 Jacques Masson, Manager of J & H Marsh & McLennanís Paris office, reports discussions with French insurance community regarding the Intelsat 708 failureís impact on future insurance programs.

Masson first mentions the necessity to create an "independent inquiry board."

February 26 Underwriters for the Apstar 1A program become increasingly disappointed regarding the lack of an independent and international failure review committee.

OíConnor provides China Great Wall Industry Corporation with a failure review committee schedule modeled after an Ariane failure review plan, and urges China Great Wall Industry Corporation to allow J & H Marsh & McLennan to obtain failure review conclusions.

February 28 J & H Marsh McLennanís OíConnor outlines for China Great Wall Industry Corporation minimum requirements for the Apstar 1A reinsurance program to continue.

March 11 Loral offers to provide technical assistance to the Intelsat 708 failure investigation.

March 20 French underwriters state minimum requirements for the Apstar 1A insurance program to continue.

Discussions regarding Loral participation in the Independent Review Committee continue among China Great Wall Industry Corporation, J & H Marsh & McLennan, and the underwriters.

J & H Marsh & McLennanís Masson identifies potential Independent Review Committee participants.

March 21 Bermuda-based underwriter, ACE Limited, advises J & H Marsh & McLennan that China Great Wall Industry Corporationís actions regarding the Intelsat 708 failure investigation are unacceptable and that the Apstar 1A insurance contract is in jeopardy.

April 1 J & H Marsh McLennanís OíConnor reports that Intelsat declined to participate in the Independent Review Committee.

April 5 China Great Wall Industry Corporation reports to J & H Marsh & McLennan that an Independent Review Committee is being established to meet the insurance communityís minimum requirements to insure the upcoming Apstar 1A launch.

Back  |  Footnotes  |  Forward


pages 1 | 2 | 3 | 4

PRC Acquisition of U.S. Technology
pages 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9

PRC Theft of U.S. Nuclear Warhead Design Information
pages 1 | 2 | 3 | 4 | 5

High Performance Computers
pages 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10

PRC Missile and Space Forces
pages 1 | 2 | 3 | 4 5 | 6 | 7 | 8 | 9

Satellite Launches in the PRC: Hughes
pages 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9

Satellite Launches in the PRC: Loral
pages 1 | 2 | 3 | 4 | 5 | 6

Launch Site Security in the PRC
pages 1 | 2 | 3 | 4 5 | 6

Commercial Space Insurance
pages 1 | 2 | 3 | 4

U.S. Export Policy Toward the PRC
pages 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9

Manufacturing Processes
pages 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10

pages 1 | 2 | 3

pages introduction | A | B | C | D | E | F

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