6 ways your financial well-being starts with space

Whether it be paying the bills, making investments or insuring our cars and homes, the vast majority of our financial transactions are now carried out digitally.  But what does this have to do with space?

Don’t worry, making a deposit or filing an insurance claim won’t require any rocket ships or intergalactic travel (at least any time soon). But they do require satellites – including those of the EU Space Programme.

In fact, GNSS and Earth Observation already play a critical role in the financial and insurance sectors. For example, the timing and positioning information provided by Galileo is used in banking to time-stamp financial transactions, while Copernicus data is used for everything from conducting risk assessments to computing indices, assessing damage and managing claims.

And that’s just the tip of the iceberg! From helping financial institutions make more sustainable investment decisions to evaluating insurance claims, EU Space is set to have a big impact on the Insurance and Finance market segment. 

Here are six ways that this is already happening:

1. Claims Assessment

When an insurance company receives a claim, it must compare the loss listed in the claim with the actual damages that occurred. Based on this information, called the event footprint, they can determine the amount of compensation that should be paid out.  

Claims examiners can use Earth Observation (EO) data to evaluate damage remotely, especially when the damage is caused by a natural disaster like floods or fires. Examiners can also use EO data to better plan for in-field assessments and manage resources, making the process both more efficient and safer. Some are even using GNSS-enabled drones for pre and post-event analysis and data gathering.  

2. Index-based Insurance

This is an innovative and quite new way of delivering insurance – mainly for the agriculture sector – which links claims to “indices” representing observable and quantifiable phenomena. Insurance companies utilise Earth Observation images to measure such parameters, such as soil moisture and vegetation growth and compute relevant indices. When a natural disaster causes damage, they use these indexes to make a pre-specified pay-out.  

3. Risk Modelling

Insurance companies have historically relied on risk modelling for everything from developing products to determining premiums. But this practice is becoming increasingly difficult due to the unpredictability brought about by climate change. To help, some companies are turning to Earth Observation.

EO can contribute to many aspects of risk modelling by including historical data providing imagery of natural events and damages hitting certain geographical areas in the past and supporting the creation of risk maps. These time series of imagery and data on parameters influencing future risks provide insurers with foresight on the future trends – and risks – created by climate change.  

4. Commodities Trading

To make better and quicker decisions and to have an advantage over their competition, commodity traders must have transparency and knowledge about current and future availability versus current and future demand. With EO, commodity traders can observe the filling status of storage tanks, check the level of oil extraction activity happening at a production site, monitor the loading and transport of goods, predict crop yields and even measure pollution and other factors that could impact a particular commodity.  

5. Financial Risk Assessment

In finance, risk assessment is the process of analysing potential events that may result in the loss of value of an asset, loan or investment. For instance, before the start of a new infrastructure project, such as building a wind farm or bridge, investors will assess risks like location, environmental threats and regulatory issues.  

While investors have long used Earth Observation data to assess immediate physical risks to a financial asset, they are now using this data to also better understand future risks related to climate change and sustainability-related issues. 

6. Timing and Synchronisation 

Financial services like banks and stock exchanges rely on powerful IT systems and networks that require a high level of availability, security and reliability. As such, the availability of accurate and secure timing information is very important – which is where GNSS comes in. 

Today, banks use GNSS equipment for time stamping functions and to log events in a chronological manner, and individual stock exchange servers apply time stamps to the trades they execute and to the quotes they establish.

Want to discover more ways the EU Space Programme supports the insurance and finance sectors? Be sure to check out the dedicated chapter in the latest edition of our EO and GNSS Market Report and get in touch with EUSPA at market@euspa.europa.eu.  

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