satellites as an investigation begins this week into the recent explosion of a US-made satellite.

The Apstar-2 telecommunications satellite and its Chinese-built Long March 2E carrier rocket were destroyed by an explosion about 55 seconds after takeoff from the Xichang Satellite Launching Centre in southwest China on January 26.

It was insured for $160 million with Bermuda-based ACE Ltd., which entered the launch and in-orbit satellite insurance market last year, covering a undisclosed percentage.

It was the insurer's first loss in the satellite market but the amount was less than accumulated premium, the company had reported.

Companies that insured the Apstar-2 said the Chinese have not been open about past engineering problems and that the decade-old alliance between China and Hughes Space and Communications Co., maker of the satellite, may come into doubt, according to Bloomberg business news citing the Asian Wall Street Journal.

Mr. Charles Rudd, senior vice president with ACE, said the company preferred not to comment at this time.

Hughes and China Great Wall Industries Corp., the country's contractor for foreign-satellite launches, will face questions about why unpublicised modifications to the Long March 2E rocket as well as another Hughes satellite after a 1992 crash did not avert the recent explosion, the Journal said.

In its January statement, Hong Kong-based owner of the Apstar-2, APT Satellite Co, gave no indication of the cause of the explosion but Hong Kong newspapers have since reported that the explosion was caused by the Hughes telecommunications satellite.

This loss, and the others will likely mean a contraction of capacity in this insurance market as well as rate increases.

Built by Hughes Corp. of the United States, the Apstar-2 satellite was to have provided television, telephone and digital telecommunications.

The Apstar-2 was the first satellite loss in 1995.