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🏗️ '''Advance loss of profits (ALOP)''' is a specialized [[Definition:Insurance | insurance]] coverage — also known as [[Definition:Delay in start-up insurance (DSU) | delay in start-up (DSU)]] insurance — that protects project owners and financiers against the financial consequences of delayed revenue or increased costs when a construction or engineering project fails to complete on schedule due to physical damage covered under the underlying [[Definition:Construction all risks insurance (CAR) | construction all risks]] or [[Definition:Erection all risks insurance (EAR) | erection all risks]] policy. It sits within the [[Definition:Engineering insurance | engineering]] and [[Definition:Project insurance | project insurance]] space, addressing a gap that standard [[Definition:Business interruption insurance | business interruption]] policies for operating businesses do not fill: the loss of anticipated income from a facility that has not yet begun commercial operations.

🔧 ALOP coverage attaches when a covered physical loss or damage event — such as a fire, collapse, natural catastrophe, or equipment failure during construction — causes a delay beyond the project's planned completion date, resulting in lost [[Definition:Gross profit | gross profit]] or revenue the project owner expected to earn once operations began. The [[Definition:Indemnity period | indemnity period]] typically starts at the originally scheduled completion date and runs for a defined maximum duration, often twelve to twenty-four months. The policy will also respond to increased costs of working incurred to mitigate the delay, such as expedited procurement or overtime labor to accelerate the revised schedule. Crucially, the delay must arise from a peril covered under the underlying [[Definition:Construction all risks insurance (CAR) | CAR]] or [[Definition:Erection all risks insurance (EAR) | EAR]] policy; delays caused by design defects, permitting issues, labor disputes, or contractor insolvency are generally excluded unless specifically extended. The coverage is typically written as a section within the broader construction policy, though it can also be arranged on a standalone basis.

💡 For large infrastructure projects, power plants, manufacturing facilities, and commercial real estate developments worldwide, ALOP coverage is often a condition of project financing. Lenders and [[Definition:Project finance | project finance]] banks recognize that even a well-managed construction project faces physical damage risks that can derail the revenue timeline, jeopardizing debt service obligations. In markets across the Middle East, Southeast Asia, and Latin America — where major capital projects are a significant driver of insurance demand — ALOP is a standard component of the [[Definition:Project insurance | project insurance]] program. The coverage requires careful [[Definition:Underwriting | underwriting]], including detailed review of the construction schedule, critical path analysis, revenue projections, and the interdependencies between physical completion and operational readiness. Given the specialized nature of the risk and the large sums insured, ALOP placements frequently involve [[Definition:Reinsurance | reinsurance]] support and may be placed through [[Definition:Lloyd's of London | Lloyd's]] or international engineering [[Definition:Reinsurance | reinsurance]] markets.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Delay in start-up insurance (DSU)]]
* [[Definition:Business interruption insurance]]
* [[Definition:Construction all risks insurance (CAR)]]
* [[Definition:Erection all risks insurance (EAR)]]
* [[Definition:Engineering insurance]]
* [[Definition:Indemnity period]]
{{Div col end}}

Definition:Advance loss of profits (ALOP) - Revision history

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