Definition:Delay in start-up (DSU)
📋 Delay in start-up (DSU) is a form of business interruption coverage designed specifically for projects under construction, protecting the project owner or investor against financial losses that arise when the completion and commencement of commercial operations are delayed by an insured peril — such as fire, natural catastrophe, or equipment breakdown — that also triggers a claim under the project's construction all risks or erection all risks policy. Often referred to as "advanced loss of profits" (ALOP) in certain markets, DSU fills the gap between the physical damage coverage that protects the asset during construction and the operational business interruption coverage that only attaches once commercial operations begin.
⚙️ A DSU policy is typically written as an extension to the underlying CAR or EAR policy, and it responds only when a delay is caused by physical damage or loss covered under that base policy. The insured sum represents the anticipated revenue or gross profit the project would have earned during the delay period, less any costs that do not continue. Key policy parameters include the indemnity period — the maximum duration of delay for which coverage applies — and a time excess or waiting period, which functions like a deductible expressed in days or weeks rather than monetary terms. Underwriting DSU requires specialized expertise: the underwriter must evaluate not only the construction risk itself but also the project's revenue projections, the sensitivity of the project schedule to various loss scenarios, and the availability of mitigation measures such as expediting repairs. Large infrastructure and energy projects — power plants, refineries, offshore platforms, and major real estate developments — are the primary buyers of DSU coverage, and the policies are often placed through specialist brokers in markets such as Lloyd's and the London engineering insurance market.
💡 The financial stakes in DSU claims can be enormous, sometimes exceeding the cost of the physical damage itself. A six-month delay to a natural gas liquefaction facility or a large-scale wind farm, for instance, can represent hundreds of millions of dollars in foregone revenue and debt-service obligations. This dynamic makes DSU one of the most significant — and most carefully scrutinized — components of a project insurance program. Project lenders and equity investors frequently require DSU coverage as a condition of financing, because without it, a prolonged delay could push a project into default even if the physical asset is eventually repaired. For insurers and reinsurers, DSU represents meaningful accumulation risk, particularly in regions exposed to natural catastrophe perils where a single event could trigger simultaneous claims across multiple projects. Sophisticated loss adjusting and forensic scheduling analysis are essential to resolving DSU claims fairly, as disputes over the true cause and duration of delays are common.
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