Definition:Delay in start-up insurance (DSU)
🏗️ Delay in start-up insurance (DSU) — also known as advance loss of profits (ALOP) in many markets — provides coverage for the financial losses a project owner suffers when a construction or engineering project is delayed beyond its planned completion date due to physical damage covered under the underlying contractor's all-risk or erection all-risk policy. It functions as the construction-phase equivalent of business interruption insurance, compensating the owner for lost revenue, ongoing fixed costs, debt-service obligations, and additional expenses incurred during the delay period.
⚙️ DSU coverage attaches only when the delay results from a physical loss or damage event that is itself indemnifiable under the associated material damage policy — meaning that delays caused by labor disputes, permitting issues, design deficiencies, or supply-chain disruptions without a triggering physical event fall outside the scope of a standard DSU placement. The policy structure typically includes an indemnity period (the maximum duration for which losses will be paid), a time deductible or waiting period (the initial number of days of delay that the insured must absorb), and a sum insured calculated from the project's projected revenue stream or gross profit once operational. Underwriting DSU is inherently complex: it requires the underwriter to evaluate both the construction risk profile and the financial projections of the completed asset — a power plant's expected output, a hotel's projected occupancy, or a manufacturing facility's anticipated throughput. Major DSU placements are common in the London market, with Lloyd's syndicates and leading company markets providing capacity, but significant programs are also placed in Singapore, Dubai, and other regional hubs serving infrastructure-heavy economies across Asia, the Middle East, and Africa.
📈 As global infrastructure investment accelerates — driven by energy transition projects, data-center construction, and transportation upgrades — DSU has become one of the most strategically important coverages in the engineering and construction insurance portfolio. Project financiers and lenders frequently require DSU as a condition of financing, because a prolonged delay can jeopardize loan covenants and debt-service schedules. For insurers and reinsurers, DSU exposures can accumulate rapidly in a portfolio concentrated on a single geographic region or project type; a major natural catastrophe that damages multiple projects under construction simultaneously can trigger correlated DSU losses on top of material damage claims. Accurate probable maximum loss estimation and aggregation management are therefore essential disciplines for carriers active in this space.
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