Advance loss of profits (ALOP)

Advance loss of profits insurance, designated by the acronyms ALOP or DSU, indemnifies the loss of financial result from delayed commissioning of a project, when that delay is caused by insured physical damage during construction or erection. Attached to a contractors all risks or erection all risks policy, it covers the lost earnings of the period when the works should have been producing but cannot, due for example to a fire, a collapse or equipment damage delaying completion. It is essential for debt-financed projects, since lenders require securing the repayment flows expected from commissioning. Underwriting requires assessing the project schedule, the critical path and the forecast financial margin, making it a technically demanding cover. For large energy infrastructure, ALOP often represents a financial stake comparable to, or greater than, the physical damage itself.

A fire delaying a power plant's commissioning by six months triggers ALOP cover, which indemnifies the margin lost during that delay, beyond the physical damage.

ALOP, perte d'exploitation anticipée, advance loss of profits, DSU, delay in start-up