Advance loss of profits (ALOP)
Cover indemnifying the loss of margin from delayed commissioning of a project caused by insured damage during construction.
Advance loss of profits insurance (ALOP, or DSU) pays the margin a project loses by starting up late, 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.
Textbook case: 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, advance loss of profits, DSU, delay in start-up
Follow the research
One letter a week. First, the week's underwriting note, when one is published: a dated, argued decision, signed by Paul Bernardski. Then what the observatory published on cyber risk, political risk and insurance. No account, no tracking.
No spam, one-click unsubscribe, no data ever sold.