While undertaking any project, the cash flows form a vital part of the strategy. The projections are made for the revenue flow from the date of project completion / commissioning. Invariably there may arise situations where in the entire project gets delayed due to a mishap in the project site or due to accident to the vessel carrying machinery vital to the commissioning of the plant. Both principals and contractors are being confronted with increasing financial risk exposure.
As a result of private finance, protecting the revenue stream with appropriate insurance is increasingly regarded as of equal, if not greater importance, than protecting the assets themselves.
Commonly referred to as Delay in Start-up insurance (DSU) or Advance Loss of Profits insurance (ALOP), the insurance of revenue for projects under construction has gained significant importance over the last decade or so.
DSU is the terminology used by the Marine insurance market for the consequential loss risk arising from loss or damage to materials whilst in transit en – route to the contract site from the place of origin.
ALOP similarly is the cover provided during the construction stage for consequential losses incurred in being unable to complete or commissioning the project due an insured peril.