The standard form of cargo/transit policy usually only covers physical damage to the insured goods, not consequential losses.
The nature of many infrastructure and project cargo risks means that the consequences of loss or damage to goods and, more particularly items critical to the continuity of the project can have a significant impact to ongoing operations.
Increased cost of working, standing charges, and anticipated profits are items of expenditure or revenue which may be severely impacted as a consequence of loss or damage caused during transit/delivery.
Delay in startup (DSU), Advanced Loss of Profits (ALOP) and Marine Consequential Loss (Con Loss) covers fill this cover void.
What is DSU/ALOP/Con Loss?
Often associated with large infrastructure projects, these covers arise from the need for an insured to be able to meet ongoing project or financial commitments as a result of damage to goods during the transit which causes delay in the startup (earning capacity) of a project – e.g. factory, power station, or desalination plant.
Coverage
Cover is placed as an adjunct to and will follow losses recoverable under the cargo/transit policy with few, if any insurers offering DSU as a standalone cover. Control over both policies (cargo and DSU) is deemed a critical factor to insurers in order to mitigate any loss or delay.
The trigger for DSU activation will be loss or damage under the cargo/transit policy with the consequences causing impact (loss or delay) to the defined revenue or expenditure targets set-out for the project.
The level of indemnity for DSU should reflect the reasonable anticipated profits expected from the completed complex (during the indemnity period) and/or fixed overheads and charges due.
Sums insured will usually be expressed as a daily sum and up to a maximum specified period of delay running from the originally planned startup date, to give a total sum insured – e.g. $50,000 per day for up to 182 days ($9,100,000). Excess (also expressed in days) of 30 days.
Cover terminates on safe arrival of the goods at the contract site, when any equivalent non-marine coverage will take over.
Critical items
Lead time for repair or replacement of critical, one off or prototype items can be lengthy and this exposure represents a major focus for any underwriting assessment. Risk management resources will likely be employed to survey the packing, preparation, conveyances, loading and discharge operations to ensure appropriate care is taken and any damage is immediately discovered.
DSU contracts are often technically involved with sums insured for the larger projects running in to the hundreds of millions of dollars. Marine Protect has the expertise and capacity to assist you with DSU covers.
How can I find out more?
Contact your local NTI Marine Specialist and State Development Specialist, or visit www.nti.com.au