Delay in Start Up (DSU) Insurance for Construction Projects

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Project owners and lenders are fundamentally interested in any future income streams derived from construction projects. These can be severely impacted by damage to the contract works causing a delay in project completion. This client briefing explores the role of Delay in Start-Up (DSU) insurance.

What is delay in start-up insurance?

Delay in start-up (DSU) insurance (also known as advance business interruption or advance loss of profits) insures project owners for the financial consequences of a delay in project completion resulting from insured physical damage.

Demand for DSU insurance has increased significantly in the last few decades as project owners look to mitigate the financial impact of delays to their projects and project lenders increasingly require the purchase of DSU as a condition of offering limited recourse finance.

Who are the insured parties for DSU insurance?

The insured parties comprise the project owner, sponsors and lenders, being the entities likely to suffer a financial loss if a project is delayed. On rare occasions, contractors may also be insured i.e. under concession contracts.

How does DSU differ from business interruption?

There are two key differences between DSU and business interruption:

DSU considers future rather than current income streams, which are the subject matter of business interruption (BI).
DSU relates to the delay between the originally anticipated commercial operation date and the achieved date of commercial operation resulting from the insured physical loss; BI relates to interruption of operations from the date of loss.

What is excluded under DSU?

Typical exclusions under DSU include but are not limited to:

Fines and penalties
Slow performance, inaccurate scheduling, late delivery of materials
Inadequate funding to complete the project
Public authority restriction
Communicable disease/COVID-19

What is a DSU claim?

To be considered valid, a DSU loss must fulfil three key criteria:

An event indemnifiable under a material damage policy such as contract works
Cause a delay to the completion of a project that exceeds the time excess agreed in the DSU policy
The delay results in financial loss to the insured such as gross profit, revenue loss, loss of rental or fixed costs

Does DSU cover the increased cost of working?

Increased cost of working may be incurred to reduce or avoid project delay. This expense would be covered by DSU insurance provided that it was incurred solely for the purpose of avoiding or reducing the loss and did not exceed the amount saved.

Download the client briefing paper for more information.

LCPA 22/006

“Marsh Pty Ltd (ABN 86 004 651 512, AFSL 238983) (“Marsh”) arrange this insurance and is not the insurer. The Discretionary Trust Arrangement is issued by the Trustee, JLT Group Services Pty Ltd (ABN 26 004 485 214, AFSL 417964) (“JGS”). JGS is part of the Marsh group of companies. Any advice in relation to the Discretionary Trust Arrangement is provided by JLT Risk Solutions Pty Ltd (ABN 69 009 098 864, AFSL 226827) which is a related entity of Marsh. The cover provided by the Discretionary Trust Arrangement is subject to the Trustee’s discretion and/or the relevant policy terms, conditions and exclusions. This website contains general information, does not take into account your individual objectives, financial situation or needs and may not suit your personal circumstances. For full details of the terms, conditions and limitations of the covers and before making any decision about whether to acquire a product, refer to the specific policy wordings and/or Product Disclosure Statements available from JLT Risk Solutions on request. Full information can be found in the JLT Risk Solutions Financial Services Guide.”