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8/13/2019 ALOP Advance Loss of Profit
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SwissRe ALOP
Z1
ALOP Advance Loss of Profits
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SwissRe ALOP
Z2
Object of Insurance
The object of ALOP Insurance is to indemnify the principal or
owner of a project for the actual loss sustained due to a delayin completion of the insured works.
T
his delay must be caused by direct physical loss or damagecovered under the CWAR policy.
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This cover is also known as ...
Delayed Start-up (DSU)
Delay in Start-up
EAR/CAR - Loss of Profits
Delayed Earnings Insurance
Delayed opening of business
CAR - Loss of Rent/Interest
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Insured
Only the principal.
Quite often the Banker's / Financier's interest has to be noted.
Contractors, Subcontractors and Engineers, Architects,Consultants etc. cannot be accepted as Insured hereunder.
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SwissRe ALOP
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Sum Insured
The Sum Insured has to be defined case by case.
Very often the "Annual Gross Profit Form" is chosen:
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Sum Insured
A+B = Annual Gross Profit (or Gross Earning)
break even
A = Net Profit
C = Variable Costs
B = Standing Charges
output
$
0
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Sum Insured
Formula
Annual Gross Profit= Net Profitplus Standing Charges
= Annual Turnover minusVariable Costs
Variable Costs are not insurable.They do not apply in case of a delay.
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Sum Insured
12
MPI SI={Turnover-Variable Costs (both during MPI)}x
MPI=Max. Period of Indemnity in months
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Sum Insured
Fixed Daily Values
They can be accepted if the planned operation will produce asteady and constant output, e.g. a power plant or a chemical
plant with continuous production.
In any case the loss settlement will be on an
Actual Loss Sustained Basis.
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Sum Insured
Interest Charges
Sometimes only cover for Interest Charges, i.e. fixed costs, isrequested.
As the client has to prove that he is in a position to earn them,
they should be expressed in the schedule as a percentage ofthe anticipated annual gross profit.
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SwissRe ALOP
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Insurance Period
The Insurance Period coincides with the works and testing
period (if testing is covered in respect of ALOP) andterminates with the commencement of operation (Provisional
Acceptance Certificate).
It never includes the Maintenance Period for which a FLOP- or
MLOP- cover would apply.
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hot test
cold test
transport, marine
property, BI,
TPL etc.
MB, MLOP etc.
03
construction anderection period
FCVfinal contract value
01 02
maintenanceCWAR incl. ALOP
provisional acceptancecertificate of completion
PAC
time
$
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Period of Indemnity
The Period of Indemnity commences on the day the handing
over would have taken place had the accident not occurredand
ends on the day that commercial operation starts; but latest at
the end of the max. Period ofIndemnity stipulated in thepolicy.
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Period of Indemnity
The Period of Indemnity is not necessarily identical with the
repair period, as often a delay may be wholly or partlycompensated during the works period.
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TimeExcess
Period of Indemnity
max. Period of Indemnity
final CWAR incl. ALOP Period
original CWAR incl. ALOP Period
time
$
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Time Excess (Waiting Period, Deductible Period)
The Time Excess is a global excess. It begins on the date
upon which, had the accident not occurred, the insuredbusiness would have been completed and taken into use.
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Cover
Basis
SwissRe ALOP endorsement to CWAR policy (or equivalent tobe approved).
CausePhysical loss or damage covered under the material damage
section of the works policy and not explicitly excluded in the
ALOP endorsement.
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Exclusions
All general and special exclusions to the CWAR policy.
Any cover extension to the material section granted by way of
an endorsement.
However, in certain cases and depending on the risk exposure
some of these may be reconsidered and reincluded by the
experienced underwriter.
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Cover Extensions
Denial of access
After a loss, Authorities may deny the continuation of activities.Resulting delay can be insured, however, the indemnifiable
period of such delay shall be limited to up to four weeks.
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Cover Extensions
Prevention of access
Loss or damage to property in the vicinity of the site mayprevent or hinder the access thereto.
Delay resulting from such an event can be insured, however,
the indemnifiable period in respect of such delay shall belimited to up to four weeks.
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Cover Extensions
Accidental interruption of PPS can cause a delay of the works.
Such delay can be insured, but any cutting-off or reduction ofthe PPS, whether preplanned or occasioned by any supply
authority, or by insufficient supply capacity or by shortage of
water due to climate reasons, fuel shortage, etc. remainsexcluded.
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Cover Extensions
Suppliers' extension
Works may be delayed due to late arrival of machinery orequipment on site. Such delay can be insured provided that
the delayed arrival is a consequence of a loss or damage at
the premises of the supplier. Such cover shall only be grantedfor:
named suppliers
defined premises
named perils (e.g. fire and natural perils)
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Underwriting
Only with corresponding CWAR policy.
Insured:
the Principal only (to be a named insured under the CWAR
policy).
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Underwriting
Extension of works requires additional premium for CWAR
cover as well as for ALOP cover.
Interest charges to be expressed in the schedule as a
percentage of the anticipated annual gross profit.
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Commission
ALOP cover is highly exposed and not always easily available.
Most customers will appreciate this support from Insurers.
Therefore it is fair to say:
No profit sharing / premium refund for single ALOP risks.
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Monitoring
Obligations of the Insured (i.e. the principal):
Regular information on actual works progress.
Regular updating of bar chart.
Regular updating of scheduled date of handing over.
Information on material damages which might contribute to a delay.
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Monitoring
Measures to be taken by the Insurer:
Standard Projects:
Inspection of site every 1 to 3 months and ad hoc.
Large or very exposed risks:
Permanent presence of control engineers on site (to agree in the policy).
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Monitoring
Measures to be taken by the Insurer:
Follow-up:
Recommendations for Loss Prevention.
Detailed monitoring of impact which material damages may have on delays
(protocol with Insured).
After a material damage loss has been advised by the insured, it will
further be necessary to co-ordinate with the insured that adequate loss
minimising measures are undertaken to avoid the completion date not to
be met.
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Monitoring
Measures to be taken by the Insurer:
Involve experts / consultants
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Indemnity
Under no circumstances indemnification will exceed the:
Actual Loss Sustained.
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Indemnity
This means the Insured has to prove that he would have
produced the Net Profit and spent the Fixed Costs.
Therefore:
Insurer will pay a provisional amount and adjust indemnity
after first year of operation.
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Unindemnifiable portions of delay
Generally:
No delay which was not caused by an indemnifiable materialdamage.
Specially:
Any delay due to amendments, rectifications, betterments,
modification, redesign (even after indemnifiable loss).
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Loss Minimisation
Reduce delay by:
Alternative solutions by providing local materials, spare parts.
Considering increased costs in order to find speedy solutions.
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Recommendation
Choose highly experienced Loss Adjusters.
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