ALOP Advance Loss of Profit

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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SwissRe ALOP

Z3

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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SwissRe ALOP

Z4

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

Z5

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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SwissRe ALOP

Z6

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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SwissRe ALOP

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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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SwissRe ALOP

Z8

Sum Insured

12

MPI SI={Turnover-Variable Costs (both during MPI)}x

MPI=Max. Period of Indemnity in months


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SwissRe ALOP

Z9

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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SwissRe ALOP

Z10

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

Z11

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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SwissRe ALOP

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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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SwissRe ALOP

Z13

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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SwissRe ALOP

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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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SwissRe ALOP

Z15

TimeExcess

Period of Indemnity

max. Period of Indemnity

final CWAR incl. ALOP Period

original CWAR incl. ALOP Period

time

$


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SwissRe ALOP

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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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SwissRe ALOP

Z17

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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SwissRe ALOP

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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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SwissRe ALOP

Z19

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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SwissRe ALOP

Z20

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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SwissRe ALOP

Z21

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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SwissRe ALOP

Z22

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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SwissRe ALOP

Z23

Underwriting

Only with corresponding CWAR policy.

Insured:

the Principal only (to be a named insured under the CWAR

policy).


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SwissRe ALOP

Z24

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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SwissRe ALOP

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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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SwissRe ALOP

Z26

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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SwissRe ALOP

Z27

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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SwissRe ALOP

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Monitoring


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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SwissRe ALOP

Z29

Monitoring


Involve experts / consultants


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SwissRe ALOP

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Indemnity

Under no circumstances indemnification will exceed the:

Actual Loss Sustained.


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SwissRe ALOP

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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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SwissRe ALOP

Z32

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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SwissRe ALOP

Z33

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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SwissRe ALOP

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Recommendation

Choose highly experienced Loss Adjusters.


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SwissRe ALOP

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ALOP Advance Loss of Profit