Builder's Risk: Delay in Start-Up exposure

Project Cash Flow

When choosing Delay in Start-Up or DSU insurance, it's important to understand cash flow to the project, particularly payments between owner and concessionaire, and validate that those payments are insurable prior to a loss.

Find out:

  • How payments are defined and calculated
  • If an "event" causes a disruption during the course of construction, is the financial obligation an actual loss sustained or pre-agreed penalty?
  • Based on the contract terms, are liquidated damages (LD's) true LD's, or can they be linked directly to loss of income, required debt service expenses, etc., and therefore insurable?
  • Can multiple parties have different and independent "loss of income" with different trigger dates?

Incremental Payments

When DSU is well-defined, reflective of actual loss sustained, and uses incremental payments, all parties benefit.  Formulaic payments, such as liquidated damages (LD's), are completely acceptable and largely insurable, assuming:

  • LD's are triggered by an insured loss
  • The penalty is a good proxy for, and directly correlated to, actual loss sustained
  • Supporting documentation after the loss is consistent with representations made during the underwriting process

Advance payments

  • Given the preponderance of non-recourse and limited recourse financing in large infrastructure financing, the timeliness of an insurance recoverable to respond to debt service payments is critical to preserving the solvency rating of the project.
  • We have manuscripted covers on selected projects that allow for expedient delay in start-up payments to parallel lender/rating agency requirements.
  • This coverage enhancement does not eliminate the proof of loss requirements embedded in the policy terms. However, it is more responsive to certain payment requirements to maintain project solvency.

Swiss Re, with its AA- S&P rating, should bring enhanced credibility to the lender in our ability to perform in the event of an insured loss requiring consequential loss payments.


There are limitations to DSU coverage, most notably:

  • Contractor default – the purview of surety obligations
  • Force majeure events – such as weather, labor shortages, etc. – that are clearly defined as "excusable loss"

Note: insurance for adverse weather is generally written separately, peril-specific, and formula-based (eg, each day temperature drops below X, a payment of Y is made).


Insurance products underwritten by Westport Insurance Corporation, First Specialty Insurance Corporation, North American Capacity Insurance Company, North American Specialty Insurance Company, North American Elite Insurance Company, Washington International Insurance Company, or Swiss Re International S.E. All subsidiary insurance companies are subject to a common S&P rating of AA- and AM Best Rating of A+ Class 15. Nonadmitted insurance products are available only through licensed surplus lines brokers and may not be available in all states.