DelayinStart Up(DSU

)
AIMU May2008
J ayKubinak
Swiss Re
EngineeredRiskView
Who Who
–Owner
–Contractor
What
–DSU/ALOP
–Soft Costs
Slide2
–Soft Costs
When
–ConstructionTimeline
–WaitingPeriods
Who- Concerns
Owner Owner
–ProjectedProfits
–OngoingCosts
–Debt
–Penalties
Contractor
Slide3
Contractor
–Penalties
What
DSU/ALOP DSU/ALOP
Soft Costs
Penalties
Slide4
DSU/ALOP
 Annual GrossProfit
= Net Profit plus StandingCharges = Net Profit plus StandingCharges
= Annual Turnover less VariableCosts
VariableCosts are not insurable
Loss of Market is not insured
 ExtraExpense
– Additional expenditureto avoid or diminishthe
amount theinsurers would havebeenliableto
pay
Slide5
pay
 Lessanyamount
– Legallyor contractuallyrecoverablebythe
insured
– Anyother sumsavedduringtheperiod of
indemnity
SumInsured: Gross
Profit
GROSSSALES
VARIABLE COSTS
STANDINGCHARGES
SUM INSURED
NET PROFIT
DEBT SERVICE
FIXEDCOSTS
Soft Costs
 Time RelatedAdditional Expenses Time RelatedAdditional Expenses
– Interest
– InsurancePremiums
– Permit Fees
– AdvertisingFees
– Taxes
Slide7
– Taxes
– Legal Fees
Penalties
 Owner Owner
– Preconstructioncontractedsales
– Performanceissues
 Contractor
– LiquidatedDamages
Slide8
When
Important Dates &Time periods
– ConstructionSchedule – ConstructionSchedule
– Start Date
– AnticipatedDateof Completion
– WaitingPeriod(Deductible)
– IndemnityPeriod
– Critical Path
Slide9
– Critical Path
AggregateTimeExcess
% PROGRESS
TIME EXCESS
100% Actual date of complétion
2
3
INDEMNIFIED
DELAY NOT
INDEMNIFIED
4
TIME
1
2
INDEMNIFIED
DELAY
INDEMNIFIED
Anticipated date of
completion
1
2
3
4
Per OccurrenceTimeExcess
% PROGRESS
TIME EXCESS
100%
Actual date of complétion
2
3
INDEMNIFIED
DELAY NOT
INDEMNIFIED
4
TIME
1
2
INDEMNIFIED
DELAY
INDEMNIFIED
Anticipated date of
completion
1
2
3
4
Critical Path
 KeyPhases
 KeyEquipment
– Prototypes
– Lagtimes
– MultipleManufacturers
– Demand
Slide12
– Demand
 Partial Operation Possibilities?
– Singlelinebuild
– Makeup capacity
MultilinePower Plant
Slide13
Watchful Eye
 Monitoring Monitoring
– Inspections
– Insurancecompany
– Outsideengineer
– Lender’s inspection
– News
Slide14
– News
– IndustryContacts
Other Considerations
 Co Insurance Co Insurance
 Seasonality
 Extensions
Slide15
HumanRisk
“ImaginativeSolutions”
Slide16
“Risk comes from not knowing what you're doing.”
Warren Buffet

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