Marine Delay in Start Up Marine Delay in Start Up

““ Touching The Adventures Touching The Adventures ””
May 16th, 2008 May 16th, 2008
AIMU AIMU
Introduction to Marine DSU Introduction to Marine DSU
Delay Delay in in Start Start Up, Up, Advance Advance Loss Loss of of
Profits Profits are are::
 The The unique unique Marine Marine Consequential Consequential Loss Loss  The The unique unique Marine Marine Consequential Consequential Loss Loss
covers covers that that address address the the marine marine time time
element element exposures exposures of of major major project project
ventures ventures..
Why do we need a special Why do we need a special
cover? cover?
 Because Because Standard Standard clauses clauses exclude exclude::
A. A.“Loss, “Loss, damage damage or or expense expense proximately proximately
caused caused by by delay, delay, even even though though the the delay delay be be
caused caused by by aa risk risk insured insured against” against” or or caused caused by by aa risk risk insured insured against” against” or or
Warrant Warrant ::
B. B.“Free “Free of of claim claim for for loss loss of of market market or or for for
loss, loss, damage damage or or deterioration deterioration arising arising from from
delay, delay, whether whether caused caused by by aa peril peril insured insured
against against or or otherwise otherwise..””
Drivers for this product Drivers for this product
 It It is is the the Financiers Financiers (( Banks) Banks) that that drive drive this this cover cover..
 They They want want their their investment investment protected protected to to the the
highest highest possible possible degree degree..
 It It is is purchased purchased on on behalf behalf of of the the owner/operator owner/operator..  It It is is purchased purchased on on behalf behalf of of the the owner/operator owner/operator..
Be Be it it aa consortium, consortium, joint joint venture, venture, government government
authority, authority, corporation corporation or or other other entity entity..
 It It is is not not for for the the benefit benefit of of the the contractors contractors..
 The The scarcity scarcity of of capital capital in in the the current current credit credit
market market will will likely likely increase increase demand demand for for this this
product product..
The Form The Form
One One of of the the most most common common forms forms in in use use today, today, The The
ECB ECB form, form, was was developed developed in in London London in in the the 60 60’s ’s..
 It It is is aa policy policy of of Indemnity Indemnity..
 It It is is not not aa Performance Performance Cover Cover..
The The loss loss triggers triggers are are::
1. 1. 1. 1. Loss Loss caused caused by by loss loss of of or or damage damage to to property property..
2. 2. Loss Loss caused caused by by Mechanical Mechanical breakdown breakdown of of or or
damage damage to to the the Vessel, Vessel, Aircraft Aircraft or or other other
Conveyance Conveyance..
3. 3. Loss Loss caused caused by by aa general general average, average, Salvage Salvage or or
lifesaving lifesaving operation operation
Duration of Coverage Duration of Coverage
 The The duration duration of of coverage coverage defines defines the the period period of of
protection protection for for the the goods goods covered covered..
a) a) From From the the time time they they leave leave the the premise premise of of the the
manufacturers manufacturers in in the the country country of of origin, origin, during during manufacturers manufacturers in in the the country country of of origin, origin, during during
ordinary ordinary course course of of transit transit and and any any specifically specifically
agreed agreed storage storage until until delivered delivered to to site site..
b) b) Breakdown Breakdown of of the the conveyance conveyance protection protection begins begins
from from the the time time the the vessel vessel or or craft craft comes comes
alongside alongside the the berth berth or or mooring mooring position position to to
receive receive the the cargo cargo..
Indemnity Period Indemnity Period
 The The indemnity indemnity period period is is not not measured measured from from the the
time time of of the the event event that that triggers triggers aa delay delay..
 The The indemnity indemnity period period begins begins at at the the anticipated anticipated
start start up up date date of of the the operation operation..
 The The period period is is expressed expressed in in aa specific specific unit unit of of time time
Months/Weeks/Days Months/Weeks/Days..
 The The waiting waiting period period or or deductible deductible is is expressed expressed in in
the the same same unit unit of of time time as as the the indemnity indemnity period period..
Policy Term Policy Term
 In In general, general, the the policy policy term term commences commences at at the the
signing signing of of the the contract contract and and remains remains in in force force until until
the the final final acceptance acceptance of of the the project project.. Some Some
contracts contracts can can take take several several years years to to complete complete..
 It It is is not not uncommon uncommon to to have have little little or or no no cargo cargo and and  It It is is not not uncommon uncommon to to have have little little or or no no cargo cargo and and
MCL MCL exposure exposure until until well well into into the the contract contract period period..
 Should Should the the anticipated anticipated acceptance acceptance date date of of the the
project project be be moved, moved, either either forward forward or or back back it it is is aa
condition condition of of the the policy policy that that the the underwriter underwriter be be
advised advised..
 Once Once the the policy policy is is in in force force it it is is non non--cancelling cancelling..
Measure of Indemnity Measure of Indemnity
 The The Sum Sum payable payable is is broadly broadly expressed expressed as as::
 The The reduction reduction in in production production
 Increases Increases in in the the cost cost of of working working
 Standing Standing Charges Charges are are expressed expressed as as::
 The The costs costs which which are are not not affected affected by by any any change change in in the the  The The costs costs which which are are not not affected affected by by any any change change in in the the
output output of of the the business business but but which which remain remain to to be be paid paid in in
full full..
 Interest Interest payments payments
 Rents Rents
 Taxes Taxes
 Fuel Fuel purchase purchase agreements agreements
Common Coverage Elements Common Coverage Elements
 The The policy policy will will only only respond respond for for loss loss to to property property that that is is
described described in in the the policy policy or or in in aa schedule schedule attached attached and and then then
only only to to the the extent extent that that those those risks risks would would be be covered covered under under
the the specified specified forms forms;; at at aa minimum minimum::
 Institute Institute Clauses Clauses Cargo Cargo (A) (A)  Institute Institute Clauses Clauses Cargo Cargo (A) (A)
 Institute Institute War War
 Institute Institute Strikes Strikes
 AA loss loss caused caused by by mechanical mechanical breakdown breakdown of of the the
conveyance conveyance references references similar similar Voyage Voyage Hull Hull clauses clauses and and
Aircraft Aircraft clauses clauses..
The survey warranty The survey warranty
This This clause clause at at aa minimum minimum will will apply apply to to all all Key Key
and and Critical Critical Items Items.. ..
 Requires Requires the the surveyor surveyor to to supervise supervise and and approve approve all all loadings, loadings,
discharges discharges and and stowage stowage throughout throughout the the entire entire voyage voyage..
 Requires Requires the the assured assured to to give give timely timely notice notice of of changes changes to to the the  Requires Requires the the assured assured to to give give timely timely notice notice of of changes changes to to the the
schedule schedule so so that that the the surveyor surveyor can can attend attend..
 Survey Survey fees fees are are usually usually for for the the account account of of the the assured assured although although
inspection inspection fees fees can, can, in in some some cases cases be be set set aside aside from from the the
premium premium..
 It It suspends suspends coverage coverage for for breaches breaches..
Principle Consideration for the Principle Consideration for the
Marine DSU Underwriter Marine DSU Underwriter
Ideally, Ideally, the the Marine Marine DSU DSU Underwriter Underwriter
should should insure insure the the cargo cargo for for the the project project..
 It’s It’s about about controlling controlling the the decisions decisions to to promote promote the the
best best mutual mutual outcome outcome..
 It It eliminates eliminates disputes disputes between between coverage coverage forms forms..
 It It eliminates eliminates disputes disputes between between claims claims units units..
 It It eliminates eliminates confusion confusion regarding regarding Claim Claim reporting reporting..
Underwriting Analysis Underwriting Analysis
Step 1. Begin with your Strength! Underwrite the cargo! Step 1. Begin with your Strength! Underwrite the cargo!
What are the total values to be shipped? What are the total values to be shipped?
Where will the plant and equipment be coming from and Where will the plant and equipment be coming from and
where is project site? where is project site?
Is the site a green field project or are there existing facilities Is the site a green field project or are there existing facilities
to received the cargo? to received the cargo? to received the cargo? to received the cargo?
If this is the 2 If this is the 2
nd nd
or 3 or 3
rd rd
expansion of a project what was the expansion of a project what was the
past experience? past experience?
What are the special shipping considerations? What are the special shipping considerations?
Will storage be needed and where? Will storage be needed and where?
What is the cargo limit? What is the cargo limit?
What is the DSU Limit? What is the DSU Limit?
Fair Fair winds winds and following Seas.. and following Seas..
Underwriting Analysis Underwriting Analysis
Step Step 22.. Identify Identify the the key/critical key/critical Items Items that that could could give give rise rise
to to aa DSU DSU loss loss..
AA typical typical application application will will include include an an Engineering Engineering Proposal Proposal
that that will will include include aa project project time time line line or or phase phase diagram diagram that that
will will graphically graphically indicate indicate when when major major milestones milestones of of the the will will graphically graphically indicate indicate when when major major milestones milestones of of the the
project project commence commence and and are are due due to to complete complete as as well well as as
what what items items are are critical critical..
The The engineering engineering proposal proposal will will also also include include the the cost cost
components components that that make make up up the the DSU DSU limit limit.. It It is is up up to to the the
underwriter underwriter to to analyze analyze the the components components to to ensure ensure the the
costs costs fall fall within within the the scope scope of of the the cover cover..
Underwriting Analysis Underwriting Analysis
Step Step 33.. Work Work with with your your team team..
Surveyors Surveyors –– CAR/EAR CAR/EAR underwriters underwriters --Brokers Brokers
Nominate Nominate your your surveyors surveyors early early..
Make Make sure sure you you can can share share underwriting underwriting information information with with Make Make sure sure you you can can share share underwriting underwriting information information with with
them them..
Make Make sure sure other other underwriters underwriters will will support support your your
nomination nomination..
Make Make sure sure your your client client has has no no objections objections..
Develop Develop an an estimated estimated survey survey plan plan that that lays lays out out the the
costs costs based based on on the the proposal proposal provided provided..
Underwriting Analysis Underwriting Analysis
Step 3. Work with your team. Step 3. Work with your team.
Surveyors Surveyors –– CAR/EAR underwriters CAR/EAR underwriters --Brokers Brokers
Consult with your CAE/EAR colleagues. Consult with your CAE/EAR colleagues.
Do they agree with the replacement estimates? Do they agree with the replacement estimates? Do they agree with the replacement estimates? Do they agree with the replacement estimates?
Review the leeways and the testing periods? Review the leeways and the testing periods?
Is the technology proven or is it prototype? Is the technology proven or is it prototype?
Underwriting Analysis Underwriting Analysis
Step 3. Work with your team. Step 3. Work with your team.
Surveyors Surveyors –– CAR/EAR underwriters CAR/EAR underwriters --Brokers Brokers
Is the broker looking for a marine lead or follow? Is the broker looking for a marine lead or follow? Is the broker looking for a marine lead or follow? Is the broker looking for a marine lead or follow?
What are you prepared to offer? What are you prepared to offer?
Do you know the lead? Do you know the lead?
Will you need to consult with your reinsurer? Will you need to consult with your reinsurer?
Will you need to consult with your home office? Will you need to consult with your home office?