DSU insurance is a safety net for project owners, developers and construction companies that protects parties from significant financial loss in circumstances where there have been extensive delays to a project. These delays can come in a variety of forms and can lead to loss
of profits and revenue streams that were contingent upon the completion of the project. In these circumstances, everybody involved is affected – from the developers themselves to contractors, suppliers and all the way back to investors. All of these parties lose out if progress is postponed, leading to the procurement of extended contracts to complete the project and additional funds to cover other requirements such as key equipment.
In recent years, financial markets have become more cautious in funding large projects due to the uncertainties associated with projects at every stage of the construction process. More so than in the past, delay resulting in financial loss poses more of a threat to the survival of developers. It’s no secret that – sometimes debilitating – schedule and budget overruns are considered the norm for construction projects. Construction work requires reliable delivery of equipment and necessary materials – now, if there is an unexpected event that affects a critical piece of equipment or machinery, then there can be disastrous implications for the developer. Project delays are just the start of the issue, as the damage can extend to further expenditures, excessive loss of profits and revenue, financial penalties and damage to the reputation of the company heading the development.
To combat this, DSU coverage helps to build close links between developers and insurers to minimise and manage risk factors to hopefully pave the way for a successful project that reaches completion on time. If a physical damage event does occur and the cover is triggered,
the insurer will need detailed and organised scheduling of progress, deliveries, changes in plans or designs and any other vital documentation. The more thorough the evidence, the easier and quicker it is for insurers to assess, pinpoint and attribute the root causes of delay.
Delays can cause significant, irreparable damage to developers. Companies that utilise debt financing to rent construction equipment may not be able to cover the payments if their project is not complete on time and revenue streams are put on hold. In public projects, such bridges, airports, and tunnels, the delays can affect multiple businesses in a wide geographic area.
The knock-on impact of these delays, as a result, can be devastating. Project monitoring can help to combat any potential pitfalls – regularly reviewing how the project changes and tracking each setback to quantify which part of the process caused damage to the development. For this to be achievable, the insured parties need to provide access every three to six months to progress reports and updates. Cover may also be taken out for the suppliers of vital equipment so that there is adequate protection in the event of an accident at the supplier’s premises, or there is prevention of access to the project site for delivery, which will, again, have knock-on consequences.
In taking out DSU cover, project owners benefit by gaining clarity so that they can move forward with their project, as well as receiving reimbursement for the damage event(s). Going forward, plans can be put in place to mitigate further potential losses.
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