Delay in Start Up Marine Insurance UK

What Delay in Start Up Cover Actually Does

DSU is a time-element cover. It does not respond to the physical damage itself — that is the job of your underlying hull, cargo or marine project policy. DSU responds to the financial consequences of the delay caused by that damage. The trigger is a covered physical loss under the primary policy; the measure of loss is the revenue, profit or debt-service obligation you cannot meet because the operation has not started on the date it was contracted or projected to start.

In a marine context, DSU most commonly attaches to: new-build vessel deliveries where a charter party or time-charter hire stream is already contracted; port and terminal construction projects where throughput revenues are committed; offshore platform or FPSO first-oil programmes; and major vessel conversion or drydock projects where the vessel re-enters a revenue-earning trade on a fixed date. If your commercial model depends on a vessel or facility being operational by a specific date, you have a DSU exposure whether or not you have named it as such.

The indemnity period — the window during which DSU pays — is negotiated at inception and typically runs from the original planned start date to the actual start date, subject to a maximum. Choosing the right indemnity period is not a formality: underwriters will scrutinise your project schedule, your critical path, and your contractual revenue commitments. An indemnity period that is too short leaves you exposed in a prolonged delay; one that is too long increases your premium unnecessarily. Your broker should be pressing underwriters to align the indemnity period with your actual critical-path risk, not a round number.

How DSU Sits Within Your Wider Marine Programme

DSU is not a standalone product in the way that hull or cargo cover is. It is written as a dependent cover, meaning it can only respond if the underlying physical-damage policy responds first. In the London market, DSU is typically placed alongside a Marine Cargo policy written on Institute Cargo Clauses (A) terms, a builders' risk or marine project policy, or a hull policy incorporating the Inchmaree clause for machinery and latent-defect losses. If your primary policy has a gap — a sub-limit, an exclusion for delay, or a deductible that absorbs the physical loss — your DSU claim can be prejudiced before it starts.

This interdependency matters most when your physical-damage policy contains a 'delay, loss of market or consequential loss' exclusion — which Institute Cargo Clauses (A), (B) and (C) all carry as standard. That exclusion is precisely why DSU exists as a separate cover. But it also means your DSU policy must be worded to pick up exactly where the cargo or hull exclusion leaves off, with no gap in the handover. When your broker submits the DSU risk to specialist underwriters, the underlying policy wording should be reviewed at the same time.

Sue-and-labour obligations under your hull or cargo policy also interact with DSU. If you incur reasonable costs to minimise or avert a delay — expediting spare parts, chartering a substitute vessel, paying overtime in a repair yard — those costs may be recoverable under sue-and-labour provisions in the primary policy. DSU underwriters will want to see that you have taken all reasonable mitigation steps before they calculate the indemnity. Failure to mitigate is a standard defence available to underwriters and will reduce your recovery.

What Is and Is Not Covered: The Practical Boundaries

DSU policies in the London market are manuscript wordings — there is no standard Institute clause equivalent for this class. That means the coverage boundaries are negotiated, and what your policy says is what you get. The following distinctions are the ones that most frequently determine whether a claim is paid.

Typically covered under a well-structured DSU policy:

Typically excluded or subject to specific negotiation:

• Net revenue or gross profit lost during the indemnity period, calculated against a pre-agreed revenue projection or contracted hire rate
• Fixed costs that continue to accrue during the delay (debt service, standing charges, committed operating costs)
• Reasonable mitigation and expediting costs, subject to a sub-limit
• Delay caused by physical loss or damage covered under the primary policy, including fire, flood, collision, and — if specifically endorsed — machinery breakdown under an Inchmaree-style extension
• Delay arising from causes not covered under the primary policy (strikes, political interference, regulatory hold, force majeure unless specifically bought back)
• Delay caused by design defect, faulty workmanship or specification error, unless the primary policy covers the resulting damage and the DSU wording follows suit
• Revenue projections that cannot be evidenced by a contract, audited forecast or committed order book
• Losses arising after the maximum indemnity period, regardless of whether the facility has started
• Penalties, liquidated damages or contractual fines payable to third parties — these require separate cover and are not automatically included

Placing DSU in the London Market: What Underwriters Need

DSU is a specialist class. Not every underwriter who writes marine cargo or hull will also write DSU, and the information requirements are more demanding than for a standard cargo placement. Underwriters are pricing a time-element risk against a project schedule, so the quality of your project documentation directly affects both the terms available and the speed of binding.

When approaching the London market for DSU cover, you should be prepared to provide the following to your broker ahead of submission:

Underwriters will also want to understand your contractual position with the shipyard, EPC contractor or terminal operator — specifically, whether you have liquidated damages rights against them for delay. If you do, underwriters may seek to limit their exposure to the period beyond the LD cap, or they may price the LD recovery as a credit against the DSU indemnity. This is a negotiating point, not a fixed rule, and your broker should be working to protect the broadest possible indemnity for you.

Binding timescales for DSU vary. A straightforward new-build vessel DSU with a clean project schedule and a contracted charter party can bind within a few working days of a complete submission. A complex offshore or terminal project with multiple contractors, phased start dates and bespoke revenue modelling may take several weeks. Do not leave DSU to the final stages of your project financing — lenders and charterers will often require evidence of DSU cover as a condition of drawdown or charter commencement.

• Full project schedule including critical path, milestone dates and the planned commercial start date
• Underlying physical-damage policy wording (or draft wording if not yet bound)
• Revenue model or contracted hire rates forming the basis of the indemnity calculation
• Details of any liquidated damages provisions in your construction or EPC contract
• Details of any existing business interruption or loss-of-hire cover in your programme, to avoid double-counting
• Name and flag of vessel, or description of facility, with build/conversion specification

Renewal, Claims and What to Watch For

DSU for a single project is typically a one-off placement that expires when the project completes or the indemnity period ends. For operators running a continuous new-build programme or regular drydock cycle, a standing DSU facility negotiated annually with specialist underwriters can be more efficient than placing each project separately. At renewal, underwriters will review your claims history across the programme, any changes to your yard relationships or project management approach, and the current market capacity for this class.

If a delay event occurs, notify your broker immediately. DSU policies contain notification conditions, and late notification can prejudice your claim. Your broker should be engaging a specialist marine loss adjuster at the earliest opportunity — DSU claims require detailed forensic accounting of the revenue loss against the pre-agreed projection, and the adjuster's involvement from the outset protects your position. Preserve all project records, correspondence with the yard or contractor, and evidence of mitigation steps taken.

One area that catches operators out on renewal is the interaction between DSU and P&I cover. Your P&I club covers third-party liabilities arising from vessel operation — it does not cover your own loss of revenue. Similarly, freight liability cover under a freight forwarder's policy addresses your liability to cargo owners, not your own trading loss. DSU sits in a different part of your programme from both, and the three should be reviewed together to ensure there are no gaps and no overlapping premiums.

Frequently asked questions

Do I need DSU cover if I already have a builders' risk or marine project policy?

Yes, if you have contracted revenue or committed costs that depend on the project completing on time. Builders' risk and marine project policies pay for the physical damage to the vessel or facility — they do not pay for the income you lose while repairs are made or the project is delayed. DSU is the cover that bridges that gap. The two policies need to be placed together and reviewed as a pair to ensure the DSU trigger aligns with the physical-damage cover.

What happens if my shipyard causes the delay through their own fault?

If the delay arises from physical damage covered under your primary policy, DSU responds regardless of fault. However, if the delay is caused by the yard's poor workmanship, design error or commercial failure without resulting in a covered physical loss, DSU may not respond unless those causes have been specifically bought back in your wording. Your contractual liquidated damages rights against the yard are a separate recovery route, and underwriters will take those rights into account when assessing your claim.

How long does it take to bind DSU cover in the London market?

For a straightforward new-build with a contracted charter party and a clean project schedule, binding can take a few working days once a complete submission is with underwriters. Complex offshore or multi-phase terminal projects with bespoke revenue modelling take longer — allow several weeks. Do not leave DSU to the final stages of project financing; lenders and charterers frequently require evidence of cover as a condition of drawdown or charter commencement.

What do you need from me to request a DSU quote?

At minimum: your full project schedule with the planned commercial start date, the underlying physical-damage policy wording or draft, your revenue model or contracted hire rates, details of any liquidated damages provisions in your construction contract, and the vessel or facility specification. The more complete your submission, the faster underwriters can respond and the more accurately they can price the risk.

Does DSU cover penalties or liquidated damages I owe to a charterer or cargo owner because of the delay?

Not automatically. Standard DSU indemnifies your own lost revenue and continuing fixed costs — it does not automatically cover contractual penalties or liquidated damages payable to third parties. Cover for those liabilities can sometimes be negotiated as a specific extension, but it requires separate underwriting consideration and will affect the premium. Raise this with your broker at the outset so it can be addressed in the manuscript wording rather than discovered at claim stage.

How is the DSU indemnity calculated if my revenue projections change during the project?

The indemnity is calculated against the revenue basis agreed at inception — typically a contracted hire rate, a signed charter party, or an audited revenue forecast. If your commercial position changes materially during the project (for example, a charter is renegotiated or a new contract is signed), you should notify your broker so the policy can be endorsed accordingly. Underwriters will not automatically adjust the indemnity to reflect post-inception changes unless the policy is updated.