When physical damage delays project commissioning, the financial fallout — lost revenue, standing charges and loan obligations — can far exceed repair costs. ALOP Insurance covers exactly that gap.ALOP operates alongside a CAR or Erection All Risks policy, indemnifying projected revenues and standing charges — loan EMIs, salaries, utilities — during delay from an insured event. Indemnity periods range from several months to over a year. Project lenders and DFIs routinely require ALOP as a condition for financial close.ALOP is triggered only by a valid underlying CAR/EAR claim. Unlike Business Interruption Insurance, it covers pre-commissioning losses. Sum insured is based on anticipated gross profit for the maximum indemnity period. Cannot be purchased without an underlying construction or erection all-risks policy.
Every capital project has an underlying financial model with projected revenues, break-even timelines and debt service obligations. A commissioning delay — even of a few months — can throw this model into deficit. ALOP Insurance ensures that insured delays do not unravel the financial viability of the project.
Even when a project is not generating revenue, fixed costs continue — loan EMIs, employee salaries, contractor retainers and utility charges. ALOP Insurance covers these standing charges for the duration of the delay caused by insured physical damage, preventing financial distress during the recovery period.
Infrastructure financing institutions, banks and private equity investors routinely include ALOP Insurance as a condition precedent to financial close for large projects. Having ALOP coverage in place facilitates smoother project financing, demonstrating robust risk management to lenders.
ALOP does not operate in isolation — it is triggered only when there is a valid claim under the parent CAR or EAR policy. This linkage ensures that payouts are connected to genuine insured events, reducing moral hazard while providing genuine financial protection against physical damage-driven delays.
Depending on the complexity of the project and the estimated maximum possible delay, ALOP policies can be structured with indemnity periods ranging from several months to over a year. This flexibility allows project developers to match coverage to their specific risk exposure and lender requirements.
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An ALOP claim is triggered by a delay in project commissioning caused by physical damage that is covered under the underlying CAR or EAR policy. The delay must exceed any agreed deductible period, and the financial loss must be directly attributable to the insured physical damage.
ALOP is most commonly purchased for industrial, manufacturing, power, infrastructure and large real estate projects where delayed commissioning carries significant financial consequences. It is less relevant for projects without defined revenue commencement dates.
Business Interruption (BI) Insurance covers loss of profit after a commissioned and operational business suffers physical damage. ALOP covers pre-commissioning delays — the financial loss before the project even starts generating revenue. The two cover distinct phases of a project's lifecycle.
The sum insured under ALOP is typically based on the anticipated gross profit or revenue for the maximum indemnity period, adjusted for standing charges. This requires detailed financial modelling and is often done in conjunction with the project's lenders and insurance advisors.
No. ALOP is a consequential loss policy that must be backed by an underlying construction or erection all-risks policy. Without the parent policy, ALOP cannot be triggered as it requires a valid physical damage claim to activate the financial loss coverage.
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