Hormuz & DSU exposures
Hormuz, Hidden in Your Construction Book:
The DSU Exposure No One's Pricing
The Strait of Hormuz isn’t just a geopolitical story: it is a delay exposure quietly building across dozens of construction portfolios.
Recent FT articles report what those of us in Complex Claims are already seeing in the data:
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construction projects stalling globally as Hormuz disruption restricts oil-derived materials, PVC, insulation, adhesives, prefabricated components, and drives input cost inflation running at 30–70% in some markets.
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This is not an event only affecting the Middle East; it's affecting projects globally.
The construction industry accounts for roughly 13% of global GDP. That’s an enormous concentration of potential DSU exposure sitting under policies underwritten in a very different supply chain environment.
Here’s what we at Complex Claims are thinking about:
The trigger problem:
DSU policies are typically activated by physical damage. But what happens when a delay arises not from a single insured event, but from the cascading absence of a single pipe fitting or adhesive? The coverage trigger question will generate disputes that require an understanding of contractual risks and responsibilities, insurance coverage, and the time and cost implications.
The maximum indemnity period adequacy problem:
Projects across Japan, Australia, India and the UK are already reporting 2–3-month completion slippages, and the disruption remains unresolved. Maximum indemnity periods set at inception may prove wholly inadequate.
The insolvency problem:
The UK’s Construction Products Association is already forecasting rising contractor insolvencies. Insolvency mid-project doesn’t just trigger delay, it creates coverage and contractual complexity that runs for years.
What should insurers be doing right now?
There are three distinct claim categories that need different responses:
Open claims with pre-conflict PD triggers.
Where physical damage occurred before the conflict began, adjusters need to isolate how much of the current programme slippage and cost inflation is attributable to Hormuz disruption versus the original insured event. Prolongation costs and revised completion forecasts need to be stress-tested against the new supply chain reality, and indemnity periods revisited accordingly.
Projects with general time inflation and programme slippage.
Even without a PD trigger, many projects are drifting. Insurers need to ask whether this constitutes a notifiable circumstance under existing policies, and whether the economics of the applicable DSU coverage still hold.
Potential new triggers happening now.
Supply failure, contractor insolvency, or material unavailability may itself constitute or contribute to an insured event on some policy wordings. Don’t wait for formal notification, proactive engagement is your best tool.
The two questions every risk manager, broker, underwriter and claims manager should be asking today:
Are your sums insured and maximum indemnity periods still adequate, given that project timelines and input costs have materially changed since inception?
Have insured commencement dates already slipped, and have they been validated and formally restated (post conflict commencement)?
Complex Claims Insight: If a project is already delayed and the policy has not been updated, the insured may be accumulating uninsured exposure without realising it; in other words, they were expecting a waiting period of, say, 45-days, but not an additional three months of uninsured loss. Potential additional and unanticipated uninsured exposures arising in the event of a claim are a problem for your relationship with the client, not just their balance sheet. Additionally, project stakeholders may need support with robust, professionally validated assessments to realign contractual milestones and evaluate contractual claims.
Conclusion
The market learned hard lessons from COVID-era supply chain disruption. Hormuz adds a geopolitical dimension with no clear resolution timeline. The window for proactive portfolio triage is now, before the notification wave arrives.
We’re already working with insureds, brokers, insurers and reinsurers on exactly this. If you’d like to discuss your DSU exposure, validate project schedules and adequacy of insured commencement dates and sums insured (including ICW), please do connect with:
Adam Humphrey +44 7545 166 210 ahumphrey@complexclaims.partners
Alan Purbrick +44 7887 922 188 apurbrick@complexclaims.partners