Turnover less variable costs alone, the basis of business interruption cover and the leading source of corporate underinsurance.
Insurable gross profit is obtained by deducting from turnover only the charges that disappear with activity: raw materials consumed, variable subcontracting, sales commissions. Everything else, wages, rent, depreciation, financing costs, goes on running during the shutdown and must therefore stay in the base, since it is precisely what the business will have to pay while taking nothing in. The most widespread error is to insure net profit, a figure familiar to the owner because it sits at the bottom of the income statement, but exactly the one business interruption cover must not settle for. The consequence is not a mere shortfall in the limit: it is the triggering of the average clause, which cuts compensation in the ratio of the declared margin to the real one, including on a partial loss. The problem solved is measuring what a shutdown actually costs, a quantity no single line of the income statement gives directly.
A company with 20 million euros of turnover and 12 million of variable costs generates 8 million of insurable gross profit, while its net profit may be only 600,000 euros. Insuring the second instead of the first leaves the business underinsured by more than 90%. The French debate of 2020 over administrative closures recalled the other limit of this cover, which in principle presupposes prior physical damage.
assiette de la perte d'exploitation, marge sur coûts variables