Volatile commodity markets are reshaping the way insurers assess business interruption risk, particularly in sectors such as energy, renewables, and mining. The standard Industrial Special Risk (ISR) Mark IV formula for calculating loss of gross profit is showing its limitations in this environment, often producing results that do not reflect the commercial realities of commodity-driven industries.

Sophie Henderson, Partner at Sedgwick and finalist in Wotton Kearney’s Turning Point 2024/25 Competition, addresses this challenge in her Turning Point 2024/25 paper, One Size Does Not Fit All: Rethinking Business Interruption Cover for Commodity-Driven Industries. Sophie was supported by Dena Paterson, Special Counsel at Wotton Kearney (Sydney), in this work.

Her paper explores why reliance on a fixed gross profit rate can materially over- or under-indemnify insureds and why the formula fails to account for increased profitability that can arise when businesses adapt operations following an insured event.

Sophie proposes a revised framework that compares expected and actual gross profit and incorporates variable costs, offering a more accurate, equitable, and practical basis for settlement in commodity-based industries.

As a finalist, Sophie was awarded $2,500 in travel vouchers to support her professional development.

Stay tuned for further updates, as we share these excellent papers and provide details for the next edition of Turning Point 2025/26.

Download your copy of Sophie’s paper by completing the form below.