How Can Foreign Companies Prove Lost Profits in a Business Interruption Insurance Claim in Turkey? (2026 Updated Guide)

How can a foreign company prove lost profits after a factory fire, flood, machinery breakdown or other insured event in Turkey? A 2026 guide to financial records, causation, loss calculations, insurer objections and insurance disputes.

A foreign-owned factory, hotel, warehouse, logistics center or other commercial enterprise operating in Turkey may suffer losses far exceeding the cost of repairing damaged property after a fire, flood, explosion or another insured event. Production can stop, sales may collapse, customers may cancel orders and fixed expenses may continue even though the business cannot operate normally. In these cases, a business interruption insurance claim may become one of the most financially significant parts of the insurance dispute.

The central difficulty is usually proving the amount of lost profit. An insurer may accept that physical damage occurred while disputing whether the company would actually have earned the profit it claims. For this reason, foreign companies should build the claim around accounting evidence, historical performance, customer orders, production capacity, market conditions and a clear causal connection between the insured event and the financial loss.

Business Interruption Loss Is Different From Property Damage

Property insurance and business interruption coverage address different types of loss. Property damage may concern destroyed machinery, inventory, buildings or equipment. Business interruption coverage, depending on the policy wording, may address financial consequences arising from the interruption of business operations.

A company should therefore calculate the two categories separately.

Paying for damaged machinery does not necessarily resolve the interruption claim.

Start With the Insurance Policy

Before calculating millions of Turkish lira, euros or dollars in lost profit, the insured should determine exactly what the policy covers.

Important provisions can include:

• insured events;
• business interruption coverage;
• indemnity period;
• waiting period;
• insured gross profit or other financial definition;
• fixed and variable expenses;
• increased cost of working;
• sublimits;
• deductibles;
• exclusions;
• notification requirements;
• mitigation obligations.

The policy’s own financial definitions can materially affect the calculation.

There Must Usually Be a Covered Trigger

A decline in revenue alone does not automatically establish an insured business interruption claim.

The company should demonstrate the connection between the interruption and the insured event.

For example, if a factory fire damages the principal production line and production stops for three months, the causal connection may be relatively straightforward. If sales were already declining before the fire, however, the insurer may argue that part of the loss would have occurred anyway.

The Claim Should Reconstruct the Counterfactual Business

The fundamental question is often:

What would the company’s financial performance probably have been if the insured event had not occurred?

This requires constructing a reasonable counterfactual scenario.

The company should not simply take its highest historical monthly profit and multiply it by the shutdown period.

Historical Financial Statements Are Critical

Audited financial statements can provide important evidence of the company’s historical financial performance.

Relevant records may include balance sheets, income statements, cash-flow statements and supporting accounting records.

Several years of information may be useful because a single prior year can be abnormal.

Monthly Management Accounts Can Be Even More Useful

Annual accounts may hide seasonal fluctuations.

Monthly revenue, production and profitability reports can demonstrate how the business normally performs during the particular months affected by the interruption.

This is particularly important for seasonal businesses.

Tax Records Can Support the Claim

Tax declarations and statutory accounting records may provide independent support for revenue and profitability figures.

Insurers may compare the amount claimed with financial information previously reported by the company.

Large unexplained differences can create credibility problems.

Sales Invoices Should Be Preserved

Historical invoices can demonstrate actual sales volumes, prices, customer relationships and product mix.

Transaction-level information becomes particularly important where the company claims that production interruption caused identifiable sales to disappear.

Customer Orders Can Be Powerful Evidence

Existing purchase orders issued before the insured event can be stronger evidence than speculative forecasts prepared afterward.

Preserve:

• confirmed purchase orders;
• framework supply agreements;
• customer forecasts;
• accepted quotations;
• scheduled deliveries;
• order confirmations;
• correspondence concerning future deliveries.

These documents can demonstrate that expected revenue was commercially realistic.

Cancelled Orders Should Be Documented

If customers cancelled purchases because the company could not deliver following the insured event, preserve the cancellation communications.

An email stating that an order was cancelled because the Turkish factory could not produce after the fire can become important causation evidence.

Lost Customers Require More Detailed Proof

A company may argue that interruption caused a long-standing customer to move permanently to a competitor.

That loss can be significant, but proving it may be more difficult.

Historical sales, customer correspondence, termination notices and evidence of the pre-loss relationship should be preserved.

Production Records Are Essential for Manufacturers

For industrial businesses, financial forecasts should be reconciled with actual production capacity.

Relevant evidence may include:

• historical production volumes;
• machine utilization;
• shifts;
• production schedules;
• capacity reports;
• downtime records;
• inventory;
• production orders.

A claim based on sales volumes exceeding the factory’s realistic capacity is vulnerable to challenge.

Inventory Can Affect Lost Sales Calculations

A factory shutdown does not necessarily mean sales stopped immediately.

If substantial finished inventory existed when the insured event occurred, the company may have continued supplying customers temporarily.

The insurer may therefore examine opening inventory, finished goods, work in progress and alternative stock.

Historical Growth Trends Can Be Relevant

A growing company should not necessarily be restricted to the previous year’s revenue.

If revenue had increased consistently over several years before the insured event, the company may argue that the appropriate counterfactual includes continuing growth.

The growth assumption should be supported by evidence rather than optimism.

New Contracts Can Support Expected Growth

Suppose a manufacturer had recently won a substantial new customer immediately before a factory fire.

Historical financial statements alone would not reflect the expected revenue from that contract.

Signed agreements, confirmed orders and production preparations can help establish that the expected increase was genuine.

Business Plans Require Supporting Evidence

Internal budgets and forecasts can support the claim, particularly where they were prepared before the insured event.

Forecasts created after the loss may receive greater scrutiny.

The company should therefore preserve original budget versions and metadata showing when they were prepared.

Market Conditions Must Be Considered

Lost-profit calculations should reflect what was actually happening in the relevant market.

If demand collapsed independently of the insured event, the insurer may argue that historical revenue cannot simply be projected forward.

Conversely, strong market growth may support a higher counterfactual revenue scenario.

Inflation and Price Changes Can Matter

In a high-inflation environment, comparing nominal revenue across different periods without adjustment can produce misleading conclusions.

Changes in sales prices, raw-material costs, wages, exchange rates and other economic variables should be considered carefully.

Foreign Currency Revenue Requires Special Analysis

Many foreign-owned Turkish companies export in euros or US dollars while incurring substantial costs in Turkish lira.

The claim should explain the currency used in the policy, accounting records and loss calculation.

Exchange-rate movements should not be manipulated selectively to increase the claimed amount.

Gross Revenue Is Not the Same as Lost Profit

A company that loses TRY 50 million in sales has not necessarily suffered TRY 50 million in insured profit loss.

Expenses avoided because production stopped may need to be considered depending on the policy’s calculation methodology.

The policy definition should control the analysis.

Variable Costs Must Be Identified

Certain costs decrease when production stops.

Examples may include raw materials, packaging, freight or energy directly connected with production.

Including expenses that the company never incurred can overstate the claim.

Continuing Fixed Costs Can Be Important

Other expenses may continue despite the interruption.

Depending on the policy wording and circumstances, these can include rent, salaries, financing-related expenses or other continuing operational costs.

Accounting records should establish which expenses actually continued.

Payroll Requires Careful Treatment

Some employees may continue receiving salaries even though production has stopped.

Others may be reassigned, placed on different working arrangements or otherwise treated differently.

Payroll data should therefore be analyzed rather than applying a single assumption to all employees.

Increased Cost of Working May Reduce the Overall Loss

A company may spend additional money to keep operating.

Examples include renting temporary premises, outsourcing production, paying expedited freight, leasing replacement machinery or operating additional shifts elsewhere.

Depending on the policy, such reasonable additional expenditure may form part of the insurance analysis.

Mitigation Is Extremely Important

An insured company should not simply allow losses to accumulate if commercially reasonable measures could reduce them.

Insurers frequently examine whether the business took reasonable steps to minimize interruption.

Document every mitigation decision.

Alternative Production Sites Should Be Evaluated

A multinational company may have factories in several countries.

The insurer may ask whether production could have been transferred to another facility.

If transfer was impossible or uneconomic, document why—for example, certification requirements, capacity constraints, customer approval, specialized machinery or logistics costs.

Outsourcing Should Also Be Considered

If production could theoretically have been outsourced, determine whether suitable suppliers actually existed and whether outsourcing was commercially feasible.

Preserve quotations and correspondence with potential alternative producers.

This evidence can demonstrate that mitigation options were genuinely investigated.

The Indemnity Period Can Limit Recovery

Even if financial consequences continue for years, the policy may provide a defined maximum indemnity period.

The calculation should therefore distinguish economic loss from loss falling within the insured period.

Repair Delay Must Be Explained

If the company claims interruption for twelve months when physical repairs could theoretically have been completed in six, the insurer may challenge the additional period.

Document causes of delay such as specialized replacement equipment, permits, supply-chain shortages, engineering work or insurer-related approval processes.

Delays Caused by the Insured May Be Disputed

Poor project management or unnecessary delay can create arguments about whether all claimed losses were caused by the insured event.

Maintain a detailed recovery timeline.

Build a Day-by-Day or Week-by-Week Chronology

The chronology should identify:

date of loss; emergency response; inspection; insurer notification; expert visits; repair decisions; equipment orders; temporary measures; production restart; partial capacity restoration; and full normalization.

This can be highly valuable in a major claim.

Partial Production Must Be Reflected

Many businesses do not move directly from zero production to full production.

A factory may operate at 20%, then 50%, then 80% capacity.

The loss calculation should reflect actual recovery rather than treating the entire period as a complete shutdown.

Saved Expenses Should Be Calculated Transparently

The insurer should be able to understand which expenses disappeared because operations stopped and which continued.

A transparent calculation is generally stronger than presenting only a single final figure.

Separate Actual Data From Assumptions

A professional loss model should distinguish:

historical actual figures; post-loss actual figures; contractual commitments; accounting adjustments; and forecast assumptions.

This allows each assumption to be tested independently.

Avoid Unsupported “Best-Case” Forecasts

A lost-profit claim should not become a business valuation exercise based on the most optimistic scenario imaginable.

Aggressive unsupported projections can undermine the credibility of otherwise legitimate losses.

Use Several Historical Comparison Periods

Where possible, compare:

the same period in the previous year; multi-year averages; immediately preceding months; budgeted results; and relevant market trends.

A combination of evidence can provide a more reliable counterfactual.

Seasonal Businesses Need Special Treatment

Hotels, tourism businesses, agricultural enterprises and some manufacturers may earn a disproportionate share of annual profits during limited periods.

A shutdown during peak season can therefore cause losses far greater than the same shutdown during a quiet period.

Historical seasonal evidence becomes essential.

New Businesses Face Greater Evidentiary Challenges

A recently established business may have little historical performance.

In these cases, evidence may include signed contracts, confirmed orders, feasibility studies, pre-loss budgets, comparable operating periods, production capacity and market data.

The absence of several years of accounts does not necessarily make loss impossible to prove, but the evidentiary burden becomes more complex.

Expert Accounting Evidence Can Be Critical

Major business interruption claims frequently require forensic accounting analysis.

The expert should be able to reconstruct the counterfactual business, explain assumptions and reconcile calculations with underlying accounting records.

Industry Experts May Also Be Needed

Where production capacity, market demand or specialized operations are disputed, financial expertise alone may not be sufficient.

Engineering, valuation or industry-specific expertise may help establish what production could realistically have occurred.

Insurer Experts Should Be Reviewed Critically

The insurer may appoint adjusters, accountants or other experts.

The insured company should examine their assumptions carefully.

A small difference in assumed growth, production capacity or recovery period can create a very large difference in the final claim.

Common Insurer Objection: “Sales Were Already Declining”

The company should analyze pre-loss trends honestly.

If sales were temporarily declining for identifiable reasons, explain those circumstances with evidence.

Do not conceal adverse financial information.

Common Insurer Objection: “The Forecast Is Speculative”

Respond with contemporaneous evidence such as customer orders, historical growth, signed contracts, budgets prepared before the loss and production schedules.

The more the forecast existed before the insured event, the stronger its evidentiary value may be.

Common Insurer Objection: “The Business Could Have Mitigated More”

Document every alternative considered.

Explain why temporary premises, outsourcing, alternative suppliers or group-company production were unavailable or uneconomic.

Common Insurer Objection: “The Shutdown Lasted Too Long”

Create a detailed repair and recovery chronology showing why each stage required the time claimed.

Supplier lead times and engineering evidence can become particularly important.

Common Insurer Objection: “The Loss Was Caused by Market Conditions”

Separate the effects of the insured event from external market factors.

A proper counterfactual model should account for economic developments that would have affected the business even without the loss.

Preserve Electronic Accounting Data

Do not provide only PDF financial statements.

Preserve underlying ERP records, sales ledgers, production databases, purchase records and inventory information.

Transaction-level data may become essential in a disputed claim.

Preserve Emails and Commercial Correspondence

Customer and supplier communications can provide contemporaneous evidence of why sales were lost or recovery was delayed.

These records may be more persuasive than explanations created months later.

Do Not Alter Historical Records

Original accounting and commercial records should remain intact.

If adjustments are made for purposes of the insurance calculation, document them separately and explain the methodology.

Interim Payments May Be Important

A major interruption can create liquidity problems long before the final amount of loss is determined.

Depending on the policy and circumstances, the company may consider requesting payment of undisputed portions while the remaining calculation continues.

A Settlement Offer Should Be Analyzed Carefully

An insurer may offer a substantial amount that is still materially below the documented loss.

Before accepting, determine whether the settlement includes a full release of future claims.

A payment described as “final settlement” can have consequences far beyond the amount immediately received.

Do Not Sign a Release Without Reviewing Its Scope

Settlement agreements may cover business interruption, property damage, interest and other claims.

Foreign headquarters should understand exactly what rights the Turkish subsidiary is giving up.

Litigation or Insurance Arbitration May Become Necessary

If the insurer and insured cannot agree on coverage, causation or quantum, formal dispute resolution may become necessary depending on the policy and applicable procedural framework.

The evidentiary work performed during the claim process can later become central to the dispute.

Interest Should Be Evaluated Separately

Where an insurer fails to pay amounts when legally due, potential interest consequences should be analyzed separately from the underlying business interruption calculation.

The relevant dates and communications should therefore be preserved.

Headquarters and Turkish Subsidiary Should Coordinate

Foreign-owned businesses often have financial records divided between the Turkish operating company and foreign headquarters.

Group reporting, transfer pricing, intercompany purchases and management fees should be reconciled carefully.

Intercompany Sales Require Special Attention

If the Turkish company sells primarily to a foreign parent or affiliate, the insurer may scrutinize whether transfer prices reflect the actual economic loss.

The company should be prepared to explain its pricing structure and supporting documentation.

Prepare a Formal Business Interruption Claim File

A strong file can include the policy, endorsements, incident reports, financial statements, tax records, sales ledgers, customer contracts, purchase orders, production reports, inventory records, payroll, budgets, market evidence, mitigation expenses, repair chronology, expert reports and the final calculation model.

Frequently Asked Questions

How does a foreign company prove lost profits after an insured event in Turkey?

The strongest claims usually combine historical financial performance, transaction-level accounting records, customer orders, production information, pre-loss forecasts and evidence showing a direct connection between the insured event and lost business.

Is lost revenue the same as lost profit?

No. Lost revenue and insured profit loss are different concepts. Saved variable expenses and the policy’s financial definitions must be considered.

Can future customer orders be included?

Confirmed orders and binding contracts can be important evidence. Purely speculative future sales are much harder to establish.

Can a growing company claim more than its previous year’s profit?

Potentially. A documented pre-loss growth trend, new contracts and contemporaneous budgets may support a higher counterfactual, depending on the policy and facts.

What if the company has only operated for one year?

The claim can still potentially be established, but alternative evidence such as confirmed contracts, capacity, budgets and market information becomes more important.

Can the insurer argue that production should have been outsourced?

Yes. The company should document whether outsourcing or alternative production was realistically available and economically reasonable.

Are increased costs incurred to continue operating recoverable?

They may be relevant depending on the policy wording and whether the expenses were reasonably incurred to reduce the interruption loss.

What if the insurer’s accountant calculates a much smaller loss?

The assumptions, accounting methodology, growth rates, saved expenses, recovery period and production capacity used in the insurer’s model should be examined individually.

Should the company accept an early settlement?

Only after comparing the offer with the documented loss and reviewing the scope of any release of claims.

What is the most important evidence in a large business interruption claim?

Contemporaneous records created before and during the interruption are particularly valuable. Historical accounts, confirmed orders, production records and pre-loss budgets generally provide a stronger foundation than optimistic forecasts prepared only after the insurance dispute begins.

Client-Focused Legal Support for Business Interruption Insurance Claims in Turkey

Business interruption disputes can involve complex questions concerning lost profits, projected sales, fixed and variable expenses, mitigation, production capacity, indemnity periods, delayed repairs, expert calculations and insurer underpayment. Fırat Fesih Kaya Law Office assists foreign investors, international companies and foreign-owned businesses pursuing substantial insurance compensation claims in Turkey. Lawyer Fırat Fesih Kaya provides legal assistance in reviewing business interruption coverage, organizing financial and commercial evidence, challenging insurer calculations, coordinating forensic accounting and technical evidence, negotiating disputed claims and pursuing available dispute-resolution proceedings where adequate compensation cannot be achieved.

Phone:
+90 312 434 22 22

Mobile:
+90 532 769 22 22

Email:
info@firatfesihkaya.av.tr

Address:
Mevlana Boulevard No:221, Yıldırım Tower, Office No:148
06520 Balgat, Çankaya, Ankara, Turkey