Result Driven Impact

Political Risk

Backstory

Phil and Carmen own and operate several gyms in the Eastern U.S. and began an 831(b) Plan administered by SRA. Phil and Carmen designed their plan to fit their business needs and to address the risks they were most concerned with, including political risk. Phil and Carmen contributed to their 831(b) Plan for the first time in 2020. Phil and Carmen’s businesses were affected significantly by the COVID-19 pandemic.

  • INDUSTRY- Fitness
  • ANNUAL GROSS REVENUE- $3.75 Million

Risk Description

With a growing bureaucratic and regulatory business environment, political changes can have a significant impact on a business’s revenue. Phil and Carmen’s businesses rely on customers having direct access to the facilities and the gym equipment that comes with a monthly membership. Loss of access would understandably lead to membership cancellations.

Incident

During the COVID-19 pandemic, gyms were deemed nonessential, and by government order, were mandatorily shut down. Phil and Carmen’s doors were closed for several months which lead to a substantial loss of income.

Resolution

Phil and Carmen filed a political risk claim to the direct writer of their 831(b) Plan. The direct writer began its claims adjusting process to first determine coverage. Upon review, the direct writer determined that its political risk policy provided coverage for the government mandated shutdowns of their gyms. Once coverage was determined the direct writer requested additional documentation from Phil and Carmen to understand the extent of the loss.

Needing an influx of cash into their business in a timely manner, Phil and Carmen agreed on a claim settlement with the direct writer in order to forgo the lengthy process of fully adjudicating the claim. Phil and Carmen were able to use the claim settlement to pay their fixed costs, including employee salaries, and keep their gyms afloat until shutdowns were lifted

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