Tour operators are struggling to find insurance cover to protect themselves against partners going out of business.
Alan Bowen, legal advisor to the Association of Atol Companies, told a Travel Weekly Webcast that insurers have become wary about the sector.
He said the Thomas Cook failure last year left many operators “holding the baby” after insurers refused to pay out, something which he said was being challenged by the Financial Conduct Authority.
Business disruption cover scarce
And he said business disruption cover is now hard to come by with the coronavirus crisis having undermined confidence in the sector further.
“There is a big problem now with trying to get credit insurance against large chains of agents because what seemed to be a very successful and long-term business for an insurer suddenly becomes a business they don’t know whether it’s got any future at all.
“And what operators are very concerned about is they don’t want to be back in the situation they were six months ago when Thomas Cook, which had collected huge amounts of money in advance and never passed on, went out of business and the tour operators were left holding the baby.
“And that leads the whole issue of if there are a large number of failures will the Air Travel Trust [Atol] pay out? The answer is no, and government is going to have to dip into its pockets again if that is the outcome.”
Lack of cover
Bowen said on the consumer holiday insurance side a lack of insurance policies covering Covid-19 is also already having an impact.
“People who are rebooking for next year are finding the insurance they’ve already bought from a large number of suppliers for this year’s holiday they can’t transfer to next year.
“And those who go out to buy new insurance find it a great deal more expensive. I was talking to an insurance broker this morning who said at the moment he advises against travel to any destination.
“If you’re booking and planning to travel against FCO [Foreign Office] advice insurance is void. So that’s a big problem for the consumer. And that’s obviously a big problem for travel agents, and tour operators who want to make sure their customers are insured.”