Abta’s bonding-renewal process this month threatens to become “a bloodbath”, leading industry accountant Chris Photi has warned.
But Abta head of membership and financial services John de Vial dismissed the warning as “overstated”, saying: “Bloodbath implies something that undermines the whole basis on which we work and that is not the case at all.”
Photi, head of leisure and travel at White Hart Associates, told a Travel Weekly Future of Travel summit on the Future of Regulation: “The September bond renewals at Abta are going to be a bit of a bloodbath.
“Abta is on record as saying it is relaxing its financial testing around the 4% ‘adjusted net current asset test’. But they are certainly not relaxing. Abta is fighting to increase bonds.”
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Photi suggested Abta is concerned about the finances of the ‘captive insurer’ which underwrites Abta bonding following the collapse of Thomas Cook a year ago.
A captive insurance company is an insurer wholly owned by those insured.
He also said: “I would urge Abta to be more transparent with its members. It has a rule book that is published for members and their advisors which show how bonding is to be calculated. But Abta is applying a different regime to that published.
“It hasn’t been subject to member consultation. It is not clear to a member seeking to find out how the bond is to be calculated and to plan accordingly.”
Photi suggested resources at Abta and the CAA “are stretched”.
However, de Vial insisted: “Chris has overstated this. It is a really serious situation. There are going to be fundamental issues for a number of companies.
“There are companies within our membership which were in difficulty before this crisis for which this crisis is a pretty fundamental threat.
“[But] we have a significant number of bonds due for September renewal already in place and members who are through the renewal process.
“Yes, there are real problems, serious problems that are not to be underestimated, but a bloodbath, a meltdown in the fundamentals of the system? No, I don’t believe that at all.”
De Vial said: “That is important in terms of confidence in the [consumer financial] protection system and, ultimately, consumer confidence.
“We’ve all got to be judicious about how we frame what’s going on, without taking anything away from the seriousness of the situation.”
De Vial added: “I can reassure everyone, in particular our members, that the captive insurance operation is completely untouched by the Thomas Cook failure.
“In fact, in a few months I will find myself in the peculiar situation of refunding unused bond money to the three insurers that provided security on Thomas Cook. The captive insurance funds are completely intact.”
Jo Kolatis, director of Themis Advisory, agreed saying: “We’re at a critical time. But John is spot on. We’re all working with clients that may not have been in the healthiest financial position before all this.
“I don’t envy Abta or the CAA their job. It’s not an easy time for anybody.”
