The trade is facing a “huge problem” as insurers pull out of the sector or make it harder for agents to secure financial protection against business failure.
Agents are being warned to prepare for potential issues ahead of annual policy renewal dates.
To adhere to the 2018 Package Travel Regulations, agents can protect consumers’ money against the failure of their businesses by either taking out financial failure insurance, buying a bond (often backed by insurance) or opening a trust account.
Matt Purser, director at insurance broker Travel Vault, said renewing failure insurance and insurance-backed bonding in the current market was proving “challenging” for agents.
He said: “It is a huge problem. Financial failure insurance is still available but with all these routes [of financial protection], the appetite of insurers has shrunk. Even with the light at the end of the tunnel, and news of vaccines, for new policies to be underwritten there needs to be a cast-iron agreement.”
Purser said some agents Travel Vault works with had been unable to get insurance renewed or faced higher premiums and less favourable terms. “We are helping businesses find alternative ways to comply,” he added. “But, for some, the only way to legally operate is to have a trust where customers’ money is left until the customer returns.”
Antony Martin, managing director of broker Rock Insurance Group, agreed Covid-19 had created “significant issues” in a sector hit by high-profile collapses such as Thomas Cook. He said this had seen the insurance market that supports financial and supplier failure “almost disappear”.
Martin said Rock Insurance was working on products “to plug gaps” for 2021, adding: “The industry will bounce back and along with that will come more insurance products, but I suspect for many this will be too late.”
Zurich Insurance Group would not comment on reports it is withdrawing financial failure cover on new policies from January.
Companies offering trust solutions have already reported increased enquiries.
Jacqui Cleaver, head of marketing communications at Protected Trust Services, said: “We’re getting an unprecedented amount of agents calling us who are highly concerned as they cannot renew their insurance. If they don’t renew, they can’t trade.”
In the past two months, Cleaver said PTS had received applications from 42 firms wanting to trade with financial protection.