CMV failure was ‘a stress-test of the system’, says Mark Tanzer
Abta chief executive Mark Tanzer hailed the association’s resilience and its system of financial protection after reporting a loss in excess of £15 million for the 12 months to June, largely due to a single failure.
Accounts published in December revealed a loss of £2.5 million on Abta’s membership operations in 2020-21 but an additional £12.7 million loss by its in-house or ‘captive’ insurer following the failure of Cruise & Maritime Voyages (CMV) parent South Quay Travel in July 2020.
The accounts make clear the insurance deficit “related mainly” to cruise line CMV’s failure “exceeding the bond held by Abta”.
Tanzer told Travel Weekly: “We’d rather not have a big company failure but the fact we’ve been able to withstand it shows the system works. It shows how resilient the system is.”
He declined to specify the cost of CMV’s failure or the size of its bond, but the payout depleted Abta Insurance PCC Ltd by more than £10 million. Abta’s accounts confirm the association paid out almost £23.7 million in total following the failure of 28 members over the 12 months.
Tanzer said: “Clearly, CMV hit our insurance reserves, but that is how insurance works. You build up the reserves and one day you’re called to pay out. It has not changed our ability to do what we do. We sit on more than £700 million in bonds. It is a £12 million hit, so [worth] less than 2%.”
He blamed the high cost of the failure on “particular circumstances”, saying: “It was a triple whammy. Normally, you pay out on future bookings when a company fails. We had to pay out on three months’ cancelled bookings. It also happened early [in the pandemic] before we had a chance to adjust the bonding level. There wasn’t time to assess the funds at risk.”
Abta bolstered its cash reserves by selling its former London head office for £19.65 million in October.
Tanzer argued: “Selling the building was the right thing to do. It was an old building that needed redeveloping and there were a number of good offers. We’ll look to get a good yield on the cash to contribute to our running costs.”
He described CMV as “a stress test of the system” and insisted: “The system worked from a customer perspective and a member perspective.”
However, leading industry accountant Chris Photi, head of travel and leisure at White Hart Associates, said: “I’m astounded at the level of exposure on one member.
“The bond was inadequate. Abta should make public what the bond was and the loss and get someone independent to look at all aspects of this. It’s such a significant sum. I would expect far more transparency about what happened.”
Alan Bowen, legal advisor to the Association of Atol Companies, suggested the cost of the South Quay failure involved “either a case of overtrading or under-bonding”.
He noted: “At Abta’s last set of renewals a lot of members were asked for substantially higher bonds and we can see why now. Abta’s lucky it had the property to sell. They got a very good deal for it.”
Bowen added: “The insurer’s liquidity has fallen substantially. There is a lot less of a buffer there for other claims.”
Abta’s Newman Street property sale eases deficit
Abta had leased its former Newman Street property in central London and drawn on the rental income since moving to its current headquarters in Park Street in 2009.
The property sale in October enabled Abta to pay off a £2 million Coronavirus Business Interruption Loan, taken out in July 2021. Abta’s accounts show the failure of South Quay Travel left the association with net assets of almost £25.7 million at the end of June 2021, down from £39.3 million the previous year.
Abta confirmed 149 members left the association in the 12 months to June, reducing member numbers to 928. Member turnover declined from £40 billion pre‑pandemic to £18.6 billion.
Abta’s revenue fell due to a 50% discount on subscriptions, costing it £3.3 million, and a decline of £830,000 in income from events including the Travel Convention. Abta’s employee numbers fell by three to 98 over the 12 months and salaries by £42,000 to just over £5 million.
The highest paid director, Mark Tanzer, was paid a salary of £289,000, down by £6,000 on the previous year.