Agents worried about future financial failure cover because of insurers pulling out of the sector are being urged not to give up hope.
Following the recent withdrawal of some insurers amid the pandemic, agents have been left to find new insurance companies to protect clients’ money should their company fail.
To adhere to the Package Travel Regulations, agents must protect consumers’ money against failure of their businesses by either taking out financial failure insurance, buying a bond or operating a trust account managed by an independent trustee.
Increases in insurance premiums and bonding costs are expected.
Lawrence Assock, commercial underwriter and product developer for Atlas Voyage Secure, part of All Seasons Underwriting Agencies, said new companies were now entering the market to plug the gap.
“There are solutions,” said Assock, whose firm provides financial protection insurance for the trade. He admitted agents would have to accept higher premiums, which he said had risen by between 75% and 100%.
“Insurers were not getting the right premiums before the pandemic,” Assock added. “With Covid, they see travel as a big risk.”
Established insurers are expected to return to the travel sector although many want to wait until the industry has revived, said Assock.
He said Atlas Voyage Secure had secured an insurer, approved by Abta, to offer financial failure cover to agents, with another in the pipeline.
The company has also partnered with one of the UK’s largest trustees in the travel sector to manage the early release of a defined proportion of booking funds from the trust account to allow an agent to pay a supplier early if required, prior to funds being released from the trust on the customer’s return. In this scenario, the agent would pay the supplier and receive the money from the trust immediately after proof of payment. Should the agency fail, the funds released from the trust would be covered by its insurance.
Assock claimed the new trust and insurance model was a “game changer”, making trusts more attractive to agents as they could pay suppliers early without losing working capital while consumers’ money remained fully-protected
More: Trade faces difficulties obtaining financial failure insurance