What is the best way to comply with the UK Travel Regulations? Travel Bond, Financial Failure Insurance or Trust Accounts?
As an approved body, ABTOT is often asked “what is the best way to comply with The Package Travel and Linked Travel Arrangements Regulations 2018 (UK Travel Regulations)?”
There is no one-size-fits-all ‘best’ solution – each option has advantages depending on the travel organiser’s size, programme and ambition. The only constant is that every travel organiser packaging non-flight holidays has to have some form of approved financial protection in place.
Department for Business and Trade guidance on UK Travel Regulations state that “Package organisers must obtain security that covers the reasonably foreseeable costs of and delivers effective and prompt return of all payments made by the traveller for services not performed and for the travellers’ effective and prompt repatriation in the event of the organiser’s insolvency”. This security can be effected in one of three ways: via a bond (Regulations 20 and 21), an insurance policy (Reg 22) or a trust account (Reg 23). There are rules around all three options, but only bonding under an approved body is actually regulated by the Department for Business and Trade. As an approved body, ABTOT believes this provides consumers with extra comfort.
One of the key changes in the 2018 UK Travel Regulations, which replaced the 1992 UK Travel Regulations, was the tightening up of the conditions applying to trust accounts. Any travel organiser wishing to use a trust account for their financial protection security must now ensure that the following conditions are met:
- It has to be held by an independent trustee who is not able to release funds until provided with evidence that the contract has been fulfilled;
- All costs in administering the trust account must be paid by the travel organiser, including those incurred in the administration of claims;
- If the contract includes carriage of customers, then an additional insurance policy must also be in place to cover repatriation and potential additional accommodation costs for the passenger prior to repatriation; and
- The protections apply to all customers, regardless of their place of residence, the place of departure or where the package is sold within the EEA.
The UK Travel Regulations allow for a trust account and insurance option to be combined (Reg 24) and in the case the trust must hold sufficient funds to meet liabilities that fall outside of the insurance cover.
The costs of the financial protection, irrespective of the method, are an outgoing to be borne by the travel organiser. With the increased requirements attaching to the trust account option, costs have increased to be on a level with travel bonds or Financial Failure Insurance however cash flow is not restricted under a bond or insurance.
ABTOT offers both an approved bonding and a Financial Failure Insurance option to its members:
- Travel Bonds are typically the most cost effective and require less time spent on administration: requiring only quarterly declarations and an annual renewal.
- Financial Failure Insurance is useful for start-up travel companies or emerging companies as financial protection is paid when the bookings are received on a monthly basis. It does require more administration as declarations are required monthly and also renewed annually.
ABTOT has around 270 Members in Membership with annual turnover ranging from £100k a year to £200m.What is ABTOT?
ABTOT is the Association of Bonded Travel Organisers Trust. ABTOT is an approved body (approved by Department for Business, Energy and Industrial strategy) which oversees the bonding process to ensure that a Travel Organisers bond is at an adequate level to meet insolvency requirements as defined by The Package Travel and Linked Travel Arrangements Regulations 2018.What services do ABTOT offer?
ABTOT runs a bonding scheme and a financial failure insurance scheme, has an ATOL Franchise and a merchant acquiring facility partnership for card payments. – providing a simple solution for you to meet your regulatory requirements.
We do not look to replicate or charge for other services as we have ABTOT Associates who can recommend what you need.Do I have to pay customer monies into a trust account?
No, we do not require customer prepayments or other funds to be held in a Trust Account as this will restrict your cash flow and the growth of your business. We provide a cash flow advantage and we will not interfere in the running of your business.What is the process to arrange financial protection through ABTOT?
To arrange financial protection you need to apply to become an ABTOT Member. The first step is to have a call with the Business Development Team who will be able to assess if you meet our criteria, if you do you will be asked to provide supporting financial information for our underwriters to complete a financial assessment. If the underwriters are in a position to offer terms they will provide the value of the travel bond or financial failure insurance required to protect your customers’ monies and any other conditions that are required for your Membership.How does ABTOT financial protection protect my customers?
ABTOT holds travel bonds or a financial failure insurance policy during your membership. In the event of your financial failure we will use the travel bond or financial failure insurance to repay your customers who have booked but not yet travelled or to repatriate customers who are abroad at the time of your failure.Do I need to find cash equivalent to the bond’s value in order to be a member of ABTOT?
Not usually, but t&g or a UK bank could require cash collateral dependent on the outcome of their risk assessment.Is ABTOT membership available to start-up businesses?
Yes and we have developed solutions which will help support your business.Is ABTOT suitable for Travel Agents?
Yes, but only when they are trading as a Travel Organiser.Do I need to approve my suppliers with ABTOT?
No. We recommend that you trade with suppliers with sound financial status and will consider any commitments you have as part of your risk assessment but we do not interfere in how you run your business.Will ABTOT membership protect me against the financial failure of suppliers?
No. t&g can provide quotations for Supplier Failure Insurance, as well as the other important policies such as Tour Operator Insurance and Combined Liability cover. Searching the market for the best rates on your behalf – we make it easier for you by dealing with just one provider.Are you able to help me with our booking conditions, suppliers’ contracts and information I need to know to run a successful business?
Through the ABTOT Associate scheme we work with leading lawyers, accountants and other key service providers who work with us and ABTOT members and who will be able to help you.
Contact the ABTOT TeamEmail the team Call the team on 0207 065 5313
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