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.Why should I use Travel Bonds for my financial protection?
Travel Bonds backed by Insurance tend to be unsecured and have additional advantages as cash sums and other business assets are not tied up as they would be normally to guarantee a bank bond. Travel Bonding is the ideal way to meet your regulatory requirements and is suitable for all types of travel organisers.Why should I bond my business with ABTOT
ABTOT is a leading approved body appointed by the government to provide a regulated financial scheme for SMEs.
ABTOT also administers an approved bonding scheme for coach package holiday providers called Bonded Coach Holidays (BCH).
ABTOT Travel Bonds are underwritten by our sister company Travel & General Insurance (t&g) who is the largest provider of Travel Bonds in the UK and Irish travel market. t&g underwrites various types of financial protection and all types of bonding travel organisers require to trade.
t&g are also a specialist broker providing access to leading insurers for combined liability policies as well as creating bespoke travel insurance policies. This enables ABTOT Members to have all their insurance needs taken care of in one place.
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