Consequences of the Thomas Cook bankruptcy
Customer funds should be better secured in the event of travel company bankruptcies
The federal government wants to better secure customer funds in the event of the bankruptcy of tour operators. A draft bill by the Federal Ministry of Justice provides for the establishment of a multi-million dollar travel insurance fund.
No one had ever expected the travel giant Thomas Cook to file for bankruptcy. In September 2019, the group went bankrupt. Tens of thousands of vacationers have to be fetched back to their home countries from the vacation areas with special machines.
Only part of the customer funds already paid in was covered. At that time, the insurance company only reimbursed a fraction of the costs because liability was limited to a total of 110 million euros per year. The state had to step in.
Now the German state wants to better protect customers in the event of the bankruptcy of tour operators. The companies should pay into a travel insurance fund. This is intended to fundamentally replace the previous protection by insurance or bank guarantees. There should be exceptions for small companies.
The fund is to be filled with around 750 million euros by the end of December 2026. Travel providers should pay fees and provide additional securities. The fund is to guarantee advance payments by customers, the repatriation of stranded holidaymakers and their accommodation until they are returned.
The risk of further bankruptcies in the industry is increasing
With the worldwide restrictions on travel in the corona pandemic, the risk of bankruptcies in the industry has also increased significantly. In the worst case, this would lead to insurers withdrawing from the market, the draft said.
Small providers whose turnover with package tours has been below three million euros on average over the last three years should be able to continue to secure themselves with an insurance contract or a bank guarantee.
At the same time, the previous liability limitation of an insurer to a total of 110 million euros per year is to be dropped. It is to be replaced by a limitation of liability in the amount of 22 percent of the annual turnover of the tour operator to be covered.
Criticism of the draft comes from the Verband Internet Reisevertrieb (VIR). Although the present concept is based on the Dutch model for securing customer funds, it ignores how long it took to build one with sufficient capital.
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“The Dutch model took 20 years to reach its target capital,” says Michael Buller from VIR. “In the present draft of the ministry, however, the travel insurance fund is only given a five-year build-up phase. We do not think this is realistic when it comes to implementation. “Buller calls for an active dialogue in which the industry associations are included in the further process.
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