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p20 columnist dec5 2/12/08 18:16 Page 20
ttglive.com
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Chris Lee Barclays Commercial
“Companies will get to their
next renewal date and be
unable to put in place the
cover that the CAA seeks”
T
here has been much comment about insurance market. I have seen hardly any new
changes since the introduction of the bonds over £500,000 written through obligors
Atol Protection Contribution (APC), since the APC was introduced.
but one area that has really affected Add to this the fact that the availability
companies has been the decimation of the and cost of facilities from many banks is also a
insurance market for Atol bonds. challenge, and that there are now fewer players
Prior to the introduction of the APC, about offering the mini-Atol scheme for companies
half of such bonds were written through banks, carrying fewer than 500 passengers, and there
and the rest by obligors in the insurance is a real problem for travel companies.
market. Bank bonds are generally cheaper but Consequently, many start-ups/management
often require cash cover, whereas insurance buyouts that don’t have cash collateral cannot
market bonds are normally more expensive gain the necessary cover. I know of several
but are unsecured. Previously, the obligors companies that have been unable to start up,
had a generous spread of travel companies or re-form as a standalone “phoenix” operation,
seeking Atols, from new businesses to following the failure of a parent company.
well-established ones. This looks set to have a major impact on
These companies represented the the industry. There is a possibility that some
full range of financial strength, from companies will get to their next renewal date
minimal net tangible assets to those and be unable to put in place the cover that
with very strong balance sheets. the CAA is seeking because no one is willing
Under the new arrangements, to supply what they need. The challenge
companies that have been around for for the CAA will be how it chooses to
fewer than four years are excluded from respond.
the APC and require Atol bonds. So do We also have the situation
those deemed by the CAA to have where some passengers are
insufficiently strong balance sheets to be protected whereas others on
included within the APC. the same plane are not, de-
This apparently comprised only a few of pending on how they booked.
the top 250 Atol-holders in terms of size, plus Surely this must be addressed
several smaller ones. Therefore, the new much by the CAA as a matter of urgency.
smaller pool of companies seeking such bonds We are unlikely to get another opportunity
from obligors understandably present a much to change the scope of Atol bonding/APC in a
higher risk than before. As a result, many oblig- united way, while the issue is fresh in the
ors have pulled out of the market altogether, public’s mind, for some considerable time. So
leaving a severe shortage of suppliers. let’s hope the industry takes full advantage.
In my experience, it is incredibly difficult
for a company to raise an Atol through the Chris Lee is head of travel at Barclays Commercial
20 05.12.2008
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