The bankruptcy of Thomas Cook surely played in this decision. The European Commission has therefore authorized the French fund of 1.5 billion euros intended to support insurers which cover the insolvency of tour operators. The objective of this regime is to preserve the protection of travelers in the event of the insolvency of a travel organiser.
The French measure
France has notified the Commission of its plan to create a state guarantee fund with a budget of 1.5 billion euros (the bottom”). The Fund will cover insurers and other guarantors in the event of the insolvency of tour operators.
The scheme aims to ensure adequate insolvency insurance which is sufficient to (i) reimburse travelers for any payment for services which have not been provided due to the insolvency of the organiser, and (ii) finance the repatriation of travelers if necessary. Such traveler protection is required by the European Package Travel Directive.
The measure is open to all insurers whose APS
Under the scheme, insurers will pass on 75% of their premiums to the Fund, which will in turn cover 75% of potential losses, up to an overall maximum amount of €1.5 billion. In addition, insurers will be compensated for operating costs related to insolvency protection.
The measure is open to all insurers and other guarantors that provide insolvency protection to tour operators. In order to benefit from the scheme, insurers and other guarantors must be legally authorized to operate in France and must provide insolvency protection to tour operators registered with the French tourism development agency. The program will last until December 31, 2023.
The Commission’s assessment
The Commission has assessed the measure under EU state aid rules, in particular Article 107(3)(c) of the Treaty on the Functioning of the European Union, which allows Member States to support the development of certain economic activities under certain conditions.
The Commission found that:
- The measure facilitates the development of certain economic activities, notably the provision of insolvency insurance to tour operators, which insurers would not carry out at all or not to the same extent in the absence of public support. Moreover, as the French tourism sector has been hit hard by the coronavirus pandemic and is now affected by the current crisis, it is important to ensure its access to insurance.
- The measure is necessary and appropriate to guarantee the reimbursement of consumers in the event of the insolvency of tour operators. Furthermore, the scheme is necessary to address a market failure, namely the limited number of insurers and other guarantors active in the market for the provision of insolvency insurance to tour operators. The measure is also proportionate as it is limited to the necessary minimum.
- The measure includes sufficient safeguards to avoid negative effects on competition and trade in the EU. The measure is open to all insurers offering insolvency protection to tour operators and is time-limited.
On this basis, the Commission cleared the French scheme under EU state aid rules.
Under the EU Package Travel Directive, applicable in member states since July 2018, travel organizers are required to guarantee that travelers will be reimbursed for any payment for services that have not been provided, in full or in part, due to the insolvency of the organizer. Insurers are also required to finance, if necessary, the repatriation of travellers.
These rules apply to combinations of at least two types of travel services (transport, accommodation, car rental or other services, for example guided tours) including:
- packages, such as a packaged holiday from a tour operator as well as now a personalized selection of components by the traveler purchased from a single online or offline outlet; And
- linked travel arrangements, for example, when the traveler purchases travel services at a point of sale, but through separate booking processes, or, after booking a travel service on a website, is invited to book another service on a different website, provided that the second booking is made within 24 hours.