Thomas Cook insolvency

Tour operators face higher insurance costs after possible €400m hit for customers

Thomas Cook Germany's head office in Oberursel, near Frankfurt
Thomas Cook
Thomas Cook Germany's head office in Oberursel, near Frankfurt

Tour operators in Germany may have to pay out much more for insolvency insurance in future after the Thomas Cook collapse left customers reportedly facing up to €400 million worth of losses.

The collapse of the country's second-largest tour operator has shown that even one of the market leaders is not "too big to fail" and can seriously damage the entire system, according to experts.

This is because, in contrast to other EU countries, Germany has a low level of insolvency insurance for tour operators with a moderate maximum liability level. An insurance company only has to cover potential total losses of €110 million from all the tour operators that it insures.

But the total losses for customers caused by Thomas Cook's insolvency could reach €400 million, according to the mass-market Bild-Zeitung newspaper. It calculated the total value of the 660,000 future holidays booked through Cook at the time of its insolvency at the end of September as €500 million. (This would be an average price of just over €750 per person.) This would leave up to €400 million uncovered if insurer Zurich repaid costs of up to €110 million.

Thomas Cook Germany said at the time of its insolvency that it had 660,000 bookings for future holidays (in the remainder of 2019 and in 2020). Since then it has cancelled all holidays with departure dates up to December 31, 2019, but it is unclear what will happen to holidays already booked for 2020.

Cook's insurance company Zurich says it does not yet have all the necessary information to calculate the total financial costs of the insolvency. In particular, it is unclear how many of the 660,00 bookings had been paid either partly or in full for 2019 holidays that have been cancelled, and how many bookings were for holidays in 2020.

Meanwhile, the German tourism industry, insurance companies, politicians and consumer rights organisations are now intensively discussing how the country's tour operator insolvency insurance system should be reformed to prevent similar cases in future.

The German Travel Association (DRV) says a new model should ensure "sufficient cover" for customer payments, be "financially affordable" for tour operators, and "appropriately reflect" the varying financial strength of insured companies.

Among market leaders, FTI's sales & marketing chief Ralph Schiller said raising the liability limit would not be enough and urged instead an 'industry-wide fund'. Travel insurance expert Roland Schmid also supported a 'guarantee fund' but called for higher insurance premiums for larger tour operators, based on their turnover and number of customers, if an insurance-based model is retained.

Both the DRV and the German insurance industry association GDV have set up internal working groups to discuss the issue.

Meanwhile, Thomas Bareiß, state secretary in the German economics ministry with responsibility for tourism, told fvw in an interview that the Thomas Cook case "shows that the current regulations have to be reviewed". But he said that the future liability limit "should not rise to an unmeasurable sum" and emphasised: "The premiums must be affordable. You cannot insure everything." 

Bareiß also defended the government's decision to provide a loan to keep Condor in the air and said he was confident that the sum will be repaid in due course. "More than 200,000 people were travelling. We had to offer security to the travellers," he commented.