Your profits are better addressed with an Insurance bond

Why bond via insurance?

Traditionally, the two sources of travel bonds have been your bankers or an insurance company.

Insurance companies are professional risk takers (underpinned by sound underwriting techniques), whereas banks are risk averse. This is why, if you bond with your bank, you will generally be asked to put a sum of money on deposit with them equivalent to the amount of your bond. This means that, in the event of a call on the bond, the bank will immediately pay themselves back out of your ring-fenced cash.

Not only will you be earning an uninspiring rate of interest, if, indeed, anything, on this cash deposit, but your bank will charge you an annual fee for not taking any risk!

On the other hand, an insurance company will provide an unsecured bond for which they will charge an annual premium commensurate with the strength of your firm, as demonstrated in the published accounts, and by other sources of financial information available to underwriters.

As the insurer-provided bond is unsecured, the premium that an insurer would charge for any given travel company will invariably be higher than the annual fee charged by the bank for taking little or no risk. However, the insurance premium is a legitimate operating expense for Corporation Tax purposes, and it frees up the capital, which would otherwise be tied up with the bank, for applying to the furtherance of your business.

If a mid-term ABTA/ATOL variation is required, this can be an involved process with a bank, and may require additional assets being pledged or a property revaluation. You won’t have this problem with insurance.