A TMU Management Expert Resource

Financial Failure Insurance (FFI) is insurance that protects customers if the principal travel company selling a trip becomes insolvent. It ensures customers receive refunds or repatriation if the business stops trading. FFI is frequently used by travel companies as a practical and commercially flexible way to meet Package Travel Regulations requirements when they are not using trust accounts or bonding. It is different from Supplier Failure Insurance, which protects when a third-party supplier fails. Travel companies choose FFI to demonstrate financial security, support merchant account approval, meet regulatory obligations and create consumer confidence. TMU Management assesses exposure, structures compliant FFI solutions and helps integrate financial protection into business strategy.

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What is Financial Failure Insurance?

Financial Failure Insurance is a consumer protection insurance product that covers customer refunds and repatriation if the travel company acting as the principal becomes insolvent. It steps in when a business ceases trading and replaces the refund and repatriation obligations that would otherwise fall on the company or its administrators.

It is often used by travel organisers and direct-to-consumer brands to provide the legally required level of customer protection under Package Travel Regulations.

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How does Financial Failure Insurance work?

If a customer has paid a deposit or full balance and the principal travel provider collapses before or during travel, the law requires that:

Customers must receive a full refund for services not yet taken
Customers currently abroad must be repatriated where necessary

Without a protection structure, customers become unsecured creditors.
With FFI in place, refunds and repatriation are handled by the insurer, ensuring compliance and protecting consumer confidence.

How does FFI relate to the Package Travel Regulations?

The Package Travel Regulations require that organisers selling package travel must have arrangements in place to protect customer money in the event of insolvency.

There are typically three recognised methods:

Trust or escrow account
Bonding scheme
Financial Failure Insurance

FFI is often chosen because:

It can be faster to implement than trust or bonding
It allows businesses continued access to working capital
It is flexible for multi-jurisdiction or niche product sales
It provides a compliant alternative for non-ATOL packages

TMU Management regularly structures FFI for companies seeking regulatory compliance without locking funds away in a fixed trust.

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How is Financial Failure Insurance different from Supplier Failure Insurance?

‍Financial Failure Insurance

Protects if the principal retailer or organiser collapses
Ensures consumer refunds and repatriation
Supports Package Travel Regulations compliance
Required at organiser level

Supplier Failure Insurance

Protects when a third-party supplier collapses
Ensures business continuity by replacing failed components
Helps avoid operational and cash flow disruption
Useful for supply chain risk

Many strong travel businesses use both protections together.

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Why do travel companies choose Financial Failure Insurance?

FFI supports both compliance and commercial performance. It enables:

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Meeting Package Travel Regulations requirements without trust structures
Increased customer confidence and conversion
Faster access to booking revenue than trust accounts allow
Better merchant acceptance and reduced rolling reserves
Stronger B2B contracting credibility
Ability to scale while maintaining a protection narrative

It is especially valuable for niche operators, new market entrants and businesses selling multi-component experiences.

Who typically needs Financial Failure Insurance?

FFI is used by:

Organisers selling package holidays
DMCs acting as principals
Luxury bespoke travel companies creating packages
Tour companies that fall outside ATOL or do not include flights
Online travel brands selling combined experiences under a single contract

If your business collects payment and takes on principal liability, you likely require FFI.

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What does Financial Failure Insurance cover?

Typical cover includes:

Refunds for prepaid customer bookings
Balance payments for undelivered travel
Repatriation costs where legally required
Administrative and claims handling support to manage customer outcomes

Coverage varies by policy and jurisdiction, which is why advisory expertise matters.

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Does FFI make merchant onboarding easier?

Yes. Merchant acquirers require clear evidence that customers would be refunded if a company fails. FFI is often accepted as a compliance-equivalent protection and can:

Accelerate approval
Reduce security deposits or rolling reserves
Support higher processing limits

Banks and acquirers increasingly ask specifically whether a travel business has FFI before signing.

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How is FFI priced?

Pricing depends on:

Turnover
Booking lead times
Exposure peaks
Product range
Repatriation risk
Internal controls and financial discipline

TMU Management uses exposure-mapping tools to negotiate pricing and build structures that insurers are comfortable underwriting.

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How TMU Management helps

TMU Management delivers:

Exposure and compliance assessment
Recommendation on whether FFI is suitable for your model
Structuring and placement of policies
Advisory for merchant and banking negotiations
Support for messaging FFI as part of your value proposition

Our objective is not only regulatory compliance but also commercial advantage.

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Financial Failure Insurance protects customers if a travel organiser collapses, ensuring refunds and repatriation. It is also one of the recognised and effective methods of meeting Package Travel Regulations. When structured correctly, it supports compliance, commercial growth, stronger banking relationships and higher customer trust.

To explore whether FFI is the right protection model for your business, contact TMU Management for an initial discussion.

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Financial Failure Insurance: The Definitive FAQ for Travel Businesses