Ministry of Tourism Presented a Conceptual Draft of a Mandatory Tourism Guarantee Fund

28 March 2023

The Ministry of Tourism has presented a conceptual draft of the first ever mandatory Tourism Guarantee Fund, which will compensate travellers in cases of non-fulfilment of commitments by tour operators and secure the liability of tour operators — as protection against their insolvency and bankruptcy. 

The task of the state and our goal is to create fair conditions for business for the benefit of all interested parties and at national level to realize better protection for the end users of package tourism services, emphasized the Minister of Tourism Dr. Ilin Dimitrov and Deputy Minister Irena Georgieva, who presented the developed concept of the Guarantee Fund. The conceptual project was created in cooperation with representatives of the Bulgarian Actuarial Society and presented to the organizations representing the segment of tour operators in the tourism sector — Association of Bulgarian Tour Operators and Travel Agents (ABTOTA), ‘Future for Tourism’ Association, ‘Tourism’ Association and Bulgarian Association of Travel Agents.
One of the priorities of the Ministry of Tourism in the past months was the continuation of the work on the development of a model of a Guarantee Fund to cover the liability of tour operators under Directive (EU) 2015/2302 of the European Parliament and of the Council of 25 November 2015, including the development of a proposal for a conceptual framework for a mandatory guarantee fund.

‘This fund is a small step in the direction of brightening the sector, which is part of our policy,’ Minister Ilin Dimitrov said. ‘This is another fulfilled promise of the priorities we outlined when we took office as a caretaker cabinet, it was important to make a start, because for years it has been said how important it is for the business to have such an instrument as an element of national protection against the insolvency of tourist organizations,’ added Minister Dimitrov. The need for such a fund has been particularly discussed during the unprecedented COVID-19 crisis. 

The Ministry carried out a study of the foreign experience of Poland, Germany, Denmark and the UK, on the basis of which different options for the design of the Guarantee Fund were considered. The available information for actuarial analysis was collected and provided with the assistance of the National Statistical Institute and the National Revenue Agency. A Task Force was formed and a series of stakeholder meetings were held. The Bulgarian Actuarial Society supported the work of the experts at the MoT with its expertise and specific analysis, and the result in the form of a conceptual framework was presented at this meeting. 

The conceptual draft envisages the creation of three pillars and the introduction of a mandatory Tourism Guarantee Fund (TGF) will build on the existing collateral regime through the mandatory insurance ‘Liability of The Tour Operator’. This third pillar should provide additional national protection against insolvency for tour operators, and this would be a realistic mechanism to build, in the experts' assessment. With such a structure and by introducing appropriate mechanisms and additional requirements — including for the prior and ongoing control of the activity and accountability of package tour operators and the adequacy of the compensation they provide — it could be possible in the reasonable short term to ensure at national level the necessary protection for consumers arising from the requirements of the Directive, said Deputy Minister Irena Georgieva. It is necessary to restructure the business model and the regime of operation and regulation of the activities of tour operators, which will lead to an improvement in the quality of services provided and better protection for consumers, she stressed. 

Initial mathematical models show that in order to accumulate financial resources in the fund, the contribution of the tour agencies will be 0.1% of their turnover, which at this point will mean a contribution of between BGN 80 and BGN 1,000. The idea is that the fund will cover the payment of benefits over the insurance limit of liability in cases of insolvency, temporary bankruptcy (liquidity problem) and possible unavoidable and exceptional circumstances.

‘The introduction of a functioning guarantee fund is a serious decision that requires legislative changes and close future cooperation with business representatives,’ Irena Georgieva stressed.
Given that the introduction of a guarantee fund requires a change in the legal framework and the existing institutional framework, a broad public consultation with all stakeholders and institutions is foreseen after the development of a proposal for legal changes. 

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