TICO Says Deloitte Study Reveals Compensation Fund Vulnerability

Bruce Parkinson, Open Jaw

An analysis and financial assessment of Ontarios travel industry compensation fund concludes that current funding arrangements combined with expected losses will deplete the fund over the next 10-15 years.

Ontario travel industry regulator TICO engaged Deloitte to complete an actuary analysis and assessment of the industry financed Compensation Fund. The purpose of this study was to determine the adequacy of the fund under various scenarios of expected losses, and to assess the sustainability of the fund into the future. 

Significant conclusions of the report include:

  • Current funding arrangements combined with expected losses are projected to deplete the fund over the next 10-15 years; 
  • Significant risk exists with the dependency on charge-back policies of credit card processors, leaving the fund and consumers at risk if these policies change in the future;
  • The optimal approach to achieve the desired target fund levels is a new funding model that includes a variable consumer protection fee;
  • The report suggests target fund level of $50 million and the introduction of a comprehensive reinsurance layer to protect consumers from catastrophic losses.

TICO says the findings of this report were integral to the recommendations it made during the comprehensive review of the Travel Industry Act, 2002 and Ontario Regulation 26/05. 

You can read the entire report here.

Bruce Parkinson

Bruce Parkinson Editor-in-Chief

An observer and analyst of the Canadian and international travel industries for over 25 years, Bruce uses the pre-dawn hours to prepare a daily news and information package to keep industry members up to date.




Comments

Harry Schneider - November 29, 2017 @ 11:11
TICO should be more selective as who they give licenses to sell travel !

Darren Swidler - November 28, 2017 @ 14:11
It's interesting that TICO releases this report 6 months after receiving it and after all the consultations are completed. In September, just 2 months ago, registrants were assured that the Fund is in good standing. Perhaps this publication can get TICO to release the 55 recommendations that they made to the government? RECO also made recommendations during the recent review of the Real Estate Act and all of their recommendations are posted on the RECO website. My guess is that one of TICO's recommendations is to start collecting a $10,000 security deposit from every registrant (not just new registrants) and using the interest from the security deposits to pay TICO's operating expenses which are now forecast to increase from $4.2 million to $6.0 million even as the registrant base continues to decline. It's this increase in expenses that is depleting the fund, not the claims. In fact, contributions from registrants are more than sufficient to cover the compensation claims.

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