From 23 June 2021, banks and insurance companies will be able to apply for state relief from the guarantees that they provide to the Travel Guarantee Fund on behalf of small and medium-sized package tour operators. The new scheme will be managed by GIEK until 1 July, when it will be taken over by the newly established Eksportfinansiering Norge (Eksfin).
The travel industry has been hard hit by the pandemic, and many package tour operators have barely had any income for more than a year. Consequently, on 27 May 2021, the Norwegian parliament, the Storting, decided to establish a temporary state scheme to help the industry comply with the requirement for a Travel Guarantee Fund.
In 2019, around 890 package tour operators had provided guarantees to the Travel Guarantee Fund. This fell to 700 through the COVID-19 pandemic.
“With this scheme, the state will help to ensure that the lack of a guarantee will not stand in the way of package tour operators being able to send people on trips once infection control rules allow,” says Minister of Trade and IndustryIselin Nybø (Liberal Party) in a press release.
Large package tour operators such as Tui, Apollo, Ving, and Hurtigruten are not covered by the new scheme.
Risk shared between private financial institutions and the state
Package tour operators have a duty to provide a guarantee for each package tour that they sell. Under the Norwegian Package Travel Act, tour operators must provide a guarantee to the Travel Guarantee Fund through a bank or insurance company, or through a cash deposit in a restricted account. The bank or insurance company conducts a risk assessment and decides whether it can provide a guarantee for the individual package tour operator.
With the new scheme, the banks and insurance companies share 50 percent of the risk they incur in 2021 through to 31 December 2022.
The scheme has an upper limit of NOK 1.05 billion, of which half is guaranteed by the private financial institutions, and the other half by GIEK/Eksfin. The scheme runs until the end of December 2021.
Eksfin (GIEK until 1 July) will announce the scheme via the Travel Guarantee Fund and industry organisations for the travel industry, as well as let well-known guarantors know directly.
Application deadline: 23 June
Eksfin will allocate the guarantee funds to guarantors based on their current market shares. Banks and insurance companies wishing to use the scheme must provide Eksfin with the following information:
– current number of guarantees and total guarantee amount
– number of expected guarantees and total guarantee amount as at 31 December 2021
– expected premium income related to the guarantees that the bank or insurance company is seeking risk relief for
NB! It is assumed that private guarantors requesting risk relief under the scheme will relieve all the guarantees that qualify under the scheme.
The bank or insurance company will have their costs covered related to the administration of the guarantees made, up to 30 percent of their premium income. The other income shall be divided according to the sharing of risk so that the bank or insurance company can retain 65 percent of their income, while a minimum of 35 percent of income is passed onto the state.
Eksfin will, on the basis of the needs submitted and the distribution of the scheme’s funds, enter into an agreement with the individual guarantor applying for relief under the scheme.
The information must be sent by e-mail to firstname.lastname@example.org (from 28 June). Please contact Director Short Term Credit Insurance Erica Blakstad should you have any questions.
Fourth temporary guarantee scheme during the pandemic
The travel scheme is the fourth relief scheme that Eksfin/GIEK has been commissioned to manage during the pandemic. During 2020, Eksfin/GIEK has already administered the Flight Scheme, the Loan Guarantee Scheme, and the Flight Scheme and Travel Insurance Scheme for credit insurance (the latter two expire in June 2021).