Trade body warns that most products don’t cover the collapse of tour groups like XL.

Few travel policies would cover the risk of a tour operator failing, the ABI has warned in the wake of the XL Leisure Group collapse.

Up to 285,000 holidaymakers were left stranded abroad when XL, the UK’s third-largest tour operator,went into administration last Friday as a result of volatile fuel prices and an inability to secure emergency funding.

But an ABI spokesman said many tourists in a similar position would get no help from their travel insurance.

“There are some specialist providers that do provide this cover but the majority of providers are unlikely to cover this kind of contingency,” he said.

The cost of flying the XL tourists home is being met by the Civil Aviation Authority (CAA), which also refunds those due to fly with the group.

The CAA was unable to provide a figure for the cost but, as Insurance Times went to press, it had arranged 94 repatriation flights carrying more than 22,000 holidaymakers.

It is believed a number of major insurers may have some exposure to the tour operator’s collapse, having underwritten a £42m bond that XL put up in case of failure when it renewed

its Air Travel Organisers Licence (ATOL) in March. The CAA was unable to name the insurers.

The leisure industry has been badly hit in recent weeks. Two smaller holiday companies, Seguro and K&S Travel, collapsed last week. Last month Zoom Airlines suspended operations. Alitalia, the Italian flag-carrier, may have to axe thousands of jobs to save the company.

Derek Moore, chairman of the Association of Independent Tour Operators, warned of a “two-tier industry” where customers who book through ATOL-registered tour operators are protected and those who book directly through some airlines are not.

He said: “It’s a ghastly mess all round, and needn’t have been so had the government followed the travel industry’s recommendations – including those of its own select committee on transport – to insist that airlines were also brought within the remit of the ATOL regulations.”

In the year to March, ATOL flew home more than 2,000 customers of failed tour groups and 21,000 clients received a refund of advance payments.