Aito threatens appeal to Europe on financial protection insurance" alt="" width="299" height="199" align="right" class="newsArticleImage">

Aito will consider an appeal to Europe if it fails to win clarification of insurers’ responsibility to reimburse a failed tour operator’s customers after the Department for Business said insurance companies were entitled to “walk away” from a policy.

The Association of Independent Tour Operators (Aito) is incensed that insurance company AmTrust Europe voided a policy offering consumer financial protection on the grounds of a “material non-disclosure” by the company insured.

Aito believes the insurer’s action on July 1 blew a hole in the Package Travel Regulations (PTRs) which allow insurance against failure as one of several ways for tour operators to protect holidaymakers’ money.

However, the Department for Business, Innovation and Skills (BIS) denied the PTRs had been compromised. A BIS spokeswoman told Travel Weekly: “The regulations have not been undermined. If an insurer walked away because there was a material non-disclosure that would be the fault of the business.”

The spokeswoman added: “A company has to provide cover against bankruptcy through one of three ways. If a company failed to acquire insurance by not applying properly, that would be an offence. The company has to provide a way for consumers to get their money back.”

Leading Aito member Noel Josephides, managing director of Sunvil, said: “This makes no sense. It means insurance is not valid cover for the public.

“We considered Clause 19 of the PTRs meant that when a policy is in place the policy has to pay out. Now we have system that is fundamentally flawed. We will take it to the European Commission if necessary because the UK government has not implemented the PTRs as it should.”

The association's lawyers have written?to insurers?requesting written commitments to honour consumer protection policies.

The Department for Business confirmed that former Aito member Skiing Europe, which was insured by AmTrust, is under investigation by the police and Trad