Insurance alternative to bank guarantees: The Thai experience
Beginning of the year 2001, IATA raised concerns over the aggregated sales volume generated in a period of 30 days by agents far exceeding the current financial collateral at the time. As a result IATA proposed to increase amount of bank guarantees, in order to protect IATA airlines from exposure tofinancial risks. Realising the financial […]
November 1, 2008
Realising the financial burden upon member agents, the Thai Airfreight Forwarder Association – TAFA consulted with Airlines Cargo Business Cargo – ACBA (known as ACP then), and Thai Star Surety Co., Ltd. – TSSC as the TAFA insurance consultant, to find alternative solutions besides putting up bank guarantees. Finally the committee agreed to adopt financial assurance policy instead of the bank guarantee and urged the TSSC to do feasibility study and to find supporting insurance companies for the program.
The Default Insurance Program-DIP policy was concluded in August 2001, and only TAFA ordinary members, which number about 100 out of 136 of total members, of high standard and good financial strength were allowed to participate in this program. The DIP program took off on 1 October 2001 with 55 TAFA agents and 38 airlines participating.
The original policy would cover 45 days of aggregated sales amounting to not more than THB100 million (US$2.9 million) per agent, and total THB240 millions in aggregate. However the coverage was reduced to THB50 million and THB240 million in aggregate after the September 11 incidents. Since 2005 the limit has been re-adjusted to THB100 million.