I don't think that this is a comforting perspective if there is alternative to avoid any ATOL-bonded chaos at all by booking with another airline...
What I don't understand as not being from the UK: If ATOL is a mechanism to protect customers of tour operators, why would the inability of a tour operator owned by an airline to pay the ATOL fee have an effect on the airline itself? So technically, if the ATOL expires, the subsidiary could not legally sell tickets on Monarch or any other airline, but it would not stop Monarch as an ailrine from trading immediately.