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Credit limits
- Global limit approval rates at the end of 2022 were 400 basis points (bps) lower than 2021, and 600 bps lower than pre-pandemic levels.
- External headwinds to growth include renewed supply-side shocks, geopolitical tensions and rising interest rates.
- Company balance sheet are beginning to show the effects of these pressures, and this is reflected in insurers approach to risk.
- Our teams are available to assist you in identifying and managing any underinsured exposures and accessing more comprehensive credit limit coverage.
Industry trends
- Approval rates in Agribusiness reduced by 300 bps to 70.0 percent in the fourth quarter of 2022. Slowing demand and margin pressures due to higher costs and inflation exacerbated by the conflict in Ukraine are weighing on the sector.
- Approval rates for Retail/Wholesale and Food & Drink sectors fell back in the final quarter of 2022. Higher input and employment costs have proven difficult to pass on to consumers. A fall in demand and increases in interest rates have contributed to difficult performance in the sectors.
- Automotive approval rates decreased by 300 bps quarter-on-quarter and 800 bps year-on-year as supply chain issues (specifically access to semiconductors) continue to create issues.
- Manufacturing and Technology both experienced reductions in approval rates in the last quarter of 2022. High input costs, wage inflation, and a fall in demand have stifled growth.
- Approval rates for Steel and Construction reduces further during the fourth quarter of 2022, as infrastructure spending is cut back or suspended due to higher costs and economic uncertainties.
Sector acceptance rates
Source: Aon TradingDesk Insights
Regional acceptance rates
Source: Aon TradingDesk Insights
Geographic trends
- Although approval rates in LATAM decreased by 400 bps in the fourth quarter of 2022 and 500 bps for the full year, they remained 700 bps higher than pre-pandemic levels.
- US Real Gross Domestic Product rose by 2.9 percent during the fourth quarter of 2022, exceeding the consensus forecast of 2.6 percent. Limit approval rates within the region increased by 300 bps during the quarter but are 300 bps lower than in the same period in 2021.
- Growth in much of East Asia and the Pacific has been driven by recovery in domestic demand, enabled by a relaxation of COVID-19-related restrictions, and growth in exports. Limit approval levels decreased by 200 bps during the quarter and are 500 bps behind pre-pandemic levels.
- Approval rates across EMEA decreased by 500 bps year-on-year to 73 percent and are 1400 bps lower than pre-pandemic levels. The conflict between Russia and Ukraine has proven costly for the Eurozone, with high-interest rates continuing to slow demand.