Introduction

Aon's Credit Solutions Chief Broking Officer reviews market dynamics and client trends

I am pleased to share our Q1 Insights from Aon’s global Credit Solutions leadership team which reflects on the key market dynamics from 2022 as well as highlights some of the critical trends for 2023.

The outlook for the global economy is full of uncertainty with inflation continuing to remain high despite the tightening of central banks monetary policy. The preliminary financial results for 2022 of our key carriers show strong growth, but illustrate that covered losses are back and starting to return to the levels not seen since before the pandemic. Credit limit capacity is at an all-time high with appetite remaining healthy although approval rates appear to have plateaued with divergent sectoral and geographic approaches.

The failure in Q1 2023 of Brazilian retailer Americanas represents a significant severity loss in the credit insurance market. The company had been engulfed in crisis since it revealed accounting “inconsistencies” of more than US $3.5 billion. These inconsistencies were disclosed in their Q3 2022 financial results, demonstrating the speed at which the failure unfolded.

We have also recently seen Silicon Valley Bank (SVB) entering receivership. Although it is unlikely to lead to significant insured losses in the credit market, this does highlight how one failure can affect confidence in an industry overall. In Europe, UBS Group AG agreed on March 19th to buy Credit Suisse Group AG in a government-brokered deal aimed at containing the crisis of confidence across global financial markets. We expect that these events will continue to have wider implications, leading to even greater focus on i) de-risking counterparty credit risk, ii) ensuring greater diversification of working capital partners for corporates and, iii) insureds evaluating coverage held to ensure adequacy and fit for purpose.

Our 2022 Credit Solutions Conference brought together global subject matter experts to discuss the finance issues that are most pressing at this time. As Nobel Prize Economist Professor Joseph Stiglitz mentioned at our conference: “Credit solutions are an important tool in enhancing the ability of both financial institutions and corporates to manage risk.” This report specifically dives back into the discussion around Surety solutions held by our team of specialists.

In this edition’s solution spotlight, we also review the applications and benefits of credit solutions to support infrastructure projects, particularly in the context of on climate transition spending. Insurer appetite for renewable assets has been specifically amplified in their move to diversify away from historical concentrations in the oil and gas sector.

As always, our Credit Solutions team's role is to ensure every Aon client is better informed, better advised, and able to make better decisions around our products.