Aon's Credit Solutions Chief Broking Officer reviews 2021 and looks ahead towards 2022

I am pleased to share our Q3 Insights from Aon’s global Credit Solutions leadership team which profiles the insurance market dynamics and performance.

As business models are reshaped for organizations globally to respond and recover from the challenges posed by the COVID-19 pandemic we are learning to navigate new forms of volatility with a business outlook that has never been more complex and interconnected.

As our interview with Nicola Marzano, Financial Director of the global fashion brand Diesel brings to life, leaders need to prioritise team engagement as their operating models evolve and it also highlights the importance of managing business partnerships with insurers during these uncertain times.

Our Solution Spotlight illustrates ways in which digital tools can help Credit Managers make better decisions, and feature insights on how Surety facilities have continued to expand during 2021.

Within our Q3 Market Insight report, we highlight the continuation of the Insolvency paradox that began 12-months ago and the resultant current trend in the easing of underwriting conditions.

Key themes

• Losses from the COVID-19 pandemic have not yet materialized to levels initially anticipated by (re)insurers; Notwithstanding this, there is a broad consensus that 2022 will bring a rebound of insolvencies as support measures taper off.
• We have seen some market participant changes in 2021: Global multi-line carriers QBE and Zurich have curtailed their involvement in Trade Credit, whilst Canopius withdrew their XOL offering altogether. However, the larger Trade Credit insurers efforts over previous renewal cycles have improved both pricing adequacy and their overall performance which, coupled with the current favourable underwriting conditions, has now shifted their focus toward profitable growth.
• Pricing levels with improved portfolio performance, have facilitated increased risk acceptance levels through higher credit limit appetite and overall coverage amounts, which are currently on track to exceed pre-COVID levels by the end of 2021.

Top tips for clients

• From our experience, establishing a clearly defined strategy coupled with a clear and sufficient timeline will underpin a successful outcome of any renewal negotiation.
• Ensure that you take enough time to review the structure of your program with your Aon team as it should adapt to changes in your business profile and strategy. Coupled with high-quality submission information, then insurance policies can be adapted to reflect risk tolerance levels, both centrally and at a local level.
• Approval rates across certain sectors are now emerging stronger than pre-pandemic. Our teams are available to assist you in identifying and managing any under-insured or seasonality exposures, thereby closing the gap for more comprehensive credit limit coverage.
• Although insurers' loss ratios are currently much better than normal and their claims volumes lower than expected, this means that individual claims could be subject to close scrutiny. This low claims activity creates an important opportunity for policyholders to ensure that their risk management process, administrative, education and management information systems are fit for purpose for when the Insolvencies return.
• Credit insurance can often facilitate access to greater liquidity and more favourable terms for the financing of your trade receivables. Your Aon team can advise how this can be applied and the potential economic benefits.