2015 was an interesting year for the UK trade credit insurance market. There have been soft market conditions and premium rates have been at historically low levels, with the size and frequency of claims increasing alongside this. In 2016 we expect market conditions to remain competitive and pricing to stabilise. This is due to the claims environment and global uncertainty from commodity price volatility, the Chinese stock market and a potential housing bubble in the UK.

1. Aon Credit International’s
Review of 2015
A year end summary and some thoughts for 2016
Aon Risk Solutions
Aon Credit International
Risk. Reinsurance. Human Resources.

2. 2 Trade credit 2015: overview
2015 trade credit insurance market
2015 was an interesting year for the UK
trade credit insurance market. There
have been soft market conditions and
premium rates have been at historically
low levels, with the size and frequency
of claims increasing alongside this. In
2016 we expect market conditions
to remain competitive and pricing
to stabilise. This is due to the claims
environment and global uncertainty
from commodity price volatility, the
Chinese stock market and a potential
housing bubble in the UK.
At Aon Credit International (ACI), we
have seen a significant increase in
business where raising finance and
working capital is the main driver,
with either a financial institution as
the insured or insurance is a condition
precedent of the financing facility and
the financier taking a loss payee / joint
insured position.
Generally there are three reasons as
to why a financier will look to utilise
insurance within a deal structure:
1. Risk Management
Supporting internal credit decisions
by providing risk mitigation, credit
enhancement on investment and non-
investment grade risks
2. Credit Concentrations
Providing alternatives to funded/
unfunded syndication, allowing the
financial institution to utilise insurer
capacity to hold a higher proportion of
the deal
3. Capital optimisation
Using insurance and guarantee
products as eligible unfunded credit
protection to improve capital relief
Finance was the driver behind 45%
of the deals closed during the course
of 2015. We picked up on this trend
during late 2013 and launched our
Special Products offering, whilst
formalising a financial institutions deal
team within the UK. This proposition
will be rolled out across EMEA during
the first quarter of 2016.
We have seen a need to develop
products which not only support
factoring and invoice discounting
but also asset based lending and off-
balance sheet receivables finance, as
these types of financing have become
more popular with multinationals
and UK corporates. During 2015 new
solutions for stock finance, leasing
and football finance (transfers and TV
rights) were also developed.
Rob Michael
Head of Business Development
+44 (0)20 7086 0330
robert.michael@aon.co.uk
An overview

3. Aon Credit International 3
An insight into
A leading automotive company obtaining
off-balance sheet finance
The client was looking to put in place a £90m off balance sheet
receivables finance facility for their mid-year, financing trade
debtors across their business to reduce their net debt burden
as much as possible.
A credit insurance wrap was key to gaining auditor agreement
that the finance facility was suitable for off balance sheet
treatment and could be de-recognised. Wishing to assist the
client in meeting their aim we introduced a major French bank.
The bank had not previously provided such a solution to clients
in the UK and looked to ACI to lead the deal.
Using our expertise, we were able to structure a credit
insurance wrap that transferred more than 95% of the trade
debtor risk to the underwriter.
This provided sufficient comfort for the client’s auditors to
agree that the finance facility could be de-recognised and they
were able to reduce their net debt burden by £90m when
cover incepted.

4. 4 Trade credit 2015: overview
Special Products
Within Special Products we work with
corporations and financial institutions
across credit, as well as bonds and
guarantees (surety), on mostly
transactional and structured deals.
For corporations, we have seen a trend
for a more sophisticated use of these
products, where treasury and finance
use credit insurance and surety to
improve working capital across the
payables, receivables and guarantees
areas of their business.
Over the past 12 months, we have
helped clients use these products to
improve supply chain and receivables
finance facilities, replace existing
collateral with insurance and extend
credit terms. We have also seen the
increased use of top up and syndication
to cover shortfalls in cover on existing
insurance programmes.
In the surety world, we have seen
the continued growth of commercial
bonds being issued by sureties as an
alternative to letters of credit from
banks. Sureties have issued on demand
guarantees in respect of a range of
obligations such as deductibles under
general insurance policies, pension
deficit repayments and deferred
consideration on acquisitions. The
benefit of surety is that it is normally an
unsecured credit facility for the client
which is off balance sheet. The latest
innovation that Aon has developed has
been the replacement of collateral for
the gaming industry.
For financial institutions, 2015 saw
the increased awareness of how
credit insurance and surety can help
risk distribution and provide capital
optimisation. As a general comment,
whilst credit insurance has been
used for capital relief on single risk
transactions for a number of years, we
have seen this extend into multi-debtor
receivables financing.
Looking forward to 2016, with the
development of new products and an
increase in insurer capacity (in both
quantum and tenor), we are excited
about what the year ahead holds.
We will certainly be encouraging
corporations to take a fresh look at
credit insurance and surety to see
how these products can improve their
working capital, and we expect that
financial institutions will continue
to be a growing purchaser of the
products, with capital optimisation and
management of credit concentrations
being the key drivers for purchase.
Steve Taylor
Executive Director, Special Products
+44 (0)20 7086 1631
stephen.taylor2@aon.co.uk

5. Aon Credit International 5
An insight into
James Ponsford
Development Director
+44 (0)20 7086 0387
james.ponsford@aon.co.uk
Securing single risk cover
for an energy trader
The client is the UK trading arm of a global energy trader who
traditionally mitigate credit risk utilising Letters of Credit. Our
client was looking to make multiple trades of Liquified Natural
Gas (LNG) with a major state owned Latin American oil trader
(State Oil Trader), who were unwilling to post Letters of
Credit.
The client requested we source contract frustration insurance
on their behalf to secure payment against the State Oil Trader.
ACI sourced capacity on the State Oil Trader from a number of
company and Lloyd’s markets – a challenging risk which was
also downgraded during the marketing exercise.
The key to successfully closing this business was our ability
to obtain cover for settlement risk and M2M exposure. We
developed a bespoke wording which addresses key points
including advanced claim payments for any frivolous disputes.
The global downturn in commodity prices has led to a rise in demand for non-
payment insurance in the natural resource sector. In particular, with increased price
volatility, a growing area of interest has been securing mark to market cover* (M2M)
in addition to the traditional settlement risk. Our team have worked hard in 2015
to expand M2M capacity within the Lloyd’s and London market through market
presentations and strategic broking strategies.
*Mark to market cover insures the difference in sales contract price received by the Insured to an
alternative buyer (often under distressed circumstances) after the original buyer defaults. If the market
price deteriorates the M2M peril covers the Insured against this Loss.

6. 6 Trade credit 2015: overview
2015 saw the headline value of
claims that Aon settled at GBP 58.5m
compared with GBP 75m in 2014. It is
important to highlight that although
it would appear this shows a reduction
in claims, the 2014 value contains the
exceptional loss on the Phones 4U
insolvency which totalled GBP 36.4m.
By excluding this loss, and by looking at
the number of claims, the actual trend is
that claims are increasing. The number
of claims during 2015 was 706 which
has risen since 2014 where the number
of claims was 668.
Whilst Phones 4U grabbed the headlines
in 2014, we saw a number of substantial
insolvencies in 2015, not only in the
UK, but also overseas. The failure of OW
Bunker, PaperlinX UK and the resulting
failure of Tullis Russell Papermakers Ltd,
coupled with, in Q4, the insolvencies of
most of Caparo Group’s UK businesses,
provided a clear indication that a
number of trade sectors are facing
significant challenges in terms of
commodity prices and cost control, as
international competition intensifies.
The closure of SSI’s UK plant, as an
example, provides further evidence of
this.
ACI continued it’s strong claims
performance in 2015, with 98% of
completed claims agreed or paid.
Of the 2%, of claims declined, ACI’s
intervention resulted in insurers
reviewing their initial decisions on more
than half of the 14 claims involved and
settling an additional GBP 454k of “out
of order” claims. That is a performance
which I firmly believe leads the market
and is greatly valued by our clients.
Claims overview
Matthew Tuckey
Claims Director
+44 (0)118 929 5078
matthew.tuckey@aon.co.uk

7. Contacts
Rob Michael
Head of Business Development
+44 (0)20 7086 0330
robert.michael@aon.co.uk
James Ponsford
Development Director
+44 (0)20 7086 0387
james.ponsford@aon.co.uk
Steve Taylor
Executive Director, Special Products
+44 (0)20 7086 1631
stephen.taylor2@aon.co.uk
Matthew Tuckey
Claims Director
+44 (0)118 929 5078
matthew.tuckey@aon.co.uk
Aon Credit International (ACI) is the leading international
trade credit insurance broker offering solutions to protect
against trade credit risk, enhance business growth and
facilitate access to trade finance.
With teams in 57 countries, ACI brings distinct expertise,
analytics and creativity to identify and propose the right
solutions for businesses in any sector whether they are
UK based or trade internationally. As market leaders,
ACI has tangible leverage in the market, optimising
coverage and limit capacity whilst also delivering an
all-encompassing, tailored service proposition.
About Aon Credit International

8. About Aon
Aon plc (NYSE:AON) is a leading global provider of
risk management, insurance brokerage and
reinsurance brokerage, and human resources
solutions and outsourcing services. Through its
more than 72,000 colleagues worldwide, Aon unites
to empower results for clients in over 120 countries
via innovative risk and people solutions. For further
information on our capabilities and to learn how we
empower results for clients, please visit: http://aon.
mediaroom.com/
© Aon UK Ltd 2016. All rights reserved.
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Financial Conduct Authority. FPref: FPACI14.01.15
The information contained herein and the statements expressed are of
a general nature and are not intended to address the circumstances of
any particular individual or entity. Although we endeavor to provide
accurate and timely information and use sources we consider reliable,
there can be no guarantee that such information is accurate as of the
date it is received or that it will continue to be accurate in the future.
No one should act on such information without appropriate profes-
sional advice after a thorough examination of the particular situation.
Risk. Reinsurance. Human Resources.