United Kingdom

Financial Institutions

Capital optimisation

In an evolving and complex regulatory environment, whether the driver is managing credit risk, credit concentrations or capital optimisation, the Aon Credit Solutions team has deep experience of creating solutions across multiple finance product lines and can help financial institutions generate additional revenue and optimise return on risk-weighted assets.

Our global footprint, across key financial markets, enables us to provide our clients with high levels of service and access to over 60 insurance markets. We also benefit from the full sponsorship of Aon’s significant relationships with insurers at a group level, which helps ensure we negotiate the best solutions on behalf of our clients.

Credit Solutions

Capital optimisation

Background

A financial institution was contemplating expanding the use of credit insurance for capital relief.

Under Basel II / III, depending on the bank’s internal model (standardised / IRB) credit insurance can be used to improve the risk-weighted-asset calculation (e.g. Probability of Default, Loss Given Default factors) and allow for Double Default methodology to be used.

Solution
  • Aon designed a bespoke single risk wording and adapted a multi-debtor credit insurance wording with a specific Trade Financier Endorsement.
  • The clear wording of the policy allowed the operational aspects to be in the bank’s direct control.
  • Following third-party legal opinion, the insurance policies could be used as eligible credit risk mitigants, resulting in reduced capital and an improved return on risk-weighted assets.

Risk management

Background

A financial institution was working with a global corporation to arrange a USD120 million off-balance sheet finance facility, using receivables in multiple countries. As part of the transaction, the bank required its client to establish an appropriately structured credit programme over its debtors.

Solution
  • Aon worked with the financier and corporation to structure the deal.
  • Receivables credit insured on a 100% indemnity basis, excess of a nominal first loss.
  • Sufficient comfort provided to auditors to allow the finance facility to be de-recognised and off-balance sheet.

Credit concentrations

Background

An international travel agency was contemplating how to best enable continued business growth in certain key (emerging) markets.

Their success over recent years has resulted in significant credit exposures across the world.

Solution
  • Aon worked with the financier to develop a single risk non- cancellable credit insurance solution for tenors up to 8 years.
  • Credit insurance was used as unfunded credit risk mitigation and as an alternative to funded syndication.
  • Empowered business growth for the vendor finance business.

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Aon UK Limited is authorised and regulated by the Financial Conduct Authority. FPNAT511