Navigating Volatility with Trade Credit and Surety
This article is provided by BRC Associate Member, Aon.
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Retail organisations are facing ever greater forms of volatility in today’s landscape, with the four megatrends of Trade, Technology, Weather and Workforce impacting all areas of business decision making. Global trade faces significant challenges, with disruption to supply chains, trade wars, and increasing geopolitical tensions in a fractured international landscape.1 Aon’s 2025 Global Risk Management Survey saw cash flow and liquidity risk re-enter the top ten business risks, with commodity price risk ranking at sixth. In an uncertain economic climate, the retail industry is likely to contend with rising non-payment and bad debt risk, while rising inflation impacts liquidity and future strategic investment decisions.
Despite these challenges, Aon’s Market Insights Report for H1 2025 showed high levels of risk acceptance at approximately 75 percent, with credit insurers maintaining strong support. With insolvencies forecast to rise globally to 9 percent in 2025 and a further 5 percent in 2026, more companies are expected to use trade credit insurance to insure non-payment risk, grow buyer relationships, aid credit management decision-making and secure lending facilities.2
Unlocking the Value of Trade Credit
Trade credit safeguards domestic and international receivables against buyers for non-payment due to insolvency or protracted default, allowing the buyer to purchase services or goods and pay the supplier at a later agreed-upon date. In these arrangements, insurers provide critical support to the retail industry. This solution also allows for expansion into further markets or products, with cash flow and investments shielded against global volatility through the risk of buyer default.
While the retail industry can benefit from the capital that trade credit unlocks, it’s important to understand how businesses are perceived as a credit risk. Retailers that have a well-established credit history will have greater access, making effective communication with the market a necessity. Leveraging credit risk advisory services gives valuable insight into a business’s standing within that ecosystem, ensuring that both lenders and trade partners view their finances as credible and stable. This helps to foster trust and supports the negotiation of more favourable terms. It’s also important to note that as a business changes management or structure, so does the external view of the business. Strategic credit risk advisory safeguards access to credit while these transitions take place.
1. Client Trends Report 2025, Aon
2. Market Insights Report - H1 2025, Aon
We have witnessed a growing trend in the use of receivable finance in the retail industry, with invoice discounting or factoring becoming a strategic tool for working capital. Global factoring volumes saw double digit growth, while there is an increasing overlap in the use of trade credit insurance as a form of collateral to improve financing volumes to optimise working capital facilities of small and medium-sized enterprises and multinationals. Bank regulatory rules are continuously changing; trade credit insurance remains a tool that banks accept to help manage risk and their internal capital costs.
Structured Credit and Political Risks
Structured credit and political risk solutions mitigate credit and political risks tied to large-scale transactions, long-term contracts, and capital-intensive investments, enabling global growth while protecting against defaults, expropriation, currency inconvertibility, and political violence. For global companies that operate in multiple regions which bear differing levels of risk, political risk insurance protects assets and supports growth against such events. While geopolitical, economic and regulatory changes are influencing risk perception, insurer priorities and capital distribution, insurer appetite has continued to grow in these areas.3 The market has also seen a 10 percent increase in insurers, with specialist insurers entering the market.
Building Financial Stability Through Surety Solutions
Surety bonds are financial instruments through which insurers guarantee the successful performance of an organisation to a third party (known as a beneficiary or employer), without tying up cash or credit lines. From contractual fulfilment to regulatory compliance, surety solutions strengthen business credibility while preserving liquidity for core operations. Surety bonds are increasingly vital in industries such as manufacturing, fast moving consumer goods and food and beverage, where performance guarantees can help businesses trade where cash collateral or bank guarantees are required.4
Surety bonds are also increasingly being used beyond their traditional role as performance bonds. They offer businesses the ability to free up working capital by replacing bank-issued letters of credit. Traditionally, as an unsecured financial product, surety can support corporations by serving as an off-balance sheet item, allowing banks to maintain their credit lines for other purposes. This positions surety as a complementary tool rather than a competitor to banks. Surety solutions are flexible enough to be implemented in both volatile and strong market cycles, supporting a range of financial objectives.
3. Market Insights Report - H1 2025, Aon
4. Better Decisions on Credit Insurance and Surety Market Dynamics for the Food, Agribusiness and Beverage Industry
How Aon can Help
As one of the largest trade credit brokers, we partner with clients to drive growth, unlock capital and secure receivables through multi-disciplinary teams including trade credit, surety and structured credit/political risk. Powered by advanced actuarial modelling, pioneering technology and deep industry insights, we deliver tailored solutions that help organisations navigate new and heightened forms of volatility.
Optimising Working Capital With a Surety Bond Solution for a Leading UK Retailer
A leading UK retailer required a £60 million credit limit as part of the renewal of its electricity supply contract in Q1 2023. While the new supplier held credit insurance, they were unable to secure the full credit limit due to the retailer’s capacity constraints. The traditional alternative, a letter of credit, would have resulted in a significant working capital tie-up and incurred large costs.
Aon’s team engaged with the retailer’s treasury and identified the opportunity to use a surety bond in place of a letter of credit. Aon identified two markets that collectively met the client’s £60 million requirement, preserving their working capital and providing the supplier with an on-demand guarantee in the event of non-payment of invoices. This surety solution produced a seven-figure cost saving for the retailer and 100% indemnity for the supplier alongside this working capital optimisation.
While care has been taken in the production of this document, Aon does not warrant, represent or guarantee the accuracy, adequacy, completeness or fitness for any purpose of the document or any part of it and can accept no liability for any loss incurred in any way by any person who may rely on it. Any recipient shall be responsible for the use to which it puts this document. This document has been compiled using information available to us up to its date of publication and is subject to any qualifications made in the document.
This article has been compiled using information available to us up to 2025. Aon UK Limited is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales. Registered number: 00210725. Registered Office: The Aon Centre, The Leadenhall Building, 122 Leadenhall Street, London EC3V 4AN. Tel: 020 7623 5500.
About Aon
Aon plc (NYSE: AON) exists to shape decisions for the better — to protect and enrich the lives of people around the world. Through actionable analytic insight, globally integrated Risk Capital and Human Capital expertise, and locally relevant solutions, our colleagues provide clients in over 120 countries with the clarity and confidence to make better risk and people decisions that help protect and grow their businesses.
