LONDON, 17 July 2008 - Paper merchants claimed over £10 million for debtor insolvency over the last 12 months, according to Aon Trade Credit that handled £3 million of the claims. Speaking at the National Association of Paper Merchants' policy group, the credit insurance broker warned that tougher economic conditions mean that credit insurance costs could rise by 10% but, more worryingly, could lead to underwriters withdrawing cover for the paper industry during this crucial time.

The paper industry’s rise in insolvencies is attributed to:

• businesses failing to absorb or pass on increases in fuel and power;
• the large number of highly geared businesses - and Aon expects further failures as a result of banks not renewing or reducing facilities in 2008;
• the 15% deterioration in sterling forcing European merchants to further raise prices for UK importers.

Pre-pack arrangements have become an increasingly common form of insolvency since the introduction of the 2002 Enterprise Act, leading to approximately 25% of claims handled by Aon in 2007/8. With less control over recovery, this is yet another issue on credit insurers and brokers' radar.  

James Bowker, leader for the Paper Sector at Aon Trade Credit, said: "Paper merchants have been hit by a number of debtor failures and some credit insurers are now losing their appetite in this sector, which is facing the most difficult business environment for at least a decade. As a result, we're working with those insurers who are closest to the sector, who are most willing to visit our clients' customers and therefore have the best understanding of the issues."

Aon recommends companies take the following actions to help prevent slashed credit limits:

• meet underwriters more frequently;
• work with other members of the National Association of Paper Merchants to create strength in numbers, with one coordinated insolvency practitioner acting on your behalf;
• make sure you have adequate credit limits in place;
• keep a close eye on customers requesting extended trading terms.

For more information contact:

Alexandra Lewis
020 7882 0541

Alexandra.lewis@aon.co.uk

http://aon.mediaroom.com

About Aon

Aon Corporation (NYSE: AOC) is the leading global provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting. Through its 36,000 colleagues worldwide, Aon readily delivers distinctive client value via innovative and effective risk management and workforce productivity solutions. Our industry-leading global resources, technical expertise and industry knowledge are delivered locally through more than 500 offices in more than 120 countries. Aon was named the world's "best broker" by Euromoney magazine's 2008 Insurance Survey. Aon also was ranked by A.M. Best as the number one global insurance brokerage in 2007 based on brokerage revenues, and voted best insurance intermediary, best reinsurance intermediary, and best employee benefits consulting firm in 2007 by the readers of Business Insurance. For more information on Aon, log onto www.aon.com

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