Newly formed Public Mutual Insurance has launched the Chinese insurance industry's first sea freight surety product for small and medium-sized enterprises in the maritime logistics chain.
The product aims to address creditworthiness issues among small freight forwarders in the country where credit data is incomplete or unavailable in the maritime sector, thus hampering the development of a credit information system. This means that a large number of small and medium-sized enterprises have been unable to obtain financial support from traditional financial institutions.
The pressure on the cash flow of small and medium sized freight forwarding companies has been huge because they have to book cargo space but have been unable to obtain credit from banks, thus limiting their expansion.
Public Mutual Insurance received the regulatory approval to start operations in February 2017. When announcing its establishment, the mutual insurer said that it would focus on credit insurance, to meet the funding needs of small and medium-sized enterprises in specific industry chains and sole proprietors. Small businesses have difficulty securing credit, and when they do, financing costs are often high for them.
The shipping freight surety product was launched this month after a year of preparations.
A Public Mutual Insurance executive said that the mutual insurer's goal is to provide guarantees for CNY1bn for a start, although the financing needs of its target market of small and medium sized freight forwarders are several hundred times larger.