Major insurer QBE pulls cover for 'high risk' retailers Myer, DJs
One of Australia's largest insurers will no longer provide cover for suppliers of struggling retailers Myer and David Jones after deeming the department store sector too risky to insure.
In a letter from QBE Insurance to suppliers, seen by The Age and The Sydney Morning Herald, the $13.2 billion insurer said it would no longer provide trade credit insurance for Myer and David Jones due to concerns the two retailers may not survive the COVID-19 crisis.
QBE has announced it will no longer provide insurance cover for Myer or David Jones. Credit:Eamon Gallagher
QBE said it had recently completed a review of the retail industry which had highlighted the department store sector as a "higher risk category". The company said it believed the two businesses would struggle with the "reality of unsustainable operating models and financial structures".
All insurance cover on Myer and David Jones will be withdrawn from suppliers on July 16, with QBE apologising for the "difficult decision".
"We appreciate this decision comes at a difficult time in the retail calendar and the post COVID-19 recovery path," the company said.
"However, with our views that operating models and financial structures will need to significantly change in the near term, our concerns are that not all participants will be successful in this regard."
QBE's move indicates the major insurer now believes there to be a high risk of both Myer and David Jones not being able to pay invoices for suppliers' goods, therefore landing the burden on QBE.
The move is a major indictment of both the department store chains, which have faced intense scrutiny and questions of their viability over the COVID-19 pandemic.
In early June, David Jones announced it would accelerate its plans to close some of its 48 stores and sell about $1 billion in property assets to reduce its sizeable debt pile and cull any unprofitable stores. Myer has not announced any similar moves, but closed all of its 60 locations during the pandemic lockdown.
Myer, David Jones and QBE have been contacted for comment.
More to come.