A number of high-profile insurance providers are beginning to review or repeal their cover for the retail industry, more specifically department stores Myer and David Jones, according to a report by SMH.
Atradius, the Bond & Credit Co., Coface and Euler Hermes are allegedly reviewing and reducing cover for the department stores, while QBE said in a letter to suppliers seen by SMH that it had made the decision to cancel all insurance to DJs and Myer due to the current market conditions.
QBE confirmed to Inside Retail the decision came after an industry review highlighted the department store sector as “high risk”.
“While we appreciate this is a difficult time for these two retailers, we believe this is a prudent course of action in the current market conditions,” a QBE spokesperson said.
“We have advised both Myer and David Jones of our willlingness to continue to review our position as and when further information about market conditions becomes available.”
A David Jones spokesperson told Inside Retail the business was in a strong cash position after successfully trading through the COVID-19 lockdown, and was continuing to work closely with all its supplies – including those who utilise trade credit insurance.
“We are working closely with trade credit insurers so that they can gain a direct understanding of our position rather than taking a broad sectoral view,” the spokesperson said.
“We have strong relationships with our suppliers and all payments to suppliers have continued throughout COVID-19. As demand continues to recover with the easing of restrictions we are focussed on maximising our mutual benefits from these improvements.”
A Myer spokesperson told Inside Retail the business is continuing to pay its suppliers as per agreed terms, regardless of trade credit insurance.
Inside Retail reached out to a number of insurance brokers for comment, but hadn’t received responses by the time of publication.
The trend could become a concern for the ailing retail sector if current conditions continue – with many expecting to see business’ struggles worsen should the government not extend subsidy programs beyond September.
Think tank The Grattan Institute recommended on Monday morning the government extend a further $70 to $90 billion in extra stimulus to help support the ailing economy as it gets back on its feet following the COVID-19 crisis.