QBE will no longer provide cover for suppliers to Myer and David Jones, after flagging the department store sector too risky to insure.
The insurance firm has sought to reduce risk in its trade credit portfolio amid the coronavirus.
The company expressed concerns the department store sector would grapple with "unsustainable operating models and financial structures."
The move comes at a time when trade suppliers and payment terms come under scrutiny.
The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell wants federal legislation requiring small businesses to be paid in 30 days.
She named Myer and David Jones among companies which have issued increasingly harsh payment terms amid COVID-19.
"Large businesses extending or in some cases, suspending payments to small businesses are on notice that this behaviour is unacceptable,” Carnell said.
“There’s no denying businesses of all shapes and sizes are enduring extraordinary challenges as a result of the coronavirus crisis, but small businesses are being hit hardest."
For QBE, insurance cover on Myer and David Jones will be withdrawn from suppliers from mid-July.
“We have advised both Myer and David Jones of our willingness to continue to review our position as and when further information about market conditions becomes available.”
QBE advised in April that it was reducing exposure to high-risk trade credit sectors.
The company’s trade credit gross written premium last financial year was $US195 million ($282 million).