Excuse the pun, but the cannabis market in the US is growing like a weed right now. Thirty-three states have already jumped on the medical marijuana train and 11 have passed legislation for recreational marijuana. While the push for recreational legalization didn’t go as planned in New York and New Jersey, the upcoming federal election will likely see more states legalize recreational cannabis in the coming years.
Accordingly, the insurance market for this emerging sector is booming, though it’s not without its challenges, such as a tighter amount of capacity compared to most lines due to regulation. To help insurance professionals navigate this evolving space, Insurance Business America is bringing its Cannabis Cover Masterclass to Denver and Los Angeles in March 2020.
“This industry has pretty much all the same needs that any industry has. They obviously have a very strong need, more so than other industries, for product liability coverage, but outside that you see pretty much all the same needs,” said Erich Bublitz, cannabis product leader, and vice president and chief regulatory compliance officer at Admiral Insurance Group. “They need property coverage and employment practices coverage, so in that regard it’s very much a market like any other, except for the fact that there is some limited capacity and even where carriers are writing it, there’s a certain level of nervousness because there isn’t any historical data as to what losses may look like compared to most industries.”
Outdoor crop and cyber coverage have, in particular, been difficult, while, on the product side, capacity is available but there are issues where a lot of carriers are willing to write it but only with very tight health hazard coverages because they don’t want it to become an asbestos or tobacco-type exposure over time. The commercial auto insurance space has been tough for these businesses, too.
“Even carriers that are writing it are putting a lot more restrictions on the coverage than maybe what’s needed for the market,” said Bublitz.
Moreover, because many of the businesses in the legal cannabis space are new to it, they need insurance professionals to guide them through the complex coverage needs they might have.
“Very much they’re relying on their agents and brokers to help them navigate this space and for the longest time, the cannabis space was illegal at all levels,” said Bublitz. “A lot of the businesses are still small – not quite mom-and-pop but pretty close to mom-and-pop type shops – so for a lot of them, they entered the legal cannabis space from where they were previously in the black market and whereas before their risk management was, how do we keep from getting arrested, they’re just now starting to understand the financial aspects of risk management and risk transfer.”
However, because there is no standardized coverage, agents and brokers have to be there to help them understand exposures and coverages, because these insureds are not coming into the insurance arena with a good level of understanding.
To be the helping hand that cannabis businesses need, Bublitz recommends agents partner up with a wholesale broker and develop their expertise in this area. And of course, attending a Cannabis Cover Masterclass is another good option for getting more education in this sector.
“If you’re relatively new to the space and you’re trying to get into it, it really is a good idea to partner up with a wholesale broker that has a good amount of this business and knows the market pretty well to help you start figuring out which carriers are providing what types of coverage and finding the strengths and the weaknesses of those coverages,” he said.
“Right now, the business is largely dispersed throughout the industry, but it’s going to start consolidating more into agents that have some specialty in this and it’s very difficult if you only write one or two of these accounts to understand the evolution of the risks and the evolution to the coverages available. So agents that are interested in writing cannabis should start putting a focus on and investing in understanding cannabis and the cannabis insurance space, and building that expertise.”
To learn more about the complex insurance needs of the cannabis, CBD and hemp industries, register for the Cannabis Cover Masterclass in Denver on March 17 and Los Angeles on March 26.