The cannabis insurance market is continuing to evolve as more states seem to be moving in the direction of legalization, though progress has been “uneven,” according to one expert.
“We’ve definitely seen significant improvement in all lines. We’ve seen improvement of carrier availability and the quality of policies across the board, but it’s been uneven,” said Norman Ives, broker and cannabis specialist in the NutraRisk division of Worldwide Facilities, and a speaker at Cannabis Cover Masterclass Los Angeles in March 2019. “The passage of the farm bill has definitely helped the CBD hemp space. The downside is that, last year, [Jeff] Sessions removing the Cole Memorandum did cause us to lose a few carriers – especially in professional exposures, we lost a few, so D&O and professional exposures have become more complicated over the last year.”
There is, however, optimism that the tide will turn in favor of the cannabis insurance market with recreational legalization gaining popularity.
“We’ve had three or four major carriers enter the market space in just the last 12 months,” said Ives. “We have seen a significant increase in capacity and carriers participating in this space.”
Besides legalization at the federal level, a shift in tax rules as they apply to the cannabis sector would have the biggest impact on the insurance marketplace going forward.
“The tax treatment of 280E as it relates to cannabis businesses complicates the insurance picture significantly for us because cannabis-related businesses do not receive traditional tax treatment that other businesses do on Main Street America,” explained Ives. “We tend to have a fairly complex business structure that can complicate insurance placement.”
Ives encourages insurance professionals to attend the Cannabis Cover Masterclass, both because it’s an excellent venue to connect with the key movers and shakers in the cannabis insurance industry, but also because this is a market that requires a higher level of due diligence.
“Cannabis is not your standard E&S play,” he said, adding that agents and brokers have a “responsibility to understand the coverages that are available and present that accurately to your clients.”
Take a deeper dive into this issue at Cannabis Cover Masterclass Los Angeles.