Cannabis risk still ‘too hot’ for mainstream market says Amwins

The division between state and federal law in the United States continues to make the cannabis insurance space too hot of a risk pool to tempt mainstream insurance carriers to dip their toes in writing business, according to broker Amwins.

Such a pattern comes despite demand for cannabis continuing to increase with more than half of US states legalising some form of medical or recreational marijuana.

The comments are made as part of the broker’s London State of the Market report, which suggests that this legal environment is unlikely to change anytime soon as both the Secure and Fair Enforcement (SAFE) Banking Act and the Clarifying Law Around Insurance of Marijuana (CLAIM) Act are stalled in Congress, and unfolding global events are taking priority over domestic discussions.

Despite lagging federal law, the business of cannabis continues to grow and small- to mid-sized operators are increasingly targeted for acquisition by fully integrated multi-state operators (MSO) who control the entire supply chain “from seed to sale.”

Typically, within the MSO structure, grow operations, extractions, retail sales, delivery, etc. function as separate entities wholly owned by one parent company.

MGAs continue to be very relevant in the space because of their ability to package property and casualty products, according to the report.

While such policies don’t necessarily provide comprehensive coverage, many cannabis insureds will opt to purchase less coverage with lower premiums.

Regarding capacity and pricing the report notes that “we are seeing increased property capacity and competition among existing insurers in the market which has led to broadening terms and conditions. In effect, insurance for established name-brand cannabis companies is beginning to look more like the coverage that their non-cannabis peers can obtain”.

“New critical CAT capacity has entered the cannabis industry, and we are seeing trends of large MSOs moving toward greater risk retention in the lower layers with a greater focus on catastrophic perils versus theft or vandalism.”

:Several new management liability market entrants in the last six months have helped to increase capacity, and we are seeing better coverage/policy forms become available.”

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