Legal Cannabis Growth Blunted by Poor Insurance Penetration

The growth in the US legal cannabis market is not being matched by access to insurance for the industry’s risks, warns a new report.

Specialist intermediary New Dawn Risk Group has issued a white paper analysing insurance cover for the US legal cannabis, CBD and hemp markets, and raised concerns over the impact of COVID-19 and the need for greater access for underwriters.

The report: “Understanding and opening up the US cannabis insurance market”, examines both the potential premiums and the size of the insurance gap for cannabis-related products in the US.

The study found in 2018 sales of medical and recreational cannabis in the U.S. were nearly nine times higher than sales of Oreo cookies.

If the sector were insured to levels normal for other businesses, the legal US cannabis industry would pay about $1 billion in annual premiums.

The US market saw an estimated $8 billion in legalized cannabis sales in 2018. However, this is predicted this could rise to over $40 billion by 2025.

Max Carter, CEO of New Dawn Risk, said: “Legal cannabis is a rapidly growing market, currently with a legal foothold in over thirty US states.  Right now, the COVID-19 outbreak has led to increased demand for cannabis in the US and stores in many states have been allowed to reopen or offer curbside sales.  However, the crisis has also exposed the financial pressures on many cannabis firms, with many VC-backed cannabis firms struggling already to meet financial projections.  A COVID-19 recession, which seems all but a certainty, will only increase such financial pressures for young cannabis businesses.

“The pandemic will make it even tougher for cannabis producers to obtain insurance as providers further tighten terms and conditions and introduce exclusions, while insurers who may have been looking to enter the marker will put their plans on hold.  With the Federal Government shut down and the possibility of a change of administration in November’s presidential election, the progress of legislation that would open up the cannabis market to insurers will be delayed.

“This reality fails to reflect the fact that many firms have significant insurance needs that are critical to help them manage the risks that exist in this young industry, with its untried legal and societal framework.

“Despite all this, the growth of the sector is inexorable and New Dawn Risk is committed to working with carriers and clients to share knowledge and insights to help identify and deliver creative solutions for this market.”


Warning: Division by zero in /home/customer/www/emergingrisks.co.uk/public_html/wp-includes/comment-template.php on line 1518
SHARE: