Top Challenges for Insurance in the Cannabis Industry

As we continue to see the “budding” cannabis industry expand, we see risk evolving and the growing need for operators to be insured. The related challenges that are emerging are proving to be complex.

Because of the federal illegality surrounding cannabis, most coverage has to be secured through Excess and Surplus Lines products. And since this is still a fairly new market with limited actuarial data available and reinsurance challenges, finding adequate coverage and policy limits can be difficult.

Read on to learn about the challenges and opportunities found in the cannabis insurance industry right now!

1. Cannabis Operations are COMPLICATED

Because cannabis legislation and regulation is new and unique, many cannabis operations exhibit a VERY complicated business structure. Think of one enterprise or brand with MULTIPLE names and ownership entities. This makes it difficult to keep track of and manage policies.?

2. The industry is still very new.?

Because of this, it’s hard to tell what the best practices are since various types of cannabis operations have only been around for 5-10 years.? While underwriters and loss control personnel are learning as they see more risks, it’s still hard to know what proper cannabis operations are “supposed” to look like.

3. Limited Coverage Options

The needs of the cannabis industry can be more than challenging, especially when it comes to the language within a policy. Many cannabis-related businesses go into a relationship with a broker thinking they’re getting the best coverage possible.? However, they often walk away with a policy riddled with coverage gaps. The NAIC’s Cannabis Working Group says the biggest risks cannabis-related businesses face include theft, general liability, and product liability.?

Conclusion

It is a challenge to break into any new industry, but we are learning that there are a few things you should know when dealing with cannabis-related risks.? Find a knowledgeable underwriter to work and know what gaps to look for when reviewing coverage options.?

The number of carriers writing in the cannabis market continues to grow as the industry matures.? We’re excited to see how this unique market will expand.