The article below was originally published in Cannabis Law Report in July 2021. You can access the original article here.
Sean Hocking of Cannabis Law Report recently spoke with Max Carter, the founder and principal at New Dawn Risk, about insurance and risk in the current US cannabis market. The following interview was conducted on 8th July 2021.
Now that we have a Democratic administration with a majority in both houses, what are your feelings about the growth of the insurance market for cannabis as the federal legislation conversation edges forward?
There is a great deal of excitement in the insurance industry at the opportunities the cannabis market will present. We are pretty certain we will see a large number of players being willing to get involved as soon as they have the certainty that they won’t be breaching any federal regulations.
At CLR we have noticed that in some states there has been a marked increase in cannabis insurance services for the sector over the last 12 months. Are you able to give us any insights about what is happening in states like CA, IL, FL and whether comprehensive services are being offered to industry players, or are companies having to string together a patchwork of coverage from different insurance suppliers?
California, Illinois and Florida are in the top five states when it comes to general property and casualty insurance, so we would certainly expect them to be where there is more activity taking place.
As for suppliers being willing to provide a comprehensive suite of cover to cannabis businesses, it does very much depend on the size of the entity being insured and their activities.
Some classes of insurance, in particular, remain very challenging for larger companies, such as directors’ and officers’ liability for listed companies.
Do you think that NY’s recent move towards legalisation and developing a regulated sector will help with providing both greater opportunity for insurance providers as well as better options for companies and organisations looking for coverage?
We don’t think we are going to see any particular difference in approach for New York compared to other large states at this point.
The key to really unlocking the market for insurance will be the passing of the Claim Act.
As mentioned above, providers in the main areas appear to be US state-based organisations providing limited coverage on a state by state basis. Do you concur with this analysis?
Yes, absolutely at the smaller end of the spectrum coverage is being provided by local state-based carriers.
Where we see international interest is more on the larger risks, although at this point there is very little capacity in the market for US risks with very few exceptions (such as Relm in Bermuda).
There really is no international appetite to write US cannabis risks. This is for the same reasons as domestic carriers, namely that they don’t want to fall foul of federal regulators and risk their ability to trade in the US for all of their business.
If you were to highlight where coverage is most needed in the industry are there certain sectors that you feel need solutions now rather than later?
For most businesses, product liability is an essential coverage and it would be nice to see a stronger supply of this coverage being available immediately.
Outside the US and especially in the EU & UK – where there still isn’t really any hard and fast regulation with regard to cannabis but an ever-increasing amount of CBD, medical cannabis & hemp businesses launching in the sector – what options are there for these companies to get coverage?
The market is still very limited in the UK and EU because of the lack of clarity around the regulation of CBD, medical cannabis and hemp.
However, solutions are available.
We think that there needs to be more clarity around regulation in order for insurers to enter the market with enthusiasm.