The cannabis insurance market has experienced a variety of transformations and shifts in recent years. As the sector continues to develop, insurance providers are refining their offerings to meet the needs and challenges being presented.
In their ‘State of the Market Cannabis report’, Amwins highlights that most major cannabis programs offer at least $20 to $25 million per location, while a select number have even secured reinsurance over time and can offer $40 to $45 million. However, Amwins warns that there may be tradeoffs with these higher coverage limits, such as gaps in coverage or unfavorable coverages elsewhere.
Elsewhere, it does not seems likely that the cannabis property market will see rate decreases over the next several months, however Amwins expects rates to level off.
A key example is in California, where the taxation rate remains an issue that in turn, is keeping the illicit market more relevant and driving up rates.
Another important factor to note is that California also faces licensing issues, with larger operators acquiring multiple micro-licenses to create even larger grow operations. As a result, this has allowed more cannabis to be grown than can be distributed in a regulated environment, resulting in increased competition with illicit shops that to date still outnumber legal operations.
Moreover, wildfire as well as other extreme weather-related events also continue to threaten cannabis operations. Because of this, underwriters are frequently re-examining their property protection class codes and making changes based on the increased risk exposure.
Amwins also noted that most markets take a “conservative approach” to weather related perils. With the recent downgrade of the largest carrier in the space, there is no longer a viable primary named storm option for insureds in CAT areas. This coverage is now scarce and only offered on an account basis with limited distribution.
Moving on, management and board turnover in cannabis operations has become quite an issue as businesses struggle to onboard and retain individuals with industry experience. Although the need for D&O has not diminished, a large chunk of businesses in the past year have opted out of purchasing coverage due to costs.
Despite this, there is some positive movement taking place, with new market entrants offering good coverage at reasonable rates – with many renewals being priced better than the expiring rate. In general, D&O liability premiums are down approximately 20% compared to last year, a trend that is expected to continue.
Lastly, it is worth addressing that aside from larger companies and a few smaller businesses that recognize the importance of having cyber liability insurance, most operations are still declining this critical coverage. Today, an estimated 10% of cannabis companies are purchasing cyber insurance.
While the cyber market in general has become more competitive, only a few markets are writing cannabis primary business. As a new and emerging industry, rates for cyber liability insurance continue to be double or even triple what a non-cannabis company would pay.
“The cannabis market is gradually maturing as the industry continues to evolve. As more states legalize cannabis, insurance providers are likely to further cultivate their offerings, expand coverage options and adjust premiums to accommodate unique risks,” commented Norman Ives, executive vice president of Amwins Brokerage in Seattle, WA.
Jeff Katz, vice president and property broker with Amwins Brokerage in Kansas City, MO, said: “From a general capacity standpoint, more carriers are entering the cannabis space with newer MGAs targeting small to mid-sized operators in a more standard and transactional underwriting style. It’s important to consider all options and make an informed decision on which package option best fits your client’s needs.”
