New cannabis industry insurance offering as US captive interest grows

North American insurance broker HUB International Limited has launched a cannabis insurance and risk services offering under its agribusiness and farm specialty practice. It is designed to provide medical and recreational cannabis producers, distributors and retailers in the US and Canada with proper protection and specialised solutions to reduce risks in all aspects of their operations. The move comes at a time when the cannabis industry is increasingly looking to the captive sector for solutions. “Cannabis is a thriving business, and there is a strong appetite to debunk common misconceptions of the industry, understand the risks and obtain proper and adequate insurance coverage,” said Joshua Smart, practice leader, HUB agribusiness and farm specialty practice. “At HUB, we are offering a comprehensive insurance solution for businesses in the US and Canada. We have a deep knowledge of the cannabis industry to insure its unique risks, so that our clients can continue to grow and thrive.” HUB pointed out that although marijuana is still illegal under US federal law, 29 states, plus the District of Columbia, Guam and Puerto Rico, have legalised it for medicinal purposes, and eight states allow it for recreational use. Additionally, recreational marijuana has recently taken its place next to medical marijuana in being legal in Canada, which has nearly 100 cannabis producers. HUB said there are currently 26 carriers insuring the cannabis industry in one way or another. “There is a huge misunderstanding in the cannabis industry about insurance coverage, which leaves businesses underinsured or even uninsured,” said Mr Frost. “Proof of insurance demonstrates operational maturity and is a key step in establishing ongoing financial and banking relationships, which clients need to keep growing their business.” In recent months, the issue of insurance for the nascent cannabis industry has been highlighted at various captive conferences. The perceived lack of support from the insurance industry for the sector has led many to conclude that captives may provide the solution for the multibillion-dollar industry. Indeed, there are a handful of captive management companies servicing the sector, including Venture Captive Management and Emerald Risk Solutions. North Carolina-based Venture Captive Management, which describes itself as a thought leader in the cannabis insurance space, noted: “From Prop 65 lawsuits in California, to the potential for insecticide exposure from improperly cultivated crops, there are potential multimillion-dollar settlements in the cannabis industry. The smart operator will prepare itself for these exposures through insurance. There are precious few insurance carriers openly serving the industry, and those that do offer solutions leave much to be desired.” It added: “Consequently, there is a multibillion-dollar industry with no meaningful risk management solution. This is a prime opportunity for captive insurance programmes. Captive insurance is designed to fill the void left where commercial carriers cannot or will not serve the market. Self-insurance solutions allow the cannabis industry to craft its own coverage while retaining the underwriting profits otherwise lost to the commercial carriers. This opportunity creates a unique market for the insurance industry. Never before in modern times have the smaller players, such as captives and risk retention groups, had a chance to deeply penetrate the market.” Emerald Risk Solutions states on its website: “It is our single mission to provide you with the comprehensive coverage you deserve to protect your green. Emerald Risk Solutions understands that you face a unique set of risks as a legal cannabis-affiliated business owner and that there are exposures and risks that can’t be covered with traditional insurance.” It is believed there are quite a number of captives writing cannabis business, but some captive regulators, such as in Vermont, have expressed concerns about licensing a captive writing cannabis business, largely because it is still illegal under US federal law, with associated issues relating to banking.

New cannabis industry insurance offering as US captive interest grows

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