As our report shows, however, there are three critical factors when it comes to considering US cannabis. First, the industry is going to continue to grow at pace, bringing significant opportunities.
Second, there is an as yet unmet demand for insurance across a number of classes at every stage of the cannabis production and distribution process.
And third, most significantly from the perspective of re-insurers, 2021 looks set to be the year when the major legal barriers to supplying insurance to the sector will be removed. As a result, in 2022, the insurance supply chain for this huge industry looks set to be transformed.
The key enablers are two linked Acts, the SAFE and CLAIMS Acts, which look set to sail through Congress under a positively inclined Democratic administration, and which will create safe harbours for the supply of insurance cover to the industry. In addition, by allowing the supply of banking and other financial services too, these Acts will also significantly reduce some of the insurance risks that have limited cover until now.
While currently around 30 local insurers provide cover, few large or international insurers have been willing to become involved until now; the legislation unlocks opportunities for insurance and reinsurance, and also makes it possible for cannabis businesses to consider establishing self-funded captives, to build up capital that is set aside to pay for losses as they arise. But this too would pose questions. This is currently a market in waiting, and the time for knowledge-gathering and planning is now.
New Dawn Risk is committed to working with carriers and clients to share insights and to help build opportunities for both sides to put cover in place as the market grows and moves towards legitimacy. We already successfully place cyber cover for a number of cannabis businesses, but we want to do more – especially in these uncertain times.
The current global crisis has led to increased demand for cannabis in the US, but it will also make it tougher for everyone to obtain insurance. As providers further tighten terms and conditions and introduce exclusions, this could create a counterbalance against the positive weight of the looming legislation.
While we wait to see how the cannabis industry weathers the stresses of COVID-19, it is vital that we maintain the discussion around how best to prepare it for the future. Please do get in touch to nd out how we can work together to tackle the challenges, deliver solutions and expand coverage in this exciting and fast-growing sector.