An increase in new markets and better brand recognition and distribution from existing markets has led to increased competition in the cannabis insurance space.
It’s good for the insurance consumer, and the trend seemed to please a panel of cannabis insurance experts giving their views on the market in 2023 and beyond.
“I also think that 2023 will be a year where certainty in claims contracts and the conclusion of precise and fair legal settlements will be really important,” said Erich Schutz, vice president of Jencap. “I think in the past ability was king and having high property was kind of the end of it all. In my opinion, having high property limits is great, but if you’re not paying claims in the first $5 million of the tower, what’s the point of having it all? So I think the focus will be much more on the quality of coverage claims processing. And it’s going to be interesting here.
Schutz’s assessment and that of the group were among the highlights of a panel titled Insuring Cannabis Foresights & Intelligence for 2022 and Beyond.
The panel was moderated by Jim McErlean, Director of Business Development at Cannasure. The panel also included Jay Virdi, director of sales for Hub International’s specialty cannabis practice, and Matt Engle, vice president of the Insurance Office of America.
They were among more than 30 speakers appearing at the Insuring Journal’s annual meeting Virtual Cannabis Insurance Summit October 26 and 27. The two-day event included panels on cannabis laws and prosecutions, a panel with carriers, experts tackling tough questions, and a large roundtable panel.
Virdi oversees some 200 brokers who work in the cannabis specialty. He thinks the ligature will soon arrive in space.
“You know, there’s going to be a lot of lawyers vying for office or looking for ways to really step up and attack this emerging space,” Virdi said.
Engle, which has been insuring cannabis since 2013, has seen the market move from a very limited and narrow range of insurance products for cannabis companies to a more competitive space. He thinks the evolution will continue.
“Today you probably have five different specialty programs through the MGA programs and a host of other carriers in both E&S and now in the admitted market space that come into play here,” he said. he declares. “So the evolution of the markets and what’s available from the customer’s point of view, from the operator’s side is improving. And I would say even in those specialty programs, they’re starting to add some of the lines of executive responsibility and your D&O, your EPL, your cyber to their offerings.
These will not only be positive changes for policyholders. Engle noted that Hurricane Ian is likely to impact an already difficult real estate market for cannabis operators.
“You’re talking about a catastrophic loss of $60 billion to $75 billion that reinsurers are going to pay out,” Engle said.
“So capacity is going to shrink, reinsurers are going to charge more, which ripples through MGAs, markets, ultimately the cannabis operator,” he added. “So I see real estate as a real talking point. And not just the price either. The other big problem with so many of these cannabis operations, they are heavy on property lines because they invested millions to build their grow facilities or whatever they were doing to build.
The panel also gave its opinion on the impact of possible federal legalization on insurance coverage and prices.
Virdi, who works in Canada, where cannabis is federally legal, explained what happened there.
“Four years after legalization here for adult recreational use and it’s still a specialty MGA, a niche game,” he said. “There aren’t a lot of domestic carriers or a lot of movement here. So I anticipate there will be a lot of attendees who will be interested, because all the legality of cannabis financial transactions is going to go away with the SAFE Act or with federal legalization, but there’s still going to be a very big curve of learning.
Many of the audience questions answered by the panel revolved around best practices and advice to customers on issues such as safety.
Schutz asked about armed guards.
“We always advise our friends and clients in the cannabis industry to sublet this to a third party company,” he said. “The reason is that you don’t want to take on the responsibility of hiring people with armed security guards. You know, with all the tumultuous times that we live in, with civil unrest and before the pandemic, it’s just something I would avoid and really transfer that risk to a professional company that takes that responsibility and has the appropriate right insurance coverage for any type of accident that may occur.
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