Into the Weeds: Cannabis Insurance and the Industry Landscape

Jan 6, 2021 / by AAIS

The COVID-19 pandemic has had lasting impacts on industries far and wide…including the growing cannabis industry. In the inaugural edition of the AAIS Pulse, AAIS’s Joe Jonas and Phil Skaggs were joined by Porter Wright Morris & Arthur LLP’s Randi Ellias and Aon’s Richard Golz to discuss cannabis insurance trends, including the impact the pandemic has had on its expansion.



The panelists reflected on where the cannabis industry stands in regard to regulation at the federal level, and whether or not the 2020 election would reshape the industry’s progress. According to Ms. Ellias, based on the Democratic platform, there is no way to guarantee the incoming Biden-Harris administration will fully legalize cannabis at the federal level. The Biden-Harris Administration appears to prefer decriminalization– something that sounds good for the cannabis industry but in reality, provides fewer benefits than legalization. Criminalization is only relative to personal use and possession of cannabis. While decriminalization would bring traditionally conservative states farther from where they are now, it doesn’t stop cannabis from being considered a level one substance by the Controlled Substance Act. According to Ms. Ellias, all anti-money laundering statutes prohibiting unlawful transactions relating to unlawful activity would still apply– rules detrimental to the success of the cannabis industry.

If cannabis use and sale is federally decriminalized, all federal statutes relating to banking and insurance, would remain the same. If the Biden-Harris administration takes steps to legalize cannabis, they would need to be very clear in terms of state laws, in order to have a strong impact on the insurance industry, Mr. Golz added.

At the time of the webinar, four major pieces of legislation were working their way through the House and Senate: The Safe Banking Act, States Act, CLAIM Act, and MORE Act. According to Mr. Skaggs, the CLAIM Act would have the most impact on the insurance industry by providing a safe harbor for insurers looking to participate in the cannabis insurance space. Mr. Skaggs added, passage of the CLAIM Act and other Acts will largely depend on the change in leadership in the Senate. COVID-19 had drastically impacted legislation, as many bills were pushed aside to focus on pandemic-related issues.

When the COVID-19 pandemic started, analysts and industry experts predicted a profound impact on the insurance space. Some forecasted drastic impacts to the profitability and growth while others predicted record-breaking consumer sales. According to the panel, early concerns and negative predictions were based upon uncertainty of the pandemic in general. Industry members were worried that the public would shift from the legal to illicit cannabis market due to tightened budgets, but according to Mr. Skaggs, this worry is unfounded, as many are loyal to the legal cannabis market due to its increased safety from tainted product. In the early days of the pandemic, many users resorted to ‘toilet-paper-esque’ hoarding of cannabis, so the market has actually thrived against the odds.

The cannabis industry has a long way to go in regard to insurance. There remains a lot of hesitation from the top to the bottom of the industry due to fear of federal law, as well as the long-held conservativism of the insurance industry. According to Mr. Golz, many reinsurers, for example, are aware of the rapid growth and opportunity that comes with the cannabis market, but they don’t want to risk breaking federal laws, especially with the lack of something like the Safe Banking Act, that would protect insurers from cannabis risk.

According to Mr. Skaggs, this trickle-down effect can impact others throughout the cannabis supply chain. When reinsurers don’t want to get into a space such as cannabis, it constrains carriers and their capacity. Despite these concerns, the cannabis industry will continue to grow and flourish– now, it’s all up to the insurance industry to catch up.

Tags: Community, Issues & Trends, COVID-19, Regulatory/Compliance, Cannabis, CannaBOP, Commercial Lines, Industry, Legislation & Regulation, AAIS Insights, AAIS Pulse, pandemic, Aon, Porter Wright Morris & Arthur, AAIS Views, GLC


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