The disruption in the cannabis space is having an impact on that insurance specialty from coast to coast, a new report out from Amwins shows.
The report, Amwins State of The Market Report 2023: A Focus on the Cannabis Market, points to “notable transformations and shifts” causing insurance providers to refine offerings “to meet the unique needs and challenges” developing as cannabis sales in the Western U.S. slow and new markets rapidly come online in the East.
Norman Ives, executive vice president with Amwins, one of the report’s authors, describes a complex insuring cannabis space beyond the highly visible regional shifts.
“There is a lot of disruption in the cannabis space,” said Ives, who started writing cannabis in 2012 as a retail broker.
The disruption is a key element in the report. Sales in early legal states like California, Colorado, Oregon, and Washington are disappointing. This has been exacerbated by a flower glut that has driven cannabis prices down.
Meanwhile, newly legal states like New Jersey and New York appeared to have learned from the built-out West Cost and found ways to expand beyond just opening dispensaries. The cannabis board for New York in late July approved more than 200 retail licenses, and it also authorized regulators to begin crafting rules to allow cannabis to be sold at concerts, festivals and other events.
The buzz in the East is drawing brokers from the West, but Ives is more often seeing brokers in the East who were waiting for their turn in cannabis getting in on the new growth.
“You’re seeing more of the East Coast guys getting their feet wet and stepping into the space,” Ives said.
The needs of insurance clients are also much different depending on region, possibly giving brokers in the East some advantage, he added.
Business owners in the West are experiencing a challenging market, so brokers seeking opportunities must show these owners how they can help them maximize their insurance dollars, Ives said, adding, “Whereas on the East Coast, you’re on a growth-centric path: How do we structure these polices as you expand and grow?”
The report calls out continued limited capacity that keeps the cannabis insurance property market challenging. New carriers are coming into the space to improve capacity, but those that are coming in are offering lighter coverage and noteworthy exclusions.
Ives cited one example of a carrier that entered the space offering a general liability policy with no equipment breakdown. He is also seeing those carriers that enter the space come in with health hazard exclusions that he describes as “robust.”
The cannabis property market isn’t likely to see rate decreases over the next several months, according to the report, which does anticipate taht rates should level off.
The report shows property claims have increased due in part to fire losses from lighting issues used in certain grow operations and extraction processes.
“While LED lights have become the preferred method of lighting by many grow operations, HPS lights continue to be widely used and are a major cause of fires due to the level of heat that is produced,” the report states.
Product liability, crime, directors and officers, and cyber all continue to pose problems for cannabis operators, according to the report.
Ives was largely positive about the report’s findings. His take-home was that the market has become more complex as it has become more mature.
“While things are getting better, we’ve got more capacity, the market is getting a lot more complex. We’re splitting the revenue between more pies. And that’s having an impact on the rates and coverage availability.”
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