The State of the 2022 Cannabis Insurance Market
Overall Segment Trends on Cannabis / Nutraceuticals
Despite new states legalizing cannabis and federal reforms being introduced in Congress, we have yet to see new entrants in the cannabis space. While there is increased carrier interest in the regulated marijuana casualty sector, we don’t expect any new market participants until there is definitive clarification at the federal level.
Currently, new capacity is primarily entering the space via existing carriers and programs expanding their offerings. COVID-19 largely spared the regulated cannabis markets, due in no small part to most states classifying cannabis businesses as essential. We expect to see expanded growth as dispensary construction resumes and states continue to expand regulated cannabis operations.
Onsite cannabis consumption is an emerging source of risk that was delayed by the pandemic. Several carriers have developed stances to accommodate onsite consumption, but we haven’t seen a steady volume of submissions that could reveal unexpected issues arising from these exposures.
Robust state regulations have been a key factor in helping insurers get comfortable writing cannabis risks – but today, regulations on delta-8 THC (D8) products are mostly non existent. Outside of the dozen or so states that have moved to ban D8 sales, regulations remain very relaxed where sales are still permitted. Although most markets have taken restrictive stances on D8, we continue to see submissions that don’t reference D8 products or conflate the products as CBD. It’s critical that retailers are aware of the issues with these types of products and educate their clients about the limitations on coverage.
Capacity and Pricing
Health, wellness and nutraceutical casualty rates remain historically low compared to rate increases in other classes. With increased interest and willingness to write CBD products among traditional carriers in the health and nutraceutical field, as well as new MGA offerings targeting this segment, it’s possible that we could see further downward pressure on these casualty rates.
Programs utilizing cannabis insurance coverage forms for hemp/CBD risks should be avoided as those products are subject to entirely different regulations than cannabis and are more appropriately covered by nutraceutical markets.
Capacity among the more established players in the cannabis space has been increasing as they negotiate more favorable reinsurance based on positive performance of their books. Fierce competition for well-run cannabis operations with clean loss histories is keeping rates flat or slightly down. In contrast, insureds with an unfavorable loss history or undesirable risk profile are experiencing substantial rate increases, lower capacity and additional exclusions.
Exposure Changes
With increased demand for product recall on CBD and hemp, a few markets have entered the space to provide coverage. While not mainstream yet, further clarification from the FDA and congress may spark additional market entrants.
Construction - Overall Segment Trends
We are currently seeing a backlog of delayed construction projects starting up, which is increasing the number of exposures and policy submissions, as well as the size of projects.
Infrastructure has always been a tough class of business for the excess market. We anticipate the new infrastructure bill to add increased exposures and opportunities into the construction market, however, it may take some time before it makes an impact on market pricing and capacity.
Although we are seeing some movement in a post-pandemic environment, we are not out of the hard market, yet. While some commercial classes may soften, challenging classes and insureds with losses will find pricing tough and limits shortened.
"We anticipate the new infrastructure bill to add increased exposures and opportunities into the construction market".
The above article summary was taken from:
https://www.amwins.com/docs/default-source/insights/sotm_q2q3_2021_web.pdf?sfvrsn=6ec6a35e_12