Cannabis News: U.S. Cannabis Insurers Get Ready to Roll as Federal Legalization Nears
by Craig Wasserman
Credit: By Alwyn Scott from Reuters.com
Insurers are quietly gearing up for a potential ten-fold increase in sales to the booming $17.6 billion-a-year cannabis industry as Congress inches closer to legalizing pot at the federal level.
While 36 U.S. states and the District of Columbia have legalized cannabis for medical or recreational use, insurance for growers, testing labs and retailers is being held in check largely by strict federal laws that criminalize pot alongside heroin, methamphetamine and LSD.
U.S. legal cannabis sales jumped 45% last year and are expected to hit $41 billion in 2026, Colorado-based research firm BDSA said.
But the industry only wrote about $250 million in policies last year, insurance agents estimated for Reuters, with a handful of carriers offering limited property and liability coverage.
Businesses also need coverage for crops and theft, along with larger payout limits, according to more than a dozen insurers, brokers, agents, lawyers and cannabis business owners interviewed by Reuters.
As Congress considers bills that would loosen federal laws, some insurers are trying to fill the gap with new types of coverage. Because insurers are regulated at the state level, they can now offer coverage in states where the drug is legal, and federal decriminalization would expand the market.
"There is an overwhelming need for the right kinds of insurance," said Rocco Petrilli, chairman of the National Cannabis Risk Management Association (NCRMA), a trade group of 3,000 cannabis businesses.
NCRMA in April set up a captive insurer to offer coverage for property, general premises liability and product liability to members. It plans to add workers' compensation and auto coverage in the fourth quarter, Petrilli said. The captive approach provides coverage only to NCRMA members that is tailored to their needs.
CannGen Insurance Services, a national managing general underwriter of cannabis, CBD and hemp risks that works with commercial carriers, plans to introduce Directors & Officers (D&O) and employment practice liability cover soon, through a new division called CannGenPRO, said Charles Pyfrom, chief marketing officer. CannGen distributes via appointed retail and wholesale brokers to provide “one-stop-shopping."
Some large insurers, such as Progressive Corp (PGR.N) Farmers Insurance, Liberty Mutual and AXA SA (AXAF.PA), are offering coverage as more states legalize pot. They often sell via subsidiaries and work with CannGen or others, state licensing records show.
Progressive said its vehicle policies cover liability and physical damage in states that have legalized transport of cannabis, but it does not insure cargos. The other companies declined to comment.