Navigating the Highs and Dangers of the Cannabis Insurance Market | Insurance business America
“We are focused on allaying fears and emphasizing robust risk management.”
cannabis
By Nicole Panteloucos
This article was produced in collaboration with Davies.
Chad Beadles (pictured), Associate Vice President – Risk Services, Davies, spoke with Nicole Panteloucos of Insurance Business about the unique challenges and opportunities that cannabis legalization brings to the insurance industry, highlighting the significant potential and highlighted the key risks in the cannabis business.
Regulatory changes and operational risks
Insurance industry: What are the advantages of federal cannabis regulation?
Beadles: I really believe that the federal cannabis overhaul will alleviate a lot of the regulatory burden that insurance companies are currently facing. It would allow insurers to offer coverage at the state or national level without having to deal with complex and varied government regulations, reporting requirements and other administrative challenges. Simplifying these regulatory hurdles could make operations smoother and reduce the risk of slipping through compliance issues, which I believe will be critical for the industry.
IB: Can you explain some of the key risks associated with securing cannabis operations?
Beadles: We primarily encounter three classes of risk: retail stores that sell both medical and recreational cannabis, often combined; Breeder; and manufacturers engaged in oil extraction for food. Farmers and manufacturers face significant challenges due to the risk of fire in processes that use flammable substances such as butane. In growing operations, certain types of bulbs and fixtures are critical; Mixing the wrong ones can have disastrous consequences. Imagine a room full of valuable plants burning – it’s like a farmer losing a cornfield, but indoors.
Education and understanding
IB: How is Davies involved in the cannabis space?
Beadles: We specialize in supporting risk management, particularly in the insurance industry. Many of our clients are pioneers in creating cannabis policies in legalized states, and we have worked closely with them. One of our key partnerships is with Burns and Wilcox, with whom we will host a panel later this year presenting national leadership of their cannabis program in the US. Our tasks include comprehensive research and development of risk management forms as well as working closely with brokers to identify critical areas. Given the emerging nature of this market, our approach focuses on understanding cannabis activity, assessing risks and implementing effective controls tailored to this sector.
Retail vs. growth businesses
IB: What typical concerns do insurers have about the risks associated with cannabis?
Beadles: What we often see is insurers’ reluctance to cover properties that include cannabis retail stores simply because of the association with cannabis. However, there is a significant difference between a retail store and establishments that grow or manufacture cannabis. Retail stores typically do not involve high-risk activities, similar to a convenience store. Many overlook this distinction due to the stigma associated with cannabis. We focus on allaying fears and emphasizing sound risk management. This approach allows us to ensure adequate coverage by implementing necessary controls and adjustments, especially for more dangerous operations such as on-site cultivation.
The future of the industry
IB: Could you talk about innovative solutions or products developed to mitigate risks in cannabis operations?
Beadles: An innovative approach involves a chemistry-based strategy from a well-known Colorado food company. They are researching compounds such as delta-8, a synthesized form of THC, with the aim of improving control and consistency in production. However, this chemical approach also brings new challenges due to the high risk of the processes involved. Despite advances in chemistry, product liability considerations remain critical, highlighting the ongoing complexity in this evolving sector.
IB: How do you see the cannabis insurance sector evolving in the next decade?
Beadles: I’m really excited to see how this develops. It is difficult to make an accurate prediction because much depends on the upcoming election decisions. What I do expect, however, is a shift towards a more open market scenario for cannabis insurance. I think that instead of just a few specialized players, we will see broader participation, particularly in retail, which could lead to more competitive premium rates – not necessarily lower, but definitely more competitive. This broader integration will also lead to more parties in the insurance sector analyzing claims and risks, which will truly expand our data set and provide risk managers and underwriters with many more opportunities to work with them.
similar posts
Stay up to date with the latest news and events
Join our mailing list, it’s free!
Source link
2024-07-03 15:19:05
www.insurancebusinessmag.com
