Cannabis Insurance Moves Mainstream in California
While the overall economic numbers of cannabis legalization in the United States are promising and usually exceed expectations, a closer look usual shows serious cracks in the foundation that need to be addressed. Many of the issues require changes at the federal level, such as access to banking services and fixing the dreaded 280e tax code that unfairly penalizes cannabis businesses. However, there are some things the state can do at the local level to assist cannabis businesses, and Calfornia has helped lead the way on opening up insurance policies for the industry as covered in the Silicon Valley Business Journal:
California’s January 2018 legalization of recreational pot was a watershed moment for the industry, with sales in the Golden State projected to exceed $5 billion in 2019. Federal illegality — whose days may be numbered — has become less and less of an obstacle to obtaining coverage “from seed to sale.”
The California Department of Insurance has made significant moves to increase the availability of cannabis-related insurance. Commissioner Dave Jones, who is about to leave office, has admitted several insurers to market and sell cannabis policies in California. He’s also approved a commercial “package” policy form (the Cannabis Business Owners Policy, or “CannaBOP”).
Previously, only limited coverage could be underwritten by non-admitted “excess and surplus lines” carriers, who were not necessarily subject to the state’s insurance regulations and consumer protections. Now, the market is being opened up to insurers — including, potentially, large national carriers — who can offer an array of first-party property and third-party liability coverages for dispensaries, manufacturers, distributors, retailers and other participants in the cannabis stream of commerce.
California, like many states, has overregulated the cannabis industry, stifling the industry in several ways, including issuing licenses too slowly. However, these regulatory hurdles should be short-lived and the Golden State will soon take its place as the number one marijuana market in the world. Securing investments with proper insurance coverage is an important step to stability, and it is good to see California leading on that front. I look forward to California fully unleashing the economic engine of the cannabis industry, and I know that the day can’t come soon enough for local entrepreneurs that have been working so hard to meet their regulatory obligations.
Learn the latest about all things related to the California cannabis industry at the next International Cannabis Business Conference in San Francisco on February 7-8, 2019. Don’t miss the opportunity to get the best information and network with top investors and entrepreneurs from the Golden State and around the globe. Purchase your early bird tickets by January 18th to save!