Editor’s note: This is part of a series of articles based on panels and presentations during Insurance Journal’s 2020 Insuring Cannabis Summit on Nov. 19.
If there is one big problem in the insuring cannabis space – where issues include property rates, the impact of COVID-19, crime, vaping – it may be capacity.
Carriers and reinsurers are still largely shying away from the cannabis business because it’s still considered illegal in the eyes of the federal government.
“Property capacity, in general, across the broader insurance market, in E&S, has become a little more difficult of late due to a reduction of capacity,” said Norman Ives, a wholesale insurance broker at Worldwide Facilities LLC specializing in custom insurance products and risk management for the cannabis industry. “We’ve seen increases of rates of in the E&S lines anywhere from 15 to 30%, across no loss accounts year over year renewals on a lot of these.”
Ives was moderating a panel at Insurance Journal’s 2020 Insuring Cannabis Summit on Nov. 19 titled State of the Cannabis Insurance Market: It’s Moving, But Where’s It Headed?
The panelists were Erich Bublitz, vice president at Admiral Insurance Group, a Berkley Company, who is responsible for cannabis underwriting, Stephanie Bozzuto, co-founder and president of Cannabis Connect Insurance Services, and Kieran J. O’Rourke, director of underwriting for Cannasure.
Ives and the panelists discussed capacity and other issues in the cannabis space, and they also offered their outlooks for cannabis and insurance in the year ahead.
“So, I’m having a really hard time right now with property, and we’re talking about accounts that have $15 million TIV, large limits, and they’re just having a really, really, really difficult time,” Bozzuto said.
Bublitz doesn’t think things will improve in this area for some time.
“I don’t think we’re going to see a significant increase in capacity over the next 12 months,” Bublitz said.
It’s not all tough insurance going in the cannabis sector. Workers’ compensation, believe it or not, may be a bright spot for cannabis companies.
Bozzuto said things have gotten much better for cannabis businesses on the workers’ compensation side in recent years.
“So, there’s a light at the end of the tunnel, it’s a very soft market, there’s about five different carriers that are willing to write it,” Bozzuto said. “And, they’re offering especially for example, if you look at some of the carriers like State Fund, and some of them… They’re offering incentives right now, they’re giving out higher commissions to brokers like 15%, commission, their are extremely low.”
Five years ago, a cultivator, or example, faced paying workers’ comp rates of $14 per $100 of payroll, now she said her clients are being quoted rates down to $4, $5, she said, adding, “just dirt cheap.”
“So, workers’ comp is like the saving grace, so you’re seeing premiums increase on the P/C side, 10, 15%, sometimes more,” Bozzuto said. “You’re getting at least some relief on the work comp, so hopefully, you’ll feel a little bit of a wash as an operator. And, I think what’s happening is people are just doing an incredible job with loss control, I see hardly any work comp claims. They’re very minimal, and if they are, they’re usually rectified very quickly.”
During the course of the panel, numerous insurance products were discussed. One was recall coverage.
“With the program we have at Cannasure offers, is a quarter-of-a-million-dollar limit of product withdrawal expense coverage,” O’Rourke said.
If an operator discovers a bad batch, the insurance kicks in and it helps with the expenses to the insured to recall the product.
“What this coverage does, is helps pay for the activity of going out and getting it,” O’Rourke said. “And, that’s everything from mailing notices to physically going and getting it, rounding it up having it shipped back, expenses for that. So, a quarter-of-a-million dollars, probably doesn’t go very far. But, we wanted to offer something that would pay these expenses, so that we didn’t have operators saying to themselves, ‘Jesus, this is going to be six figures, and this is coming right out of my pocket.’ So, we offer up this coverage, it’s a flat charge, we don’t even audit on it.”
Ives, who has dealt with recalls, cautioned that some of these products require certain triggers, and that insureds and their agents should become familiar with what their coverage does and doesn’t do.
“I would encourage the community out there to look at their specific endorsement and look at the triggers,” Ives said. “I am aware of a few that do require government required mandates to trigger the coverage, and some of them as a requirement. So, don’t assume that just because one carrier has one, that it applies to all, the coverage by and large, as Kieran referenced, specific to the expense of recovering your product. It does not reimburse you for the actual product itself.”
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