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.
Is there a lot of risk in cannabis crops that insurance professionals should know about?
You bet, if you listen to Evan Stait, a commercial account executive and cannabis practice leader for Hub International in Kelowna, British Columbia.
“These guys that are growing outdoors are dealing with not only the weather, sporadic weather, fire seasons, wind, hail, early frost in certain areas. They also have to work with pest control. They have to worry about genetics,” Stait said. “There is a whole lot to it that comes with the lack of the ability to control your environment. And especially now, and definitely in Canada, where you’ve got some of the first grows happening in certain regions where they’re using genetics from other areas that have maybe been successful.”
Stait gave a presentation, What You Should Know about Cannabis Crop Risks and Coverages, during Insurance Journal’s 2020 Insuring Cannabis Summit on Nov. 19.
Stait and his team are credited with creating one of the first high-value hemp crop insurance solutions for open air, large acreage hemp cultivators.
Stait discussed the ins and outs of growing the plant, both hemp and cannabis, and is an expert on providing risk management and insurance solutions for the entire vertical chain from seed to product distribution.
“But you put them in a different area, a different geolocation, and all of a sudden you’ve gotten a whole new set of pests that are maybe attracted to the terpene profiles that are all of a sudden floating around the area,” he continued. “And so they really had to be on their toes and adapt to it. Or maybe wind is coming from a certain direction all of the time. So now they’ve got to figure out, okay, well, how do we mitigate this wind? And yeah, there’s ways of risk transfer from an insurance perspective, but really what these guys are doing on the ground is protecting the plant in real-time, as best as they can.”
One risk that became a reality this year were the wildfires in California and the Pacific Northwest.
October usually heralds the harvest of outdoor cannabis plants, popularly known as “Croptober,” but this fall smoke from the wildfires ravaging the West became a big concern for cannabis growers.
Stait said the fires compound already ongoing issues, such as COVID-19, making life harder for growers, who have to walk a very straight-line due to being in such a highly regulated industry.
“The wildfires particularly in the last year were so intense and so devastating that the shortfall is going to be massive and the impact to people’s livelihood is going to be significant,” he said.
It’s not just the fires that scorch the Earth and destroy plants, but the smoke and particulates in the atmosphere impact the plant.
“It impacts its ability to mature and flower, because what happens is the light polarizes through that fog, if you will, it’s a smoke fog essentially,” Stait said.
Parametric products, which are considered one of the more standard ways to insure these rops, were another area Stait addressed.
“And put simply, parametric insurance is, we’re basically using the weather as a proxy in place of the plant itself, since we cannot insure the plant directly in the ways that you can for indoor facilities,” he said. “So what we’re doing, for example, is taking risk issues like excess rain, depending on the area and irrigation it’s less common, but drought, high heat.”
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