Insuring Cannabis Summit: More Market Growth Through the Year and Beyond

This is part of a series of articles from Insurance Journal’s annual Insuring Cannabis Summit on Oct. 14. You can find more articles from the summit at the bottom of this one.

Cannabis literally beat COVID-19.

After being declared an essential business in many U.S. states, sales not only stayed steady, they increased during a rough economic patch.

Don’t expect that to wind down through the rest of 2021 and into 2022, with established markets continuing to grow – though maybe not at the pace they’ve been growing during the lockdowns – and new markets coming online.

That was the word from Cy Scott, co-founder and CEO of the cannabis data and intelligence firm Headset. Scott was speaking at Insurance Journal’s annual Insuring Cannabis Summit on Oct. 14 on a panel titled “Insuring Cannabis market Outlook.”

Scott was answering questions from moderator Norm Ives, cannabis practice leader at Nutra Risk, a division of Amwins. The other panelists were Morgan Fox, media relations director of the National Cannabis Industry Association, and Patrick McManamon, founder and CEO of Cannasure Insurance Services LLC, a wholesale broker and managing general agency.

“I think, speaking in macro trends, in general, the more mature markets, markets like Colorado, Washington, Nevada, even California somewhat, we’re seeing a bit of slowing growth, year over year, happening right now,” Scott said. “It’s still growth, but we’re talking single digit percentages right now. Probably going to end the year in single digit percentages.”

But what may drive cannabis sales and growth in the industry are emerging markets, limited license markets, markets in the East Coast and the Midwest that are coming online, according to Scott.

“We’re seeing very strong growth, even in markets like Michigan that have had some legal sales for a fair amount of time, more and more access, more and more stores are opening up, more and more consumers are coming into the category to purchase cannabis,” Scott said. “We expect those markets to bring up the averages across the board, but I think the story is still very much growth for this space.”

Fox, an avid policy watcher, discussed potential federal legalization, including the Cannabis Administration and Opportunity Act.

“The original draft was just a draft and luckily the Senate leadership, particularly Senate majority leader Schumer, as well as Sens. Cory Booker and Ron Wyden, have been very engaged with stakeholders in this process and took a lot of feedback over the months since that has been introduced or was released,” Fox said. “And now we’re just waiting to see what the actual bill looks like.”

Considering some of the feedback on the draft, particularly the tax structure, which cannabis businesses have warned creates a heavy tax burden on an industry that is still competing with a thriving illicit market, the bill when it comes out will be much different than the draft.

“Hopefully we’ll be able to see that introduced sometime before the end of the year so that we can really start the work of lobbying for it and getting more co-sponsors, at the beginning of next year and hopefully get as much movement on it before the Senate starts to go home to campaign,” Fox added.

McManamon said legalization would bring more carriers and reinsurers to the market, helping capacity, and adding to coverages and products “that are desperately needed.”

“That would definitely bring in and open up that product set and it would continue to provide innovation insurance,” McManamon said. “Insurance is going through a huge innovation change right now, spurred by the pandemic and you’re seeing a lot of the way the carriers currently onboard customers, underwrite risk, how they secure data, that’s changing very quick and I think that this would be really be beneficial to the industry and you’d see a lot more change happening quicker, more sophistication coming into the space.”

McManamon, along with the rest of the panelists, see legalization as an important step to help the insurance and banking industries – which have been kept largely at bay – start to keep up with the growing sector.

Just how big is the cannabis industry getting?

Fox has seen figures ranging from 10 to 20,000 licenses in the U.S. between cultivation, manufacturing and retail and testing labs.

“I think that the potential for growth is really huge, not just among direct to plant businesses, but in ancillary businesses as well,” Fox said. “And there will be a very strong need for those businesses to be able to obtain insurance products.”

Topics Trends Cannabis