Takeaways from Our Conversation on The Impact of California Wildfires on Cannabis Insurance

By | July 19, 2021

The California wildfire season is shaping up to be an ugly one, with a worsening drought and soaring temperatures in the Western U.S.

Wildfires are already blazing across numerous states. As of early July, the number of fires in California had totaled 4,599, with 73,511 acres burned. That’s an increase of 752 fires and 42,400 acres from last year. The five-year average is 2,630 fires with 52,623 acres burned, according to CalFire.

The National Interagency Fire Center reports more than 1 million acres have burned across 12 states, while there are 68 active large fires. States reporting large fires include Idaho (14), Montana (12), Arizona (11), California (8), Alaska (6), Oregon (6) and Washington (5). So far this year, NIFC data shows 34,216 fires burning 2.2 million acres. That’s the most fires since 2011, and the most acreage burned since 2017 (4 million acres).

Drew Taylor

This has California’s massive cannabis industry on high alert, and it will likely make insurance more expensive and harder to get. We spoke with three expert brokers to find how high property rates are going, and what they’re doing to help their clients though this troubling time.

In the latest Insuring Cannabis Podcast, we spoke to a three cannabis insurance brokers about the impacts of wildfires in California on things like higher rates, lack of insurance availability, crops, indoor grows, as well as parametric coverage.

Following are brief takeaways from that conversation.

Brad Rutt

Drew Taylor, managing director of AlphaRoot, a full-service insurance brokerage that focuses on the cannabis, CBD and hemp space, isn’t encouraged one bit by what he’s seeing in California and the Western U.S., and he believes wildfires will make carriers pull back even further from writing in the riskier areas.

Taylor, who said he’s preparing his clients for 20% to 25% rate increases, “and then fighting tooth and nail with the carriers when the renewal does come around,” has several clients in wildfire areas with indoor grows that he’s concerned about.

“I think property right now, just given the limited capacity you’re seeing the biggest rate hikes and increases,” Taylor said. “I think the wildfire of this summer will have a huge impact on the marketplace. Not unlike it did last summer.”

Jim McErlean

Brad Rutt is a senior vice president, producer and the leader of Hub International Ltd.’s U.S. cannabis practice.

Rutt has numerous clients with properties that are literally in the line of fire.

“I think it’s going to be a very dangerous wildfire season,” Rutt said. “All of the metrics say it’s a dangerous wildfire season. Personally, our team is proactively reaching out to our clients and saying, ‘Hey, we’ve got to be ready for this.’ It’s not an if, it’s more of a when.”

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Rutt, who said the property insurance market “is probably the hardest market we’ve seen in 30 years,” estimates his cannabis clients pay between three and seven times more for insurance.

Getting everything covered, and enough coverage, for his cannabis clients often takes going to more than one carrier, and of course heading into the excess market.

“I think the next issue becomes how much insurance can you get, what limit of insurance?” Rutt said. “So, if last year a carrier was saying like, ‘Hey, you know, I’ll give you 15 million in limits,’ you might find this year the carrier is like, given everything that’s going on, ‘We’ll be willing to put up 5 million.’ And then we have to go and sort of get excess insurance and create these towers. Carriers are deploying less capacity today than a year, and certainly, two years ago.”

Jim McErlean is director of business development for Cannasure Insurance Services.

Cannasure announced in March that it was acquired by One80 Intermediaries, and soon after it made known its plans for a big expansion into California. In June, Cannasure began offering property capacity of up to $40 million in total insured values as well as product liability limits of up to $5 million throughout the state.

One of their products is a national parametric crop program, which seems custom made for outdoor growers who don’t have access to a federally backed crop insurance program.

The parametric coverage was launched in the fourth quarter of 2020, and McErlean said they are fielding more calls from interested buyers amid reports of a worsening drought in the Western U.S. and a growing number of wildfires in California and the Pacific Northwest.

“We did our initial marketing blast in November, I think October, November of 2020,” he said. “And we’ve got a little bit of interest and a lot of folks saying, ‘My growing season is coming up in April, so let’s connect then.’ And then (with) the reality of the wildfire season approaching or the tornado season approaching, let’s say in the East coast, the frost season in the Midwest, all of these perils have driven our phones to be ringing easily five times more so, or emails. Sometimes I get text messages, but there’s no doubt there’s been a pretty significant uptick that we’ve been fielding and it’s been fantastic for us.”


Topics California Catastrophe Natural Disasters Wildfire Cannabis

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