Lloyd’s of London, the insurance network that became infamous in the 1980s for writing multi-million policies to protect everything from a rock star’s voice right down to his love muscle, has reportedly suspended all dealings with marijuana-related businesses in the United States.
Earlier last month, the organization quietly distributed a memo to its panel of members indicating that it had become necessary to sever ties with the cannabis industry until after the American government officially repealed prohibition.
The letter, which was authored by Tom Bolt, Lloyd’s director of performance management, states that while the group has entertained the many requests from cannabis firms seeking insurance services, the decision has been made to no longer support these companies until after marijuana has been legalized on a federal level.
“Any policies of this type that are currently in force should not be renewed and no new business should be written,” Bolt wrote. “Existing quotes issued before today should be notified to your Syndicate Underwriting Performance account executive who will consider on a case by case basis whether the quote may be honored.”
Lloyd’s of London told the Insurance Journal that their decision to wash their hands of the emerging cannabis trade is primarily due to a fear of prosecution for violations of the Controlled Substances Act.
“Currently, marijuana is listed as a Schedule 1 drug under U.S. federal law, which means that it is not legal for sale” the organization wrote. “In addition, cash generated from the sale of marijuana may implicate federal Anti-Money Laundering laws. Nevertheless, a number of states have passed laws that permit the sale of marijuana for medicinal purposes and additionally a smaller number allow its sale for recreational purposes.
“Based upon a thorough review of all positions,” the statement continued, “unless and until the sale of either medicinal or recreational marijuana is formally recognized by the Federal government as legal (as opposed to subject to non-enforcement directives), Lloyd’s has asked that underwriters should not insure such operations in any form (including crop, property, or liability cover for those who grow, distribute or sell any form of marijuana or cover for the provision of banking or related services to these operations) in the United States.”
There is speculation that Lloyd’s sudden loss of nerve is over the same concerns the banking industry has in regards to working with the cannabis trade – being prosecuted for money laundering. Regardless of the Obama Administration’s promise not to go after financial institutions for dealing with medical and recreational marijuana businesses, there have been no guarantees that a shakedown will not occur.
And while the answer may be that simple, insurance professionals argue that it is odd that Lloyd’s of London, which has made a name for itself by insuring bizarre risks, would use that as an excuse to steer clear from marijuana.
However, Lloyd’s hasn’t provided a definitive answer as to what made the group suddenly decide to back away from the cannabis industry. This retreat, of course, has caused others who insure marijuana-related companies to grow increasingly paranoid about the implications buried inside the mystery.
“When you hear something like this it has to give you pause… It’s Lloyd’s of London making a decision to do something they have never done before. I am sure every carrier out there has taken pause,” said Mike Aberle, senior vice president of Next Wave Insurance Services. “And anything could still change. Lloyd’s could say why and that could throw the whole market off.”
Some experts believe that Lloyd’s announcement of disconnection could drive an already skittish industry over the edge – creating a black market on insurance services for businesses operating in legal marijuana markets.