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Insurance for Cannabis Businesses is Becoming More Available As Legalization Spreads

Because of a lack of insurance options, cannabis businesses are particularly vulnerable.

Mary Carreon

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Federal law keeps the cannabis industry from flourishing. Aside from a lack of banking, cannabis businesses are also prohibited from being fully insured, thus making them extremely vulnerable. In California, however, the last year-and-a-half has seen a wave of insurance providers writing coverage for the industry. At the end of last month, Golden Bear Insurance Co. was approved to lower existing insurance rates, bolster coverage options, and expand the types of business they will cover.

“We’re moving in a positive direction,” Dave Jones, California’s insurance commissioner, told High Times in an interview. “It demonstrates that there’s a market for this coverage and that it’s necessary.”

Golden Bear also now provides equipment-breakdown coverage. So, if your business loses inventory and/or income because of refrigeration issues, manufacturing equipment, or other machines necessary for processing and maintaining cannabis, Golden Bear help businesses from having to eat the cost. Although expensive, the protections could help save businesses thousands–even millions–of dollars, depending on operation size.

“The insurance covers all of the equipment that’s integral to the business’ operations,” Jones said.

Last November, the Stockton-based company became the first commercial insurer to offer insurance for the California cannabis industry. The other types coverage plans offered are general liability, products insurance, and property coverage. These plans extent to cultivators, manufacturers, and retailers. And, according to Jones, Some policies will even cover crime.

Cannabis law in California requires businesses to have commercial general liability coverage of at least $2 million, with insurance of up to $1 million for each loss. The state’s legislation also requires a $5,000 surety bond that is to be addressed to the state of California.

“Since Golden Bear came into the market, we’ve approved five other insurers offering various kinds of coverage,” Jones says. “For example, the other week we approved a filing for Atlas Insurance for workers compensation. Earlier in the year we approved several companies offering surety bonds.”

Lloyd’s of London Providing Coverage in Canada

On the heels of Golden Bear making their coverage more available, Lloyds of London, the UK-based insurance marketplace, announced they’d provide coverage for Canada’s legal industry.

“It is anticipated that the legalization of cannabis-related activities [in Canada] will give rise to new opportunities for insurers considering writing related risks,” Lloyd’s said to its underwriters in a statement.

Although announcing coverage in Canada, Lloyd’s also issued a warning to its underwriters. “In view of the proximity of the USA to Canada and the potential to write cross-border exposures, it is important that managing agents ensure that any cannabis risks have Canadian risk location only.”

Lloyd’s of London actually used to facilitate coverage for the cannabis industry in America. But, in 2015, underwriters were told not to open or renew existing accounts with cannabis companies in the U.S. until the plant’s federally legal. Pulling out of the U.S. market left thousands of cannabis business owners seeking new insurers for their crops, buildings and inventory. To this day, there’s a major gap in crop insurance available to the industry.

Lloyd’s of London doesn’t provide coverage, however. It operates an insurance marketplace similar to a stock or commodities exchange. Lloyd’s works with “syndicates” that underwrite coverage, and those syndicates transact with London-based brokers who deal with companies around the world that provide insurance to businesses; some of which offer coverage to canna-businesses.

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