MJBiz - July/August 2024 - 54

VIEWPOINT Isaac Bock
Good News for Green Growers
More cannabis business insurance options are on the horizon
H
istorically, financial
institutions shy away
from cannabis companies,
investors opt for other markets
and insurers often only touch the
industry using a 10-foot pole. But
the times? They are a-changin'.
Like other business sectors,
marijuana companies depend
on digital operations to keep
the gears grinding. For example,
cannabis businesses handle sensitive
customer data in everyday
transactions-from personal
information to financial details.
But as more operations store
and manage sensitive data, they
become prime targets for cyberattacks.
These dynamics have
created a need for protection
against a cyber incident.
Cannabis Liability Insurance
The uptick in cyberattacks and
data breaches has catapulted
cyber-liability insurance from
optional to must-have status.
Traditional insurance policies,
such as general liability, don't
cover these specialized risks.
Cannabis businesses can't safely
operate without cyber insurance
because it can cost owners their
business if they're forced to
cover the out-of-pocket cost of a
cybersecurity incident.
With cyber threats ever-evolving,
cyber insurance is budding
as a vital tool for cannabis businesses
to secure sensitive data
and ensure financial stability.
More Options, More Green
We're seeing a surge of insurers
entering the market, offering
54 July-August 2024 | MJBizMagazine
a wider range of coverage
options and, potentially, more
competitive pricing for cannabis
businesses.
As the potential for federal
rescheduling of marijuana
grows, this trend is likely to
continue. A more transparent
legal framework naturally will
fuel competition in the cannabis
insurance market, ultimately
benefiting businesses with more
choices and lower premiums.
The entry of new players-particularly
in niche markets such as
cannabis insurance-could lead
to more competition, potentially
lowering premiums in those
areas and softening the market.
Softening Insurance Market
In 2019, insurance began
shifting toward a hard market
characterized by higher
premiums and more coverage
restrictions. Despite the pressure
on insurers, many insurance
professionals expect the market
to soften soon.
According to Matt McKenna
of New York-based Scale
Underwriting, the state of the
cannabis insurance market
depends on several factors. He
mentioned that the degree of
softening-particularly for
management liability-will
depend on the federal
government's treatment of
cannabis.
Recent news about the
U.S. Drug Enforcement
Administration potentially
rescheduling marijuana as a
Schedule 3 drug would have a
softening effect on the market in
two ways:
1. Insured balance sheets
will improve with revised
tax practices and renewed
interest from investors,
which will positively affect
the average management
liability risk profile.
2. More carriers will enter the
space, and this competition
will push premiums down
and broaden coverage.
Also at play is the overall
casualty-reinsurance market,
which has experienced a
softening over the past few
years. This might temper the
degree to which the market
softens since managementliability
premiums, in particular,
have been going down on
average since 2021.
Enhanced Options
Aside from a more promising
insurance-market outlook,
we're experiencing an uptick in
cannabis crop insurance options
beyond basic property coverage.
This development is great news
for cultivators.
Traditionally, cannabis crop
insurance focused on protecting
against physical damage from
natural disasters. However,
innovative insurers now are
offering more comprehensive
coverage, addressing the unique
risks cultivators face.
One key enhancement is gap
coverage: This protects growers
from financial shortfalls if their
yield falls below a predetermined
level, even if the cause

https://mjbizdaily.com/dea-signs-off-on-marijuana-rescheduling/ https://mjbizdaily.com/dea-signs-off-on-marijuana-rescheduling/ https://alpharoot.com/insights/cannabis-cybersecurity-insurance/ https://alpharoot.com/insights/cannabis-cybersecurity-insurance/ https://alpharoot.com/insights/cannabis-do-insurance-guide-2/

MJBiz - July/August 2024

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