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Growth in pot sales

The cannabis market rapidly changed over the last few years and continues to change on a daily basis.

In 2017, the cannabis industry took in nearly $9 billion in sales. Nationally, in 2018, the overall marijuana industry was worth $10.4 billion, and is anticipated to bring in $21 billion in 2021. Other estimates project that by 2022, the cannabis industry will create an estimated $80 billion in sales annually.

Source: The National Association of Insurance Commissioners

The insurance market for California’s legalized cannabis industry is about as tough to crack as securing bank financing.

Both industries remain largely wary, mainly because cannabis is still considered an illegal drug on the federal level.

“Those directly and tangentially involved in the industry need insurance that addresses the specific needs of growers, retailers, distributors, property owners and lab researcher,” according to a new report from A.M. Best, a U.S.-based credit rating agency for the insurance industry. “Carriers that have entered the market are typically partnering with agencies and producers that have a better understanding of the industry and the needs of cannabis businesses,” according to the report, titled “Cannabis: New Opportunities for Insurers, but with Burgeoning Risks.”

Insurance brokers like Cover Cannabis is a good example. According to its website, the brokerage works with three unidentified insurance carriers that write policies around certain aspects of the cannabis business. Cover Cannabis declined to comment.

There are hundreds of insurance carriers listed on the state insurance commissioner’s website, but it’s unclear how many, if any, provide full coverage to the state’s cannabis industries. Commissioner Ricardo Lara doesn’t recommend or endorse any of the listed carriers.

When contacted by the Business Journal for specifics about how the commissioner can encourage more carriers to be comfortable writing policies for cannabis businesses, his office twice declined to offer any more than the following statement, attributable to the commissioner:

“My goal is to make sure coverage is available in the California insurance marketplace and I continue to work with insurers who are interested in this issue to consider expanding coverage options. California businesses need insurance coverage to protect themselves and consumers. From seed to sale, cannabis businesses operating according to the law, need insurance protection and I am committed to making sure new insurance product applications are moved quickly through our review and approval process.”

Lucian McMahon, a senior research specialist at the Insurance Information Institute, headquartered in New York City, said there is much confusion around the legal issues around cannabis, and a lack of understanding.

He also noted that some carriers are offering partial coverage, while others may be unknowingly providing cannabis coverage.

“Often it’s from the misclassification perspective,” McMahon said. “An insurer may get an application from, say, a retail store and later find out it was a marijuana store.”

The level of risk can also differ. A carrier may be willing to cover a retail store but not a grower or manufacturer.

In August 2018, the National Association of Insurance Commissioners formed the Cannabis Insurance Working Group to identify insurance issues, gaps and opportunities facing the cannabis industry, and to identify best regulatory practices to address these issues.

The group prepared a white paper, finding that the need and demand for cannabis insurance will continue to increase as more states legalize the plant.

“There are substantial gaps in insurance coverage for the cannabis industry, which means that consumers, workers, vendors, owners and investors face risks that are not covered as they interact or engage with the cannabis industry. It is important for state insurance regulators to understand and address insurance availability and coverage gaps in their markets,” according to the findings.

The cannabis market rapidly changed over the last few years and continues to change on a daily basis.

Growth in pot sales

The cannabis market rapidly changed over the last few years and continues to change on a daily basis.

In 2017, the cannabis industry took in nearly $9 billion in sales. Nationally, in 2018, the overall marijuana industry was worth $10.4 billion, and is anticipated to bring in $21 billion in 2021. Other estimates project that by 2022, the cannabis industry will create an estimated $80 billion in sales annually.

Source: The National Association of Insurance Commissioners

In 2017, the cannabis industry took in nearly $9 billion in sales. Nationally, in 2018, the overall marijuana industry was worth $10.4 billion, and is anticipated to bring in $21 billion in 2021. Other estimates project that by 2022, the cannabis industry will create an estimated $80 billion in sales annually.

McMahon sees hope in the future.

“It’s a slow sea change in the perception of these businesses which, again, are illegal at the federal level,” he said. “Public opinion is shifting about marijuana businesses being legitimate enterprises.”

Staff Writer Cheryl Sarfaty covers tourism, hospitality, health care and education. Reach her at cheryl.sarfaty@busjrnl.com or 707-521-4259.