Cannabis businessowners policy approved in Nevada
This comprehensive policy provides coverage for cannabis manufacturers, distributors, processors and dispensaries.
Businesses operating in the rapidly growing cannabis industry have a new option for insurance coverage in Nevada. Just before the end of 2019, the American Association of Insurance Services (AAIS) expanded its Cannabis Businessowners Policy (CannaBOP) into Nevada, where the program received approval in just four days following its submission to the Nevada Division of Insurance.
The CannaBOP program is currently available in only three states: California, Nevada, and Colorado. However, AAIS expects to develop similar programs for Alaska; Washington, D.C.; Illinois; Maine; Massachusetts; Michigan,; New Jersey; New York; Oregon; Vermont; Washington and other states.
The benefit for companies operating in this space is that these are standardized policies as opposed to a one-off, explained Christine Barlow, managing editor of FC&S Expert Coverage Interpretation. It takes time for new forms and programs to become established in states, especially for something like cannabis that isn’t legal the same way in every state. Barlow adds that if the program is expanded nationwide it will be the only industry-standardized policy available. Even if the policy is not used in a state, it could still be a valuable reference for carriers.
Under the Nevada CannaBOP program, both property and liability coverage are available for dispensaries, storage facilities, distributors, processors and manufacturers. “The AAIS form, as the name CannaBOP suggests, is focused primarily on retail exposures,” says Patrick McManamon, founder and chief executive officer of Cannasure Insurance Services, LLC, a wholesale broker and MGA operating exclusively in the hemp and cannabis industries. “Many of the policies written today use a mix of standard and proprietary forms that can provide coverage to a wide range of cannabis exposures such manufacturing, cultivation and lessors’ risk as well as retail.”
The legal marijuana industry is already poised for significant growth. Grand View Research Inc. anticipates that the global legal cannabis market will grow to $66.3 billion by 2025. In 2018, the U.S. legal cannabis market was valued at $11.9 billion. The most popular product type involves dried buds, which are usually used for smoking.
If sales in Illinois are any indication, that number could be reached sooner than expected. On January 1, 2020, legal recreational marijuana sales began in Illinois and more than 77,000 transactions occurred that day alone, totaling sales of approximately $3.2 million. The average sale was $135. Since then, some dispensaries have had to close due to a lack of product.
“Cannabis and hemp are two of the fastest-growing markets in North America,” said Joseph Jonas, AAIS commercial lines product manager, making the CannaBOP program a critical consideration for insurance carriers and agents.
AAIS says that cannabis sales in the U.S. could exceed $15 billion this year, and Nevada alone is expected to reach $1 billion by 2022.
For more information on the cannabis industry and coverage risks, plan on attending the America’s Claims Executive Leadership Forum & Expo in New Orleans, April 20-22, 2020.
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