Cannabis Crop insurance refers to a type of marijuana insurance which insures hemp farmers and marijuana crop producers against the their loss of cannabis crops due to natural disasters, such as hail, drought and floods.
If California marijuana insurance is a major topic at a wholesaler conference then you know that it is important. California saw over $9 billion in general insured losses last year over the two November wildfires alone. Also, a massive court decision known to as the Dynamex decision is shaking the industry.
The California Wholesaler Association conference is a major conference for insurance agents in the 5th largest economy in the world. California is lacking in cannabis insurance specialists but the industry is ramping up quickly after recreational marijuana became a legal regulated market in 2018. A little over a year later, California is still working out many details and has a long way to go, but the California marijuana insurance business is likely to become much larger.
A number of marijuana insurance agents were present to speak and learn at the conference and spoke with an Insurance Journal reporter. The CEO of one particular insurance company had this to say:
He said most cannabis operators seek the same kind of insurance many businesses want, such as general liability, workers’ compensation, slip and fall.
He said growing facilities with their expensive equipment and sophisticated operations need a lot of insurance.
“We’re seeing high property limits,” he said.
Brown said some businesses have been in operation long enough to have a good loss history, but many operated in grey areas before California legalized adult use, so that history isn’t always a dependable one for underwriting purposes.
Underwriting as a whole for the cannabis industry can be tough, he said, because there are also numerous companies with no loss history at all.
“The business interruption exposure, for example, is a vague and nebulous thing for a lot of startup operators,” he said.
Tatum said that because banks are regulated by the federal government, which still considers cannabis a controlled substance, that many operations have an abundance of cash on hand.
“Finding coverage for the actual cash on the premises has been a problem,” he said.
Quilici said that educating her clients on the ins and outs of cannabis coverage has become a big part of the job, as has educating herself.
“I’ve got retailers that know this business than I ever could, and I’ve got retailers that know nothing,” she said.
Cannabis coverage is essential and it is not surprising that marijuana business owners are looking for the same sort of Directors and Officers insurance, slip and fall insurance and other logical forms of coverage as mainstream industries. California has been the home of illegal marijuana grows since the 1960’s and the idea of getting any sort of marijuana insurance coverage probably never really occurred to growers.
The marijuana industry is growing rapidly and so proper cannabis insurance coverage will be as normal for cannabis companies as any other industry. Cannabis crop insurance is certainly important with the wildfires in that region of the country. Beyond that, normal dispensary insurance, marijuana lab testing insurance and other forms of coverage become that much more important the bigger the California marijuana industry grows.
https://www.s2sinsure.com/wp-content/uploads/2019/02/california-marijuana-insurance-is-very-important-considering-all-the-wildfires-burning-down-cannabis-crops.jpg6821024David Rahnhttps://www.s2sinsure.com/wp-content/uploads/2019/04/logo.svgDavid Rahn2019-02-15 16:21:322019-02-18 11:28:03California Marijuana Insurance Big Topic at Wholesaler Association Conference
Opinions on the emerging cannabis industry are so numerous that they are beyond my ability to track them. Everyone is either claiming to be an authority on the business of legal marijuana, or are striving to become the authority. The truth is that nobody is a complete authority on legal cannabis. It is still too new of an industry, and the proof is how inconsistent the rules and regulations pertaining to marijuana/hemp/CBD vary from state-to-state, and within each state! One moment Michigan has a restricted medical marijuana program, the next moment they have legalized adult-use marijuana. How can anyone be an authority, when fragmented state and federal regulations continue to evolve?
You should all know by now the largest barrier to entry into this industry is the Schedule 1 status of cannabis. This particular legal barrier unavoidably looms in our background everyday. Attending B2B cannabis conferences, from smaller more intimate ones such as C-LAB events to massive conferences like MJBiz, I consistently listen to speakers, vendors and attendees bring up the same topics. All of these cannabis conferences serve to educate and communicate, but no matter where I go people still talk about banking restrictions, merchant service problems, taxes being too steep to turn a profit due to IRS Tax Code 280E, inability to engage in interstate commerce and all sorts of marketing challenges. For us of course, it is the barriers to suitable marijuana insurance policies that we focus on the most.
How long does it take for a state regulated body to be funded, staffed, implemented, grow and stabilize? Depending how fast current laws are adopted or changed, it will take a long time and a lot of discussions as to how the cannabis Industry, the federal government and the cannabis approved states will come together to implement best in classlicensing and regulations, product quality standards, taxation and enforcement. Through this evolution of an industry, we will witness successes and failures along the way.
Look at Massachusetts, voters legalized adult-use marijuana in 2016, and it took over two years for sales to begin with only two dispensaries allowed to open by December of 2018. Florida has multiple lawsuits filed over unconstitutional medical marijuana laws that do not match what voters approved in 2016. State laws are changing on a regular basis and have not even stabilized in states like Colorado and Washington which began selling adult-use cannabis in 2014 and medical marijuana well before that.
The evolving marijuana industry is full of so many financial and regulatory uncertainties that insurance policies for cannabis companies are not consistent from one carrier to another. Marijuana insurance companies like S2S Insurance Specialists have to stay current with many state and federal regulations. Federal prohibition continues to plague the cannabis insurance industry by preventing it from operating in a free market environment. These restrictions have made most big insurance companies reluctant to enter the cannabis market place, therefore we are restricted to a couple of surplus lines carriers.
Best practices in business are still evolving in the cannabis space. The time for cannabis entrepreneurs to build, scale and stabilize their businesses is now! We have all read and heard about the growth projections of the cannabis industry. Projections that cannabis will represent the next $20 billion industry are probably conservative. We will eventually rival the multi-billion dollar snack, alcohol and pharmaceutical industries. As companies scale up, management teams become the forefront of any successful operation.
Most professionals I have met have pivoted into the cannabis Industry from other specialized professions. Like myself, they see an opportunity to do something new and exciting. We need to bring the best of our skill sets to this very young and emerging industry. Come into this industry with your eyes wide open. The opportunities in cannabis are great, but the competition is fierce. It takes more than just a love of marijuana or the passion of wanting to see the social injustice of marijuana prohibition come to an end. It takes a strong understanding of the fundamentals of business. It takes organization and constant research to understand the next big trend or new state mandated rules.
As cannabis insurance specialists, David and I stay current on industry trends, data points, cannabis research and the full spectrum of the supply/distribution chain. The biggest problem we all face in this young emerging industry is the lack of credible and actionable data. Like most institutional markets, insurance relies heavily on the data acquired across the industry in order to rate, compare and assess risk. We also follow current industry news and insurance trends in cannabis.
The most recent industry change was the passing of the2018 Farm Bill. It allows for broad cultivation of hemp, not simply pilot programs for studying market interest in hemp-derived products. Its language clearly allows for the transfer of hemp-derived products across state lines for commercial use and other purposes. It also puts no restrictions on the sale, transport, or possession of hemp-derived products, so long as those items are produced in a manner consistent with the law.* Now that hemp will be descheduled, along with hemp derived CBD, hopefully insurance for these products will be more widely available and competitive. There is hope that states will offer state sponsored crop insurance for hemp growers.
Another big trend we are seeing is the need for companies to raise capital for future growth. Many cannabis companies are looking towards the Canadian stock exchanges such as the TSX, VSE and CSE to raise funding. When companies engage in selling shares of stock to the public, there is a greater need for Directors and Officers Liability insurance (D&O). A Directors and Officers Insurance policy protects you as a director or officer of the company if your actions negatively affect the company’s profitability or if the company is sued because of your actions. The policy will pay for legal damages and fees. D&O helps preserve the company’s cash flow against expensive legal bills. These sorts of risks will become even more apparent as the number of cannabis stocks continue to grow and the amount of active investors and traders diligently following these companies hope to capitalize on the market by challenging management and business development goals.
We continue to follow various insurance claims affecting the cannabis Industry. We are seeing claims in the product sector, D&O claims from shareholders, employment dismissal issues and crop/property claims due to the fires on the west coast. California’s gray market persisted for 20 years, but over the summer it became mandatory that any cannabis product intended for commercial sale undergo product safety testing by state certified labs. A Sacramento testing facility that had serviced the industry for years was just suspended for failing to test for 22 pesticides. The cannabis was distributed to California consumers and the recall will cost many companies in legal fees, fines and potentially their licenses while the state courts figure out who is at fault for the lost revenues. Stories like this will hopefully start to weed out the bad actors in the industry.
We highly recommend that management review their insurance policies, policy limits and deductibles every six month to make sure that as your business grows, you are maintaining adequate coverages. Many things change in the course of a year, it is important to constantly manage your risk assessments. S2S Insurance Specialists are dedicated to helping you insure, from seed to sale, all your cannabis, CBD and hemp insurance needs.
Reach out Eric Rahn and David Rahn to find the cannabis insurance policies that are most suitable for your company.
https://www.s2sinsure.com/wp-content/uploads/2018/12/hemp-field-3661214_960_720.jpg720960Eric Rahnhttps://www.s2sinsure.com/wp-content/uploads/2019/04/logo.svgEric Rahn2018-12-18 13:53:072018-12-18 14:08:39The Evolution of the Emerging Cannabis Industry
Many people are looking for ways to get into the growing cannabis industry. The potential is vast from cannabis dispensaries, cannabis lab testing facilities, edibles, infused drinks, oils and more. The one area people can also look at in this growing industry is actually growing cannabis. The obvious key to the industry is the actual plant, and the only way to have more cannabis is to grow cannabis. That being said, not all soil and growing conditions are created the same, so where are some of the best places to grow cannabis in the United States?
Leafly put together a list of the top five regions in the united states to grow cannabis and S2S Insurance Specialists thought we’d share it along with a few thoughts on how to protect your crop once you figure out if you are in a good place to grow cannabis and enter the world of marijuana.
California’s lush, rugged northwest territory—dubbed the Emerald Triangle—is akin to the New York Yankees and their history-leading 27 championships. The region’s balmy Mediterranean climate and vast swaths of sloping mountainsides have made it a premiere growing location, akin to France’s Burgundy and its contribution to making wine.
Ranking second in indoor cannabis production behind California, Washington the Northwest territory proves to be a formidable rival to Oregon despite its more precipitous location on the west side of the Cascade Mountains. Areas nearby Seattle are dampened by heavy rain and lack of sunlight, leaving most growers to cultivate more sativas and early-flowering hybrids. However, towns east of the Cascade range get much better sunlight, while all parts of Washington benefit from the rich soil and abundance of fresh water.
Ranking 4th in indoor production, Oregon is a fantastic state for cultivation due to its relaxed personal cultivation laws and ease of entering the commercial industry. Naturally, the state grew way more cannabis than it even needs. Price declines have spelled trouble for many farmers, but consumers have rejoiced in $50 legal ounces, more than 80% cheaper than Califor
nia bud in 2018.
The East Coast may be notorious for low quality buds, but the Northeast can actually provide decent conditions for outdoor growing, namely Maine. Humid summers combined with a shorter fall season might not be ideal, but early-harvesting strains such as indicas or hybrids can benefit from the nurturing soil and the extremely fresh water.
Growing cannabis is like any other form of agriculture and requires knowledge, skill, patience and a bit of luck. The luck comes into play when weather and other variables out of your control enter the picture. S2S Insurance Specialists can help take luck out of the equation by providing a risk management solution tailored to your needs. Some of the regions mentioned above are threatened by hurricanes, fires, and other real threats to agriculture and especially cannabis. Crop insurance, property casualty insurance and cargo transportation insurance are all options to help you with your grow operation. Contact Eric Rahn of S2S Insurance Specialists to discuss your risk management plan and to help protect your investments of time, money and energy.
https://www.s2sinsure.com/wp-content/uploads/2018/10/top-5-cannabis-growing-regions.jpg12011921David Rahnhttps://www.s2sinsure.com/wp-content/uploads/2019/04/logo.svgDavid Rahn2018-10-22 16:21:072018-11-05 09:39:35Best Places To Grow Cannabis In The US
The cannabis industry is centered around agriculture and the ability to grow and cultivate marijuana plants. Cannabis crop insurance is a way to protect this particular type of agriculture. The results of cannabis agriculture produces various edibles, oils, and flowers people use to consume cannabis for medicinal or recreational purposes. In order for any of the previous mentioned applications to exist, there must be a crop that produces a yield to put into market. If you produce a crop that can potentially turn a profit, you will need insurance, cannabis is no different, thus marijuana growers should have cannabis crop insurance.
As the cannabis market expands and more underwriters and insurers become willing to take on the risk despite the Schedule 1 status of marijuana, opportunities for risk management will grow. Cannabis crop insurance may sound like an unnecessary expense to a cultivator in their early stages, but insurance cannot be overlooked. Imagine investing a portion or all of your life savings into starting a grow operation only to lose it all to a fire. There are many in the industry who have experienced such loss, but there are also others who were able to protect themselves and their investment with a sound risk management strategy.
One Carpinteria farmer won an insurance payout well in excess of $1 million after ashes from the Thomas Fire destroyed thousands of his plants. What was unusual was that the plants were marijuana. As cannabis cultivators come out of the shadows, pot businesses are starting to operate like any other businesses — they have lawyers, accountants, bankers, and, more recently, insurance brokers. Most of the Northern California cannabis farms scorched by last fall’s wildfires did not have insurance. They were forced to suffer huge losses. But now insurance brokers in Santa Barbara County are starting to tap into the once-illicit industry.
There are many growers that suffered massive losses that prevented them from competing in the cannabis industry again. While a marijuana grower with a cannabis crop insurance policy may still experienc some losses, because of their cannabis crop insurance policy they are able to significantly reduce that loss. As a new business owner you risk severe exposure to financial loss if unforeseen risks are not accounted for in some capacity. For a grower or a business owner with a grow operation, cannabis crop insurance should be explored with a knowledgeable insurance agency that can help you decide what policy is right for you.
Growing marijuana, regardless of whether a grow operations is outdoors or indoors, is no different than any other crop in the sense that the variables of nature such as fire, storms, earthquakes, or other natural disasters must still be accounted for. Because we can’t predict these various perils, risk management policies exist to help fill the void of the unknown. It is also important to remember that regardless of what type of cannabis crop insurance policy you have, coverage limits will apply. You must read your policy with both your agent and your attorney to determine what your coverage consists of. As a business owner, if you are going to invest your time and money into an endeavor such as a cannabis grow operation, it only makes sense to protect that investment against the unforeseen.
S2S Insurance Specialists LLC is an international insurance intermediary and brokerage firm, specializing in the placement of insurance and other risk insurance services to businesses operating in the Medical And Recreational Marijuana Industry.