In 2022, Mississippi became the 37th state to legalize medical marijuana, and Rhode Island, Maryland, and Missouri all approved adult recreational use. On November 23, the US Congress passed the first bipartisan cannabis bill Medical Marijuana and Cannabidiol Research Expansion ActThis will enable researchers to fully study the health benefits of cannabis, and lead to further federal regulation.
Along with the regulated marijuana industry, the hemp CBD industry is now reaping the benefits The 2018 Farm Bill eliminated hemp and cannabis derivatives From the definition of marijuana in the Controlled Substances Act (CSA), with very low concentrations (no more than 0.3% THC on a dry weight basis) of the psychoactive compound delta-9-tetrahydrocannabinol (THC).
This new-found legality of hemp CBD paved the way for cannabis product development in finance, insurance and medical, health and wellness. Unlike hemp CBD, marijuana is a Schedule 1 drug under the CSA, which has actually prohibited insurance carriers and financial markets from supporting the cannabis industry.
“Regulated marijuana for medical and/or recreational use and hemp CBD are two different risk profiles,” says Norman Ives (pictured, left), a cannabis expert with Amwins Brokerage in Los Angeles, CA. “Regulated marijuana business has different insurance requirements than hemp CBD risk.” And have different insurances. Insurance carriers are generally more comfortable with the federal stance surrounding hemp CBD.
Morgan Moore (pictured, right), EVP with Amwins Brokerage in Los Angeles, CA, said the legalized marijuana industry is still “underserved” by insurance markets, with few “robust coverage” options. This could become problematic as the industry grows, and more states legalize adult recreational cannabis.
Cannabis Market Imbalance: West vs. East
Western states pioneered adult marijuana legalization, with Washington and Colorado coming online in 2012, followed by Oregon in 2014 and California in 2016. Although these states paved the way for the recreational cannabis industry, cracks are now appearing in their foundations.
“In mature markets, the wholesale price of cannabis has come down significantly,” Ives said. “In some cases, it’s actually sold for less than the cost of production, which puts enormous pressure on the producer and/or processors, especially those at the middle or lower end of the revenue model. If they don’t produce large quantities of cannabis, they struggle to compete with the big players in mature markets.
Eastern states have generally been slow to legalize cannabis. New York approved adult use in 2021, and has begun issuing grower licenses with the goal of dispensaries operating by the end of the year. However, delays are expected as the state is present It was involved in a legal battle over its licensing criteria.
As more states legalize adult marijuana, growers, manufacturers, processors and distributors are looking to mature markets in western states to understand their business models and see how they can incorporate technology and innovation. They focus on how to address social equity issues associated with the former illegality of cannabis activities. But mature markets are far from perfect prototypes.
“Financially, a lot of cannabis operators are not in a great place. There’s a ton of debt in the cannabis industry, which is going to create a lot of enforcement,” Moore said. We have, and other states are now 5+ years into maturity and struggling financially. ”
Product innovation: turning to minor cannabinoids
Cannabis has been cultivated and used for medicinal and recreational purposes for centuries. Although regulated marijuana is still an ’emerging market’, many consumers are already familiar with the product. Therefore, the challenge for cannabis companies is to keep traditional users interested in legal products while also attracting non-traditional users with innovative offerings such as gums, beverages and health and wellness solutions.
“The research and development of cannabis products is very slow, and there is a lot of uncertainty about how far the product can go. Passing some of these laws [like the Medical Marijuana and Cannabidiol Research Expansion Act] That opens up other avenues for research,” Moore said.
Ives said he sees a “continuing push into smaller cannabinoids,” compounds found naturally in the cannabis plant that are often believed to have therapeutic and medicinal effects.
Two common cannabinoids are cannabidiol (CBD) and tetrahydrocannabinol (THC), both of which are commonly highlighted in regulated products on the market today. But now companies are trying to find ways to produce and market other cannabinoids, including cannabinol (CBN), which is believed to aid sleep, and non-psychoactive substances (meaning they don’t induce a “high”), such as cannabigerol (CBG).
This can create insurance challenges, especially if the cannabinoid is synthetic, meaning it is a chemically engineered analog. For example, CBN is a product of oxidation and can be produced from exposure of THC to heat and light. To make CBN, producers may be tempted to buy Farm Bill-approved hemp, which they can convert into their desired cannabinoid. However, Ives stressed that those who are tempted to add their regulated THC or CBD products this way should be cautious.
“Many cannabis carriers exclude coverage for manufactured cannabinoids,” he told Insurance Business. “If you’re extracting a cannabinoid from a cannabis plant, that’s not a problem. But if you’re buying Farm Bill-approved hemp and converting it to another cannabinoid, you may not be covered. If your policy excludes analog or synthetic cannabis, you could add an ingredient that makes your product uninsurable.
Tips for ‘Green’ Brokers for the Cannabis Insurance Industry
The The regulated cannabis industry is always evolving. As companies navigate a complex regulatory minefield, they try to innovate and capture new customers with new products.
“The cannabis market is growing. “It’s a growing industry, and we’ve had all this amazing technology and evolution happen in such a short period of time,” Ives said. “I would encourage agents and brokers to work with an expert in the space. Don’t shop for a policy, shop with a broker who knows what they’re doing and can help you understand the appetite and intent of different carriers with their coverage.