Medical Marijuana Business Insurance Developments

NEWS FLASH: Lloyd’s of London recently announced a ban on its insurance syndicates writing new policies in the USA to businesses growing and selling medical marijuana. Click here if you are interested in learning how licensed marijuana dispensaries and growers can create a custom privately held insurance company to insure their operations.
  • Oddly, this could help expedite passage of proposed federal senate and house bills that decriminalize medical marijuana in states that have approved medical marijuana use. This action of Lloyd’s could pave the way for improved insurance and banking services needed by the medical marijuana industry, and open the door to a flood of institutional investment waiting on the sidelines to participate in cultivation and distribution investment opportunities in the medical marijuana industry. In time, we expect corporate agricultural giants and farming coops to dominate the cannabis industry.
  • The primarily family and entrepreneurial ownership driving this still cottage industry will change dramatically as the US federal government acknowledges the public interests in decriminalization far outweighs that of opposing special interests, like alcohol, pharma and even law enforcement. These conflicting special interest groups have long aided suppressing marijuana legalization and medical study and use.
  • Nothing short of fear, false rumors and hostile economic interests have prevented US based scientific and medical study of marijuana and its compound derivatives. Had this not been the case for over 50 years, today there would be extensive US based human study data joining the growing mountain of scientific data from around the world concluding the benefits of medical marijuana and its many derivations outweigh associated risks and concerns.
Despite this setback by Lloyd’s making it more expensive to conduct medical marijuana business today, the trend and tide toward widespread medical use and decriminalization will continue given the majority of American’s today coming out of the closet in support of decriminalizing marijuana use. Not only would states and the federal government see new sources of significant tax revenue, but they simultaneously would see large drops in criminal related departmental budget expenditure requirements.
The Lloyd’s release in part states: “As you may be aware, recent months have seen significant press coverage regarding the status of marijuana under U.S. federal and state law.  The current administration has adopted a policy of non-enforcement of federal law with respect to both medicinal and recreational marijuana where marijuana is legal in a state, while Congress recently indicated (as part of a temporary spending bill) its intention not to seek enforcement of the sale of medicinal marijuana.  Notwithstanding these enforcement decisions, marijuana remains illegal for sale throughout the United States under federal law.  In addition, cash generated from the sale of marijuana invariably implicates federal Anti-Money Laundering laws (these, too, are currently subject to non-enforcement policies).
The Impact on Businesses in the Medical Marijuana Cultivation and Sales Market:
  • With diminished capacity to find commercial insurers willing to insure cultivators and dispensaries,  premiums will likely increase over levels seen for the past 12 months for medical marijuana operations.  There are domestic players as well as other international players besides London and not all insurance companies will follow Lloyd’s lead.
  • The use of customized captive insurance companies will likely grow quickly as successful businesses in the medical marijuana industry in particular are extremely good candidates for creating a customized affiliate captive insurance company, that designed and operated correctly is extremely powerful with a range of important benefits.
  • Using a closely held captive insurance company, rather than seeking insurance through commercial insurers who have been known to deny any claims or delay processing even if they agree a claim is valid, is something businesses in the medical marijuana industry should consider.
Leading insurance brokers with clients that have vertical operations in the medical marijuana farming and distribution business, prior to Lloyd’s recent decision, were seeing annual premiums in the range of $20,000 up to $35,000 for some basis commercial liability coverage.  This was typically for a combined $1,000,000 limit policy for D&O, EPLI, and Fiduciary liability.  Retentions are running in the $25K – $50K range.  Crime coverage for marijuana businesses is the “problem child.”  The limits previously afforded by Lloyd’s have been paltry at best.See our banking related articles for more information on the struggles medical marijuana businesses continue facing in the US despite strong public support and nearly 50% of states expected to legalize medical marijuana soon due to growing supportive science confirming this powerful botanical should be embraced and explored fully without further delay in the US and abroad as it may very well hold one of the most important keys to improving regenerative medicine and reducing the escalating cost of health care.


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