At its Summer National Meeting last week, the National Association of Insurance Commissioners (NAIC) adopted the Regulatory Guide to Understanding the Market for Cannabis Insurance: 2023 Update.
The white paper – produced by the NAIC’s Cannabis Insurance Working Group – looks at the insurance issues related to the cannabis industry, as well as the state of cannabis regulation in the United States.
This new update to the NAIC’s original cannabis white paper published in 2019 discusses how the cannabis industry has become more sophisticated with its rapid expansion. This expansion has driven new product development, infrastructure changes, and the need for businesses to provide ancillary services. It also dives into the ways that cannabis regulation, specifically at the state and local levels, has evolved significantly.
Among the key findings in the paper, NAIC found that capacity has improved since 2019, however, most of the commercial insurance for cannabis-related businesses is in the non-admitted market. Also, smaller industry players are most impacted by the lack of admitted options since the non-admitted market doesn’t offer the “off-the-shelf” insurance solutions typically available in the admitted market.
In addition, it revealed that insurance gaps are most prevalent in the emerging areas of the cannabis industry, such as ancillary services, cannabis-infused products, and social consumption lounges. Further, among the potential structures being explored to facilitate cannabis-related business coverage are the use of state-based commercial insurance programs, risk retention groups, captives, and joint underwriting associations.