Some cannabis insurance brokers are lately reporting better conditions for their cannabis clients – such as lower rates, better terms.
It’s too early to say whether their cannabis clients are getting better rates thanks to a maturing industry with a clearer claims history, or if other industries are just catching up to the tough times cannabis operators seeking insurance have faced since their inception.
As usual, there is probably a lot more going on than meets the eye. For our latest episode, we spoke with Stephanie Bozzuto, cannabis practice leader and commercial insurance broker for Acrisure’s West region, and Shauna Blackburn, cannabis team leader at Blitz Insurance.
Following are takeaways from that conversation.
Bozzuto, who has been focused on cannabis since states first began legalizing adult use, has gotten used to facing higher rates and harder terms for her cannabis clients.
However, she had an interesting experience with a client who owns a building leased to a cannabis operation. The client had the tenant leave, and the building owner was considering leasing to a non-cannabis business. Bozzuto took the client’s account to over a dozen markets for property insurance with a non-cannabis tenant, but they faced limited coverage and a higher premium than with a cannabis tenant.
“What we’re seeing is to typically a flat renewal or a small uptick in premium, depending on what state and city they’re zoned in,” she said.
Cannabis rates are “still relatively flat” but steady, with small increases possible depending on the amount losses a client has had in the years prior, according to Bozzuto.
As more coverage options popped up, and more capacity came into the market, insureds with a good claims track record are benefitting from the inpouring of effort and resources carriers and brokers have put into developing business in cannabis.
“I think we have a plethora of fabulous options for the insurance industry, especially in cannabis at this point, more so than we’re seeing in mainstream business,” she said. “And when I speak about mainstream business, I’m thinking of contractors, um, nonprofits, just different areas our agency has expertise in. And just speaking with my colleagues and other industry friends, (we’re) learning that those actual premiums have inflated and actually surpassed cannabis premiums.”
Blackburn has been in insurance more than 25 years – so she’s seen some ups and downs.
“So the premiums have been stabilizing over the past three years,” Blackburn said. “What I’ve noticed is that rates appear to be more conducive to what we see in other classes of E&S. So, in ideal conditions, we can even be more competitive depending on the coverage type than some of your standard classes – for instance, general liability has become more affordable as a coverage by offering these policies without the limitations and exclusions. So, like assault and battery being excluded or (certain) products being excluded.”
Blackburn describe what sort of scenarios she sees if the market as a whole gets tougher.
If we do see a hardening of the market, and rates start to increase, “it would be unfortunate because it always seems to follow costly property and casualty claims,” she said. “And that’s kind of what you’re seeing in the property area right now. The hard market always falls after a too soft market. What that means is, like if you have the rates too low and the claims in are coming in too heavy, and then you got inflation, all this other stuff coming in, you’re setting yourself up for a hard market.”
She added: “I would, on this point, I would urge all cannabis carriers to be wary and hold the line not to lower the premiums too deeply because we don’t want to create bidding wars. They always, always, always end badly for the operators and for the insurance retailers and the MGAs. This is still an emerging market and from what I’m seeing, the rates, they’re competitive, but they’re still adequate right now for carrier survival. So if we just protect the weight line as an industry, we can improve the odds of these pricing. I like to call them mood swing. And that means the severity of the soft market and the hard market shift. You kind of want to stay in the middle.”
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