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One of the more opaque segments of the cannabis industry is anything that touches banking or insurance, owing to the plant’s federal illegality and Schedule I designation.

Even though access to financial services are severely hampered for many cannabis businesses, said businesses can’t exactly opt out: cash-only enterprises are dangerous and difficult to manage, and most cannabis businesses are required to have insurance in one form or another, particularly if they are leasing or purchasing property.

As the cannabis industry continues to grow and evolve — and legislation along with it — insurance needs become more complicated and comprehensive. I checked in with Charles Pyfrom, CMO of CannGen Insurance Services, which is an insurance provider that specifically targets the cannabis industry, to talk about some of the intricacies of working in this space and what changes may be on the horizon, legislatively speaking. CannGen also recently announced its offering of D&O coverage, which is something that remains elusive to most operators in the cannabis industry.

JB: Risk and compliance management has been a hot topic in the cannabis industry over the past year. Can you tell me how CannGen Insurance Services can help companies manage their risks?

CP: Though cannabis businesses are often required to have insurance – depending on line of coverage – many historically had found it difficult and/or expensive to secure the appropriate limits/products for true risk transfer. CannGen was created to help cannabis businesses, which are often considered high-risk, protect their products, services, employees, IP, property, and overall operations. We do this by evaluating what types of risks each business has and providing them with the adequate coverage to meet their needs. We help them navigate the variations in the exclusions, limitations, and endorsements of each individual insurance policy.

JB: What sets CannGen apart from other cannabis insurance providers? 

CP: CannGen became the first Managing General Underwriter (MGU) to exclusively focus on the legal cannabis industry in 2008. Underwriting for both ancillary and plant-touching companies in the cannabis industry, CannGen has become a one-stop shop for comprehensive insurance coverage in all legalized states in the U.S. as well as Canadian provinces through a sister company. 

There is not another insurance underwriting facility that offers the cannabis industry in a one-stop shop for all of its coverage needs. Small companies in the space offer coverage in a specific region or a specific type of coverage while CannGen provides clients with a full breadth of coverage that can service everyone from start-ups to MSOs all at one source. This is a large advantage that saves time, stress and money for both cannabis companies and brokers.

CannGen’s offerings are ideal for start-up businesses, multi-state operators and all businesses in between as they are highly customizable depending on a company’s needs.

JB: Recently, the company began offering Directors & Officers (D&O) insurance. Can you tell me a little bit about why this became a focus for your company? Why do companies need this?

CP: The cannabis industry is one of very few industries that not only survived, but thrived during the pandemic. Still, since cannabis remains federally illegal, companies and their executives in the industry typically struggle to find the proper appropriate D&O, as well as Employment Practice Liability (EPL), coverage.

D&O protects directors and officers and/or their company in the event they are sued – it is particularly important for a company’s financial health because a lack of proper coverage puts individual board members as being potentially personally liable for the actions of the company. EPL covers the actions of the operator against employment practices. 

JB: What are some of the biggest challenges for cannabis companies when it comes to securing insurance?

CP: There is a capacity issue within the cannabis insurance industry. There are only a few insurance companies that are now offering comprehensive coverage specific to cannabis operators and ancillary businesses. There are also limitations, including lack of customer awareness and small margins, that make it difficult for operators to prioritize proper insurance coverage vs. just the lowest price. 

Due to the massive growth this industry has seen and continues to experience, it has naturally attracted lots of interest from both carriers and brokers who are looking to “get into” the cannabis space. However, as we see on a regular basis, not all policies are created equal and unless the buyer is spending time to read the forms and understand what they are buying there will be circumstances where insureds/buyer are surprised come time of claim. Education is key in cannabis insurance so trusting a firm like CannGen, who brings a track record of real coverage at appropriate pricing, is of paramount importance.  

JB: Can you tell me about what the passage of the Clarifying Law Around Insurance of Marijuana Act of 2021 would do for the cannabis industry?

CP: The CLAIM Act, if it became a law, would “provide a safe harbor from penalties or other adverse agency action for insurance companies that provide services to cannabis-related businesses in jurisdictions where such activity is legal.”

This could be great news for the industry and is especially important as it may enable additional capacity from both issuing carriers and reinsurance providers for the cannabis industry. We aim to help make it very easy for operators in every state where medical and/or recreational cannabis is legal to secure their assets through appropriate risk transfer solutions.

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