Billion dollar insurance gap dawns in legalised cannabis market

Legalised cannabis sales in the US totalled £6.4bn ($8bn) in 2018, in a market that, were it insured to levels normal for other businesses, would pay about $1bn in annual premiums.

And with that figure projected to rise to over £32bn ($40bn) by 2025, a report from New Dawn Risk argues the need for insurance in this fledgling industry, with its untried legal and societal framework.

CEO of the firm, Max Carter said: "Legal cannabis is a rapidly growing market, currently with a legal foothold in over thirty US states. Right now, the COVID-19 outbreak has led to increased demand for cannabis in the US and stores in many states have been allowed to reopen or offer curbside sales. However, the crisis has also exposed the financial pressures on many cannabis firms, with many VC-backed cannabis firms struggling already to meet financial projections. A COVID-19 recession, which seems all but a certainty, will only increase such financial pressures for young cannabis businesses."

The pandemic, he says, will make it even tougher for cannabis producers to obtain insurance as providers further tighten terms and conditions and introduce exclusions, while insurers who may have been looking to enter the marker will put their plans on hold.

"With the Federal Government shut down and the possibility of a change of administration in November’s presidential election, the progress of legislation that would open up the cannabis market to insurers will be delayed," he added.

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