Sales of legal cannabis in the US have hit a record high of US$17.5bn and new legislation surrounding insurance and banking rules for the market is set to open up potential new opportunities for insurers.

New Dawn Risk has published a white paper on insurance for the US legal cannabis, CBD and hemp markets, detailing the changing legal landscape within the sector. The 2021 report – Opportunity knocks at last in the US cannabis insurance market – notes some significant changes from its predecessor in 2020. Since the previous report, US sales of medical and recreational cannabis have grown exponentially, reaching US$17.5bn in 2020, a 46% increase from 2019. In addition, the legislative landscape in the US has been transformed by the arrival of the pro-cannabis Biden presidency, supported by a Democratic majority in both houses.

A new CLAIM (Clarifying Law Around Insurance of Marijuana) Act has been introduced to the US Senate, alongside the parallel SAFE Banking Act, and both are expected to pass into law by the end of 2021. This will allow insurers to work with the cannabis industry legally, as well as reduce some of the insurance risks that previously affected the industry. For example, D&O cover will become a legally available option, and marijuana businesses will be able to regularise their banking and cash operations.

The white paper from New Dawn Risk examines the key drivers of growth and details both the potential premiums and the size of the insurance gap for the cannabis industry in the US. It says that 36 US states, and Washington DC, have now legalised cannabis for medical or recreational use. In addition, Americans now spend almost as much on legal marijuana products as they do on Coca Cola, and cannabis dispensaries were deemed “essential businesses” by many states and therefore remained open during lockdown.

Max Carter, CEO of New Dawn Risk, said: “The legal and regulatory environment of the cannabis industry has transformed over the past year. The changing attitude towards the cannabis industry, and new state and federal legislation present an exciting opportunity for insurers to work with growers and sellers. With legalisation of banking and insurance, the door seems likely to open to what could be a US$1bn premium market.

“On the consumer side, cannabis was deemed an ‘essential business’ during the COVID-19 pandemic, and the growth of the sector seems inexorable. New Dawn Risk is committed to working with carriers and clients to share knowledge and insights to help identify and deliver cover for this untapped market.”

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