The window for captive insurance companies to provide coverage for cannabis may be short, according to David Provost, deputy commissioner for captive insurance, Vermont Department of Financial Regulation.
Panellists in the ‘regulatory hot topics’ session at the Captive Insurance Companies Association (CICA) 2019 conference emphasised that on the surface captives appear a suitable vehicle for managing cannabis risk.
Nancy Gray, regional managing director, captive and insurance management, commercial risk solutions at Aon, explained: “Captives have a long history of responding to emerging risks where you can’t purchase insurance in the traditional marketplace. I don’t expect the cannabis industry and some of its coverage needs will be any different.”
Gray said Aon was working with a few clients in the cannabis space, adding that she expected if any cannabis captive solutions were to go ahead they would most likely be domiciled offshore and not in the US.
Cannabis is currently a Schedule I substance under the Controlled Substance Act, which is problematic as it impacts anti-money laundering laws and means banking services are particularly hard to obtain.
Dana Sheppard, associate commissioner, Risk Finance Bureau at District of Columbia (DC) Department of Insurance, Securities and Banking said the Schedule I classification limited what the industry was able to do.
He commented: “Captives have always led the way in terms of new risks, so this is perfect. We would like to do one but we are a little hesitant in DC to get too far out in front due to the schedule one prohibition.”
“This is something we would love to do but right now we just have to stand by and wait.”
Provost said it was something Vermont could also be interested in, but that he suspected if the Substance I classification was removed captives would only have a small window to take advantage of.
He said: “My bet is that once cannabis becomes legal or is no longer a schedule one prohibited substance the commercial market will step in and maybe there won’t be a need for captives.”
“If there is a need it might be a short window.”
