The flexibility offered by captive insurance makes it a tailor made solution for the cannabis industry, according to Joe Holahan, attorney at Morris, Manning & Martin.
Speaking at the Captive Insurance Companies Association 2018 Conference, Holahan said that while it is no secret that the cannabis industry is “big business now”, with an estimated $9.7 billion in legal cannabis sales in 2017, its unique risks can make insurance problematic.
He explained: “These are unique risks, risks that are hard to place and when they are placed with more traditional carriers they can be subject to strict limits and exclusions. The captive industry has grown up around those kinds of risks.”
“If ever there was an industry that could benefit from captive insurance, it is the cannabis industry.”
According to Holahan, giving the insureds the power to shape their own coverage could provide the cannabis industry with more appropriate and cost-effective cover.
He said: “The cannabis industry involves risks where your risk management is especially important to the risk profile and again that is an area where captives excel.”
“The owners of the captives are the insureds and they can come together and to develop good risk management guidelines and procedures where they can share their risk, and they’re the best qualified to know what the risk is and how to insure it.”
He added: “Captives really excel at this kind of thing. Until the industry grows and matures, the traditional market has as low incentive to get involved because the underwriting is difficult and the risk is difficult to assess, and that is where captives have a valuable role to play.”