NAIC Publishes Updated Guide to Cannabis Insurance Market

The National Association of Insurance Commissioners (NAIC) has published the Regulatory Guide to Understanding the Market for Cannabis Insurance: 2023 Update white paper.

The updated NAIC white paper explores emerging insurance issues in the cannabis industry and the current state of cannabis regulation in the United States. The NAIC Cannabis Insurance (C) Working Group of the Property and Casualty Insurance (C) Committee produced the white paper as an update to the NAIC's original cannabis white paper, which was published in 2019.

According to the NAIC, the updated white paper discusses how the cannabis industry has become more sophisticated, with its rapid expansion driving new product development, infrastructure changes, and the need for businesses to provide ancillary services. It also outlines the evolution of the state of cannabis regulation, specifically at the state and local levels.

The NAIC said the white paper avoids advocacy and focuses on issues affecting the affordability and availability of insurance for cannabis-related risks in states that have legalized its use.

Key findings of the updated white paper include the following.

• Insurance capacity has improved since the NAIC's 2019 white paper. However, most commercial insurance for cannabis-related businesses is still found in the nonadmitted market.
• Smaller industry players are most affected by the lack of admitted options since the nonadmitted market doesn't offer "off-the-shelf" insurance solutions typically available in the admitted market.
• Insurance gaps are most prevalent in the emerging areas of the cannabis industry, such as ancillary services, cannabis-infused products, and social consumption lounges.
• Among the potential structures being explored to facilitate cannabis-related business insurance coverage are the use of state-based commercial insurance programs, risk retention groups (RRGs), captives, and joint underwriting associations (JUAs).

The NAIC's Regulatory Guide to Understanding the Market for Cannabis Insurance: 2023 Update can be found on the NAIC's website.