Thirty-eight states and Washington, D.C., have legalized some form of medical marijuana, and recreational marijuana is legal in 19 states and Washington, D.C.

“In 2023, Delaware, Minnesota and Ohio passed legislation making recreational cannabis legal, while medical cannabis became legal in Kentucky," says Joe Dahlvig, cannabis product expert and senior casualty underwriter, Admiral Insurance Group, a Berkley Company. “There are several states that could pass legislation in 2024, including Wisconsin, which is looking at passing medical marijuana through the legislature, and recreational marijuana potentially being on the ballot this year in Florida."

As states expand legalization, the demand for cannabis is growing. As a result, the cannabis insurance market is growing too, which creates an opportunity for independent agents to enter a market that has significant growth potential.

“You're really seeing an exciting time for the cannabis market and for people interested in insuring it because the number of opportunities is really getting to be quite plentiful," says Norman Ives, cannabis practice leader, Amwins. “Ten years ago, you were really limited to medical operators—that was really geared toward patients."

Despite the opportunities, there are challenges for agents looking to get into what can only be described as a fluid market. 

“The biggest challenge for a new agent is the ability to learn and understand the business and marketplace," Dahlvig says. “The cannabis insurance sector is relatively small on the excess & surplus side with well-known established agents, brokers and underwriters. So, selling yourself as a professional that understands the nuances is vital to breaking in."

Then, “there is the specialty nature of the product itself," says Jason Scheurle, national product leader, cannabis, Burns & Wilcox. “It's a lot more than your standard, typical E&S risk. There are a lot of ins and outs that an agent should attempt to learn so that they're well equipped to serve their clients."

When it comes to underwriting the risk, agents must comprehend that “the majority of policies are written on proprietary endorsements, so knowing the ins and outs of each carrier's form is critical," Dahlvig says. For agents hoping to submit a complete submission to a carrier, one thing they need to understand is that cannabis insurance is not placed through ACORD forms.

“Nothing makes my job more difficult than getting an ACORD form that just gives me the square footage of a space occupied by a cannabis business with no information about whether the business has a burglar alarm in place, how much inventory is kept on site, if it's a grow facility, what kind of lighting they are using—there are a lot of questions that go into underwriting a cannabis operation," Ives continues. “If you want a robust insurance option, you've got to give the underwriter the information they need to underwrite."

As they do for any industry, agents need to procure coverages for their clients' risk and they “need to be able to point out the differences and understand which coverages are most important to each client," Dahlvig says.

Essentially, cannabis insurance “is a little different risk than your standard Main Street exposure—there is some complexity," Ives says. “One unique complexity is the vocabulary used within the cannabis space. It is very diverse and can be very hard for an agent first jumping into the cannabis space to understand the vocabulary and the nature of the risks that they're trying to insure."

Further, agents have to understand details, such as “which lighting systems are more prone to fire and which extraction methods are more susceptible to explosion and leaving residual chemicals in the finished product," Dahlvig says.

White labeling, which is when a retailer sells a third-party's product but uses their own branding on it, is another practice becoming more prevalent in the market. “Understanding the risk each party has and how the contract can determine liability is essential to placing adequate coverage," Dahlvig says.

And as the industry continues to change, “understanding the risk of new products being launched, such as THC powders, and new operations, such as breweries attempting to brew CBD beverages, is also a challenge," Dahlvig explains.

Agents looking to enter the cannabis insurance market should understand that “in this highly competitive area, it's going to serve an agent to be prepared to understand the terms and to have the relationships with other reputable people in the niche to help them win the business," Scheurle says.

Olivia Overman is IA content editor.