Practical considerations for insuring cannabis, hemp & CBD

Insurers must understand the differences between marijuana, hemp and CBD when offering coverage for these products and their manufacture. (Photo: Shutterstock)

Despite its complete illegality on the federal level, cannabis is big business in the United States, projected to reach $30 billion by 2025 according to some estimates. Even if these projections turn out to be overly rosy, the growth of the industry — and the recent federal legalization of hemp under the 2018 Farm Bill that resulted in an explosion in CBD sales nationwide — brings with it sophisticated operators who are transforming how business is done. This includes a new demand for risk mitigation, like insurance products that did not exist a few years ago.

Industry appetite for the sector is apparent from federal legislation introduced in Congress, including the Secure And Fair Enforcement (SAFE) Banking Act of 2019 (which creates safe harbors for banks servicing that industry) and the Clarifying Law Around Insurance of Marijuana (CLAIM) Act (which does the same thing for the insurance industry). Neither piece of legislation has been enacted into law, however, and when it comes to “state legal” cannabis, fully legal hemp, and a CBD industry in flux, one size does not fit all.