The Evolution of Cannabis Insurance

SPEAKER_1 (0:12)

Well, we're a dozen years or so into what we can now call a mature market, I guess. What is the cannabis space starting to get about risk management and insurance?

Jesse Parenti (0:21)

Well, I think what's starting off was when I first got in the space, I thought my runway was about 10 to 15 years.

Now looking back and where I'm standing now, I believe between the national and the global market, we've got another 15 to 20 years of growth, maturity and expansion that's ahead of us. So from my aspect, really what we're seeing is broader products, expansion of coverage, loosening of underwriting guidelines. One of the biggest things I've noticed is the vault requirements for most of the standard carriers have been really stringent for years and even been issues where they could possibly deny claims.

Underwriters are finally realizing that we don't need to be looking at cannabis like we do diamonds and understanding that a vault may not be the specs of a vault, but if it's a secured environment and we've got multiple controls in place, we've got multiple doors and areas to get through, probably a secured storage and we can feel comfortable considering that a vault or an area where we would not want to deny coverage. I think the data that we're seeing has been a huge benefit for underwriters. I also think that the market and the pricing is finally starting to compress correctly. There's been a disrespectful cannabis debit on the insurance industry for over a decade. It's been way overpriced for all lines of coverage, and it doesn't really follow the standard trends of standard insurance. Ultimately, we are starting to finally see price compression happening across the board because of the products I've been doing for the large operators for our risk and seeing where the prices have literally been coming down, even though the revenues have been going up. In my opinion, there's still probably a good 20% of delta that's still there to get pricing really where it should be. And for me, that's a big delta to these large operators and MSOs that are paying a lot of money, hundreds of thousands to millions of dollars, and having little to no claims. That is a big profit margin that's going to the insurance carers that needs to be going back to our operators.

SPEAKER_1 (2:29)

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