Catch insurance business can be a challenge for cannabis operators, from limited claims reporting to regulation, according to panelists who spoke on Thursday at the Business Insurance virtual World Captive Forum.
"Prisoners are part of the insurance industry's self-correction system," said Chris Payne, CEO of CLIC Management LLC. "When traditional markets cannot provide adequate coverage or charge too much, buyers have the opportunity to form self-insurance programs and prisoners."
More cannabis operators are considering prisoners to address the challenges of a limited insurance market.  "More conversations with customers and prospects involve our capture team," said Scott Foster, senior vice president of NFP Corp. and added that prisoners have been discussed with a majority of cannabis clients.
Interest in prisoners among cannabis operators is growing as they take a more holistic approach to risk management.
"Insurance is becoming a minor expense for items, and people are looking at managing the total risk costs of their business and looking at prisoners as part of an overall program," Payne said.
The panelists said that engaging regulators are also part of the equation.
"We can tell regulators that we're coming to the table to solve a problem and prove to them what does not exist today," said Rocco Petrilli, president of the National Cannabis Risk Management Association.
Access to reinsurance companies and any additional capacity can be achieved through a prisoner.
"One of the benefits of owning a prisoner is that the owners have direct access to the reinsurance market and that's where most of the capacity is right now and where a lot of the insurance experience is," Payne said.
The reinsurance market is beginning to "Expand beyond just a handful of" players to "have a wider breadth," says Foster, based on the feedback he receives from insurers.
The lack of claims history and data can be an obstacle to pricing and pricing, according to Mr Petrilli, and can also be a challenge for reinsurance companies.
Mr. Foster said that although there is a lack of claim history, the cannabis business is expected to follow other consumer products, such as nutritional products, in the types of claims that are produced.
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