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Cannabis represents significant opportunity for insurers: Report

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Legalized cannabis represents a significant new business opportunity for the insurance industry, according to a report released Tuesday by New Dawn Risk Group Ltd., a London-based brokerage.

The insurance industry could issue more than 100,000 policies, were insurers to sell only a single policy to each active marijuana business in the United States, according to the report.

“The legal U.S. cannabis industry would pay about $1 billion in annual premiums were it insured to levels normal for other businesses,” the report said.

New Dawn offered some dramatic numbers to demonstrate the potential for cannabis. In 2018 the U.S. market saw an estimated $8 billion in legalized cannabis sales, and this could rise to more than $40 billion by 2025, the report said. “In 2018 sales of medical and recreational cannabis in the U.S. were nearly nine times higher than sales of Oreo cookies,” the report said.

Insurance markets, however, appear to be lagging in their ability to offer coverages as the cannabis industry grows. “Buyers find that their insurance premium costs are inflated because of the nature of their business,” the report said. It offered anecdotal evidence of a supply-constrained marketplace in which limited choice leads to inflated premiums and the availability of coverage is not guaranteed.

The report suggests that cannabis may have slipped down the legislative ladder this year because of more pressing concerns.

“The economic and political shocks of the COVID-19 pandemic have now further reduced the possibility that legislative time and attention will be allocated to the legalization of cannabis at any time in the near future,” the report said.