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Exclusions in reinsurance contracts have been cited repeatedly by industry sources as a major impediment to expanding the choice of insurers and insurance capacity for cannabis operators and their ancillary service industries.
This could change as the proposed Clarifying Law Around Insurance of Marijuana Act of 2021 has the backing of the principal U.S. reinsurer trade group.
“It is essential that state-legalized cannabis-related businesses and individuals have basic protections that insurance provides so that they can safeguard their property, employees and customers,” Frank Nutter, president of the Reinsurance Association of America, said in a statement.
One of the group’s larger members also sees the benefits of the legislation.
“The proposed federal CLAIM Act removes the legal uncertainty currently faced by insurers and reinsurers regarding our ability to serve cannabis-related legal businesses and businesses that support them,” said Tony Kuczinski, chief operating officer of Munich Re U.S. Holding, in an email.
The creation of a safe harbor would enable the development of “a vibrant insurance marketplace” for legal cannabis-related businesses, Mr. Kuczinski said.
Nicole Austin, senior vice president of federal affairs for the RAA, said the group’s member companies have contributed to the development and introduction of the legislation and are very supportive of it.
“Since late 2018, the insurance industry has worked with federal lawmakers on legislation to provide a federal safe harbor for the state-regulated business of insurance so that our industry can provide products and services to businesses and individuals that have a direct or indirect relationship with state-legalized cannabis,” Ms. Austin said.
A bill introduced in Congress that would allow insurers to cover cannabis-related businesses without fear of prosecution under federal law is expected to substantially ease constraints on the burgeoning sector if it makes it into law.