Some insurers have left the marijuana insurance market after a warning memo sent by Attorney General Jeff Sessions earlier this year, but others are staying and even planning to increase their involvement in the sector, say observers.
Insurers who have left the business include Glen Allen, Virginia-based Markel Corp. and Munich Reinsurance Co. unit Hartford Steam Boiler & Inspection Co., observers say.
Mr. Sessions referred in his Jan. 2 memo to a memo issued in 2013 by then-Deputy Attorney General James M. Cole, which said law enforcement should focus on certain priorities with respect to marijuana, including preventing its distribution to minors.
Mr. Sessions said, “previous nationwide guidance specific to marijuana enforcement is unnecessary and is rescinded, effective immediately.”
“There’s been a mixed reaction,” said Ian A. Stewart, a partner with Wilson Elser Moskowitz Edelman & Dicker L.L.P. in Los Angeles. “On the insurance side, we saw a couple of carriers leave the space,” but “there are other carriers thinking about getting in, in 2018, who have taken a pause to see how things play out,” while others already in the business see this as an opportunity, he said.
Justin Lehtonen, assistant vice president at Los Angeles-based wholesaler Worldwide Facilities Inc., said “probably one of the most severely handicapped areas at the moment” is coverage for equipment breakdown.
A spokeswoman for Hamilton, Bermuda-based XL Group Ltd., which does business as XL Catlin, said it has not withdrawn from this market. “We review submissions on a risk-by-risk basis,” she said.
Hartford Steam and Markel did not respond to queries on reports they had withdrawn from this market.
“There have been markets that have pulled out, and some are just kind of tightening up,” said Ronnie Cabral, cannabis group practice leader at San Francisco-based wholesaler Crouse & Associates Insurance Co.
The Cole memo’s withdrawal created “a little bit of a skittish marketplace that’s unsure about what they’re getting into,” said Rafael Haciski, a producer with Philadelphia-based broker The Graham Co.
However, Stephen Pate, a member of law firm Cozen O’Connor P.C. in Houston, said despite the Cole memo’s withdrawal, “to date I haven’t seen anything that indicates to me they’ve done anything to try to enforce the federal marijuana laws.”
Mr. Pate said insurers “right now are in a wait-and-see status, to see whether, in fact, the Trump administration is really, really going to do anything about this.”
Seth A. Goldberg, a partner with Duane Morris L.L.P. in Philadelphia, said the memo has caused most industry participants to “pause and consider their involvement. But that said, the space has continued to grow and flourish,” and “the opportunity for insurers to profit from the space also remains.”
Read More …