NAIC on... Cannabis and Insurance.

• Position: [IN THE NEWS]

NAIC - The Center for Insurance Policy and Research

* Demand for cannabis is increasing dramatically. More than half of U.S. states have legalized some form of medical or recreational marijuana, and the demand for cannabis is increasing dramatically. The division between state and federal status makes it difficult for businesses to receive inclusive, affordable coverage and often leaves policyholders with restrictive plans.

Conflicting state and federal laws, emerging standardization of business practices and rapidly evolving regulations have largely discouraged insurers from participating in this market. Cannabis is an illegal substance under the Controlled Substances Act (CSA), which classifies it as a Schedule I drug and is stated "to have no currently accepted medical use in treatment in the United States': A provision in the 2018 Farm Bill removed hemp from the list of Schedule 1 controlled substances. As such, the U.S. Drug Enforcement Administration (DEA) will not consider hemp-derived cannabinoid (CBD) a controlled substance subject to the CSA.

However, cannabis and CBD (regardless of whether its sourced from cannabis or hemp) is subject to Federal Drug Administration (FDA) approval under the Federal Food, Drug, and Cosmetic Act. The FDA has not approved a cannabis drug. It has, however, approved three CBD medicines for the treatment of epilepsy.

Cannabis-related businesses (CRBs) face many risks and obstacles. Some of the biggest risks involve theft, general liability and product liability. Companies functioning within state legality face severe banking restrictions due to federal regulations. CRBs may be forced to handle large sums of cash, subjecting them to a higher risk of theft. CRBs share the same general liability and other risks agricultural and manufacturing businesses face. This includes workplace accidents, damage to property and crop failure. CRBs are especially prone to fires from both wild and internal sources.

The popularity of cannabis-infused products, such as edibles, increases the risk of product liability and safety...