A recent federal proposal to reclassify cannabis as a Schedule III may move more insurers to offer coverage to cannabis businesses, but falls short of eliminating many of the risks currently inhibiting insurers from fully engaging the cannabis market. McCarter & English Partner Nicole Corona, who represents policyholders, spoke with Law360 and said that she expected rescheduling cannabis would push the insurance industry to take a renewed look at cannabis businesses in terms of risk and pricing.
With more data, she said, underwriters could feel better pricing risks. “Potentially it will open up the market to new players, and initially that might have an increase on risk and therefore potentially we could see the market tighten,” Nicole said, adding that ultimately more competition could actually help to loosen up the market.
Ryan Magee, Partner in McCarter’s Cannabis practice group, said the rescheduling, on its face, was an expected and abundantly positive development for the industry, but still left a lot to be desired in terms of truly transformative change. “It’s going to be helpful in inducing further change when we talk about things like access to capital and traditional financial institutions,” Ryan said. “Also in the context of insurance as well, which is obviously a highly regulated space.”