The California Department of Insurance recently approved three new insurance carriers to provide coverage for the emerging cannabis industry. Insurance Commissioner Dave Jones announced last week that The North River Insurance Company, United States Fire Insurance Company, and White Pine Insurance Company will all begin offering surety bonds for cannabis businesses by the end of the month.
As we have previously covered on this blog, California approved last fall the first admitted insurance coverage specifically targeting cannabis businesses. In February, regulators approved the first insurer to offer surety bonds for cannabis companies, which are required for licensing under the California’s Medicinal and Adult-Use Cannabis Regulation and Safety Act. The act creates the general framework for state regulation of commercial medicinal and personal adult-use cannabis in California. One requirement under the act is that all cannabis cultivators, manufacturers, distributors, retailers, and other business seeking licensure obtain a surety bond to ensure compliance with licensure and permit requirements and guarantees payments in the event those requirements are violated. The recent announcement will add three more insurers to assist business owners in meeting their surety obligations.
The new approvals are especially timely given that the number of cannabis licenses issued in California reportedly has grown 322% in the first quarter of 2018—averaging 65 licenses a day and projecting to exceed 20,000 total licenses by the end of the year. Expansion of the cannabis surety bond market is further proof that California regulators remain committed to filling important coverage gaps in the cannabis industry by encouraging commercial insurers to seek approval for cannabis-specific products. Further improvements are likely needed, however, as cannabis customers, employees, and businesses seek to recover in the event of accidents, injuries, property damage, or other losses typically covered by insurance.