Takeaways from Our Conversation on Insuring Cannabis Opportunities

Cannabis tax revenue in Colorado fell nearly $100 million in 2022, while California, Oregon, Nevada, and Washington all saw sales decline as the industry began its first downturn. Conversely, sales were up big time in Michigan, Illinois and Massachusetts.

It isn’t just regional differences in the industry. Sales of flower are down, but edibles are enjoying stellar growth.

Here’s a nugget of wisdom for some perspective: As it was during the rise and fall of the Gold Rush, businesses can’t survive without goods and services – ancillary operators selling pickaxes and the like just need to look for the opportunities.

For our latest podcast we spoke Charles Pyfrom, chief marketing officer at CannGen Insurance Services, and Erich Schutz, vice president of Jencap Specialty Insurance Services.

Following are takeaways from that conversation.

Schutz immediately tackled the green rush vs. gold rush question – how much is the rush into cannabis like the rush more than a century ago into gold, and how will things play out?

“Well, there’s that good old expression, ‘Would you like to be gold mining or selling the pickaxes?’ And, you know, for me, I definitely want the pickaxe route for a number of reasons. I do think that there’re a lot of ancillary businesses out there that are going be around for a while. And I feel like, you know, to a degree, some people aren’t looking at them because they’ve got their sights sets on the bigger cultivation facilities. Honestly those are bigger ticket operations…but the bottom line is if you’re selling jars, scales, packaging lights, they’re always going to need those things.”

He added: “It doesn’t matter whether it’s dispensed from a pharmacy or John’s Pot Shop, it’s going to always, always have an (ancillary) need. And I think people don’t necessarily recognize that these ‘smaller operations’ do have big facilities. They’re often manufacturing, and oftentimes these are easier risks to write.”

While Pyfrom said the cannabis landscape is a lot more complex than merely slowing sales in the West vs. a rise of opportunities in the East, his firm is putting greater effort into cultivating growth in the newly legal states.

“A lot of the newer up and coming states where we’re seeing operators not only being rewarded with licenses but expanding into new verticals – whether it’s cultivation, manufacturing or distribution – we’re seeing a lot of our bigger operators finding success from the Midwest all the way to the East Coast, predominantly in the Northeast, where we’ve gotten lots of traction recently and are finding our operators who are really receptive to the best in class coverage that CannGen offers that is targeted in those geographies,” Pyfrom said.

That’s not to say that states like Colorado or California are being ignored.

“We still have meaningful market share and that is a very real opportunity for us to keep writing those states, which we appreciate and love the culture and the opportunity to write risk in those states,” he added. “But the biggest influx of new business and newer opportunities are coming from the Midwest all the way up to the Northeast, depending on where they’re at from a type of license issuing standpoint.”

Pyfrom said the firm is also looking for other opportunities beyond a regional perspective as the space continues to evolve.

“Lounges are the newest topic in terms of where cannabis offers a kind of vertical that’s being underserved and where brokers can find a margin for entering a new deal that they maybe didn’t have access to before,” Pyfrom said. “So lounges are a hot topic. So are the opportunities for what’s known as non-store front deliveries, which really boomed over the pandemic and it’s still happening in states like New York, where they’re starting to issue licenses.”

Asked which products will bring the insuring cannabis space the most business in the next few years, Pyfrom cited a report that Whole Foods believed one of their top five products by the end of the year was going to be a CBD product.

“Based on the amount of submissions we see that are CBD-focused, I would certainly agree that that is a very high level, not only a talking point, but a real insurable hazard for operators like CannGen and our broker partners to focus on,” he said.

He also said that insuring “edibles are super attractive.”

Schutz believes beverages and extracts hold a great deal of promise for the insuring cannabis space.

“Beverages is just an underserved, underdeveloped area of the market,” Schutz said. “As we get more consumption lounges, more normalization, it’s just going to be a product we’re gonna see more commonly.”

Related:

• Takeaways from Our Conversation on Insuring Magic Mushrooms
• Takeaways from Our Conversation on Environmental Risks for Cannabis Operations
• Takeaways from Our Conversation with Cannabis Regulators Group
• Takeaways from Our Conversation on the Best Position to Start an Insuring Cannabis Career
• Takeaways from Our Conversation on Cannabis Captives

Topics Cannabis