Lloyd’s of London Exits Cannabis Industry
As reported by various news sources earlier this week, Lloyd’s of London is pulling the Cannabis insurance wing of their business. The UK insurance company cites the separation between state and federal law as its main concern, but would be willing to re-enter the space down the line should Cannabis become federally legal. Tom Bolt, Director of Performance Management at Lloyd’s released the company’s change in stance in a memo:
“Any policies of this type that are currently in force should not be renewed and no new business should be written…Lloyd’s will continue to monitor developments under U.S. law and will reconsider this position if and when the conflict of laws is resolved.” –Tom Bolt
The first impact of Lloyd’s exit has already been felt by Cannabis businesses in the state of Oregon. Long time Lloyd’s clients, some with a 10-year relationship, are failing to obtain policy renewals or are simply being cut out all together. Either way, these Cannabis industry professionals are being forced to seek out new insurance, a process that can be slow, arduous and perhaps deadly to a developing company. According to Amy Margolis, a Cannabis lobbyist and attorney, Lloyd’s decision to pull their underwriting sends the wrong message to the Cannabis industry.
“You can tack this issue up along with the banking issue. We’re asking cannabis businesses to be active participants in a traditional business market. They can’t access banking and now it has become much more difficult to access insurance.”-Amy Margolis
The impact of Lloyd’s exit will certainly impact the Cannabis industry in the short term. However, perhaps the Cannabis industry will get the last laugh at what could be a huge tactical error by Lloyd’s. Hannover Re of Germany, a German underwriter launched a campaign recently to compete with Lloyd’s in the industry. The exit of Lloyd’s is music to their ears as Hannover Re is one of a handful of companies looking to grow its support of the industry, and with good reason. Researchers from The ArcView Group, a Cannabis industry research and investment firm out of Oakland, California lists the legal Cannabis market as growing from $1.5BIL in 2013 to $2.7BIL in 2014, a 74% increase.
Lloyd’s officials claim that the company is continuing to monitor ongoing legislation and will consider reentering the space in the future. This is a great example of a company being unable to ‘see the forest through the trees’. While the 74% growth over the past year is remarkable, it is a drop in the bucket compared to the projected future of the industry. In the same report from The ArcView Group, the company predicts the legal Cannabis industry growing to $11BIL by 2019, with other reports predicting upwards of $35BIL by 2020. In addition to growth potential, government support has grown year by year.
Bottom line, no one can argue that the legal Cannabis industry is growing and has seen a proven rise in government support.
For example, this past Wednesday the House of Representatives renewed an amendment(242-186), which in short, bans federal prosecution of Cannabis businesses who are operating within legal state regulations. The renewal was passed by 56 votes, which is 26 more than the 219-189(30) vote margin that originally passed the amendment in 2014. Bottom line, no one can argue that the legal Cannabis industry is growing and has seen a proven rise in government support. Perhaps Lloyd’s will in fact re-enter the space in the future, but by waiting for federal approval they risk being long forgotten by an industry who will certainly remember that they pulled their support at such a critical time and failed to see the forest through the greens.
Do you think this was the right move for Lloyd’s of London? Will the Cannabis industry embrace Lloyd’s in the future if they renter the market? Tell us your thoughts in the comment section below!
Photo Credit: Iswanto