The United States has come a long way in terms of public attitudes toward cannabis. An increasing number of states are passing legislation generally designed to permit commercial markets to serve medical or recreational marijuana users, often with significant variation between jurisdictions.
One analysis found that the U.S. cannabis market earned about $9 billion in sales in 2017 and that sales could reach $21 billion by 2021.1
Other countries have also begun passing similar legislation. For example, Uruguay now permits recreational marijuana sales from government stores;2 Canada permits recreational marijuana markets;3 and Germany recently passed legislation permitting medical marijuana use.4
The effect, or “high,” induced by marijuana comes from the psychoactive chemical tetrahydrocannabinol (THC).5 Marijuana-related products that may not induce a psychoactive response, such as cannabidiol (CBD), also exist.6
Commercial marijuana markets may pose new risks and exposures for insurers and reinsurers across the supply chain, including cultivating, manufacturing, dispensing, and using the drug. And it’s also important to remember that marijuana is currently listed as a Schedule I drug under the federal Controlled Substances Act of 1970 (CSA), which defines Schedule I drugs as those “with no currently accepted medical use and a high potential for abuse” and “the most dangerous drugs of all the drug schedules with potentially severe psychological or physical dependence.”
Indoor crop cultivation: Many marijuana businesses conduct crop cultivation indoors, allowing for a year-round growing season in a tightly controlled environment that can maximize THC content and the quality of the plant. Such operations may be exposed to higher risks from mold, fires, and dangerous gases. Crops could also be contaminated from improper pesticide use.7
Product manufacturing: Some marijuana businesses may take harvested marijuana and process the crop into other THC-based products, including concentrates, oils, and tinctures. Hydrocarbon-based solvent extraction
processes may be used to create products high in THC content. Hydrocarbon-based extraction can increase fire and explosion risks in such facilities.8
Dispensary and sale: Marijuana businesses that sell or dispense recreational or medical marijuana are furnishing potentially intoxicating substances to consumers, typically for off-premise consumption, depending on the state in question. Properly classifying such risks may be difficult. Marijuana is a high-value product, and since many marijuana businesses operate using a cash-only business model, there may be increased exposure to theft risk. Businesses may also be exposed to product liability risks.9
“Stoned” driving: Products containing THC are intoxicants. Some studies—though not all—have found that marijuana use correlates with the rate of automobile accidents. Others have argued that it’s difficult to know when marijuana is to blame for a vehicle crash, and epidemiological research is ongoing. The length of a user’s intoxication from marijuana varies widely by consumption method, the potency of the product, and the user’s physiological characteristics. Identifying actual marijuana intoxication by measuring levels of THC has been a concern because, unlike alcohol, THC persists in a user’s body for long periods after intoxication.10
An earlier version of this article appeared in “ISO Emerging Issues: Insurance Perspectives on Evolving Risks”, a Verisk publication, (You can download the complete report here.) and content from that article is reprinted herein with permission of Insurance Services Office, Inc. (ISO).