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Why is Cannabis Insurance So Difficult and Expensive?

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Cannabis insurance is no easy task, as any operator will tell you. Most insurance decision makers in the space have heard the reasoning behind inflated premiums, limited coverage terms and difficulty finding options. 

Cannabis is an emerging industry operating in a legal gray area without the historical data and federal backing insurers require to confidently price and compete in the marketplace. While the redundant message has become cliché, operators must be deliberate in their efforts of obtaining proper insurance and risk management, which in turn drives the industry forward in many ways. 

How does a cannabis business owner secure proper coverage?

The first and perhaps most important step is for operators to align with an insurance professional that specializes in insuring the cannabis industry. Ideally, this insurance professional will have the experience and education to guide them in navigating the insurance process and making smart insurance and risk management decisions. 

The cannabis industry is flush with seasoned entrepreneurs and executives with backgrounds from across the board, yet many are accustomed to a similar commoditized, transactional insurance process from their prior experience in more accessible industries.

While a transactional approach may work in an industry where insurers must compete with aggressive pricing and policy coverage terms, it leaves cannabis organizations exposed to adverse financial events that could be detrimental to the profit and long-term viability of the business and its stakeholders.

Aligning yourself with a true cannabis insurance professional may seem obvious and easy, but similarly to the limitation on insurance carriers, there are few insurance agents that dedicate most of their time toward insuring cannabis operators.

As a result, many agents claim to have the ability to help, but they may not have the actual knowledge and experience to make sure the cannabis operation is properly covered. Here are a few questions I would recommend asking an insurance professional to gauge their level of expertise:

Is your agency a member of any cannabis trade or support organizations? What cannabis-specific insurance carriers do you represent? Are any of these direct appointments or are they all accessed through an intermediary?How are you addressing the common limited policy terms in the policies such as product liability, property, and directors and officers liability?Courtesy POWERS Insurance & Risk Management How can an agent give wrong advice or leave me uncovered?

It’s financially unrealistic for most cannabis operators to purchase all lines of insurance coverage that “should” be in place to cover all business exposures, so sacrifices to coverage and overall insurance product quality must be made carefully. Choosing the right areas to cover with your insurance program vs. self-insuring exposures is paramount and a risk advisor that specializes in the cannabis space can help an operator navigate those difficult decisions.

An inexperienced advisor will focus on saving cost, which is much less complicated compared to securing a complex and robust cannabis insurance and risk management program. It’s easy to save money, but you are almost guaranteed to have significant gaps in coverage if not thoroughly understood. For example: 

A Product Liability policy that saves 10 percent or more in cost will typically come with significant drawbacks, such as a Health Hazard or Cannabis Impairment exclusion. That exclusion essentially makes the policy only worth the paper it’s written on, and self-insuring would be the better option to save money.Property insurance, which covers everything from the physical facility, contents, equipment, cannabis crop, inventory and loss of business income, is one of the most nuanced insurance products a cannabis operator will purchase. When coverage falls short (whether it’s from the carrier’s limited coverage or co-insurance penalties for having insufficient limits), operators must resort to financial reserves, an untimely cash call, or even folding the company. Property insurance is not immune to exclusion-heavy policy terms, just like General and Product Liability. If an organization’s Property policy excludes butane extraction but this wasn’t explained or vetted in the data collection and policy placement process, a cannabis processing and manufacturing operator is spending tens or even hundreds of thousands in insurance premium but have no coverage if there were a butane extraction-related explosion and fire. Business Interruption coverage, a key component to a Property Insurance policy, must be carefully designed and understood otherwise the ongoing expenses after a covered loss can keep an operation from reopening its doors. Directors & Officers liability is one of the costliest insurance policies for a cannabis company and is often overlooked or forgone, or the lowest cost option is purchased. The purpose of a D&O policy is to protect the directors, officers (and typically the company), from claims made against them while serving in their capacity for the company. Exposures include claims by investors, customers, competitors or vendors for mismanagement, misrepresentation or breach of duties that cause financial consequence. 

Unless the insurance decision makers are familiar with reading the policy form fine print, a transactional approach to insurance will result in purchasing policy contracts with significant coverage shortfalls or missing key coverage altogether. Insurance decisions makers must be weary when solicited with insurance expense savings as the leading reason to engage. 

Why are the insurance applications so important?

Each carrier has their own underwriting appetite, unique conditions and subjectivities that serve as contract and coverage warranties. The policy contract will frequently cite information disclosed on the original application as a condition or limitation of coverage. If the application states no in-house security but the operation, after submitting the application and binding coverage, decides to hire armed security, you can count on the policy’s “armed security exclusion” being cited for the declination of an assault and battery lawsuit.

If at the time of construction planning, a fire sprinkler system was intended but later forgone, a cannabis facility operator must be aware there are many cannabis property policies that require active, functioning fire sprinkler systems for coverage to extend in the event of a fire.

Safe and vault construction specifications are another example where the policy will have set requirements for theft or fire coverage. Typically, a safe must be a certain weight or be bolted to the ground, feature a certain fire rating such as one- or two-hour, and a vault must have a certain fire rating, video surveillance with a specific period of recorded history and certain construction specifications to deter forced entry. 

Proper documentation is even more important when it comes to contract alignment with business-to-business relationships. Read more about the importance of contract alignment for cannabis operators.

All too often, cannabis operators are learning these insurance lessons the hard way. Fortunately, there are a few experienced insurance and risk management professionals who specialize in insuring cannabis operations. A great place to find a cannabis insurance expert is a cannabis trade association, such as Missouri Medical Cannabis Trade Association (MoCannTrade) or National Cannabis Risk Management Association (NCRMA).

By taking a big picture approach, a proper insurance and risk management program not only ensures the long-term viability of the organization, but also encourages competition from insurers which drives the industry forward through safety, profitability and sustainability.

Members of both MoCann Trade and NCRMA, POWERS Insurance & Risk Management specialize in Cannabis Insurance. Call (314) 725-1414 or visit POWERSInsurance/ChrisSullivan.com.

Original Source: hightimes.com

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Labat and Leaf Botanicals Relationship Ends in Tears; N Cape Cannabis Producer Pulls Out of Deal with JSE Company

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Unresolvable issues around value and quality

Northern Cape organic cannabis grower Leaf Botanicals has pulled out of its share deal with JSE-listed Labat Africa and wants out. That’s emerged after Labat, which owns 80% of Leaf Botanicals, posted an announcement on SENS to its shareholders on 17 March 2022 that there was a “quality issue” behind the breakdown.

 

Both sides seemed equally unhappy with their year-long marriage, with Upington-based Leaf Botanicals pulling the plug because of financial disappointment, and Labat saying the flower was not good enough for its international customers. Labat has gone looking for production elsewhere, picking up 80% of Eastern Cape grow op, Sweetwaters for R10 m – for which it paid cash. Leaf Botanicals’ intentions going forward have not been made public.

 

The company said the “Leaf Botanicals acquisition was terminated due to Leaf Botanicals no longer wishing to pursue the transaction following the discovery that the product was not up to standard and the inability to find a suitable way forward. Following further discussions, the termination has been accepted by Labat.”

 

Van der Colff activated suspensive clause after sale value plummeted by 75%

Labat purchased 75% of Leaf Botanicals in May 2021 from award-winning farmer, Johannes van der Colff.

Labat paid R11,25 million for its equity in the SAHPRA-licensed facility and paid the Gog van der Colff Trust by way of 11 250 000 Labat shares, taking a bet that the Labat share price would go up. Well it didn’t. It is currently trading around 25c a share, which means the R11,25 m van der Colff was paid for giving up majority control of his operation is now worth a mere R2,8 m, 75% down on the value of the striking price.

Van der Colff’s got out the deal by activating a suspensive condition in the purchase agreement which allowed him to pull out if Labat was trading below R1.00/share for the 30 days before the first anniversary of the deal, which is imminent.  The issuing of his Labat shares is to be cancelled and those shares delisted.

 

Labat has endured a rocky ride so far, prospects are looking up

Labat has had a rocky ride as the mover with first advantage in the South African cannabis space. It paid for many of its acquisitions with Labat shares valued at R1.00/share. With the price languishing below 30c/share, those who accepted shares in return for giving up equity in their own businesses, have taken a haircut of 75% of the value of their shares.  Nonetheless Labat appears to have stabilized, and has again been out shopping

The post Labat and Leaf Botanicals Relationship Ends in Tears; N Cape Cannabis Producer Pulls Out of Deal with JSE Company appeared first on Cannabiz Africa.

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Gauteng Signs Township Act into Law; Calls for Entrepreneurs to Pitch Proposals to Industrialize Cannabis

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New Act aimed at empowering community trade

The Gauteng government has invited entrepreneurs to come forward with commercial proposals for the provincial cannabis industrialization programme. It published the invitation in the Government Gazette on 29 April 2022, the same day that Premier David Makhura ratified the Township Economic Development Act (TEDA), aimed at empowering townships and informal settlements.

 

Agriculture MEC Parks Tau, who is in charge of the province’s cannabis strategy says TEDA’s benefits include:

cutting red tape by introducing model standard bylaws, 
providing targeted tax incentives to unlock capital formation and job-creating investments, and 
providing targeted funding and targeted procurement whereby 40% of government procurement from the Gauteng provincial government comes from companies in the TEZs.

 

Tau: Vaal River Smart City will be SA’s first real cannabis hub

Writing in the Sunday Times on 1 May 2022, Tau said TEDA was “ a welcome legislation to unleash the potential of the township cannabis and hemp sectors that will be fully licensed in the full hemp value chain and acting as gateways for the industry. This will make Gauteng a “green gold” mecca, as announced by Makhura, with the establishment in the Vaal River Smart City area of the country’s first cannabis hub focusing on cultivation of cannabis primarily for medical use and application”.

Tau said the implementation of TEDA would be done in conjunction with the private sector and community organizations. “TEDA is a whole-of-society call to action to build better townships and informal settlements reeling from the negative effects of the Covid-19 health and economic pandemic, the July 2021 civil unrest and the complex spillovers from the Russia-Ukraine war” he wrote.  

“Moreover, this requires the introduction of a solidarity economy through, for instance, a service delivery co-production for municipalities where enterprises and organisations such as stokvels and mutual benefit societies provide their own communities with goods, services and knowledge that meets the local community’s needs”.

 

Gauteng wants to form partnerships with private sector

The Gauteng Department of Economic Development and the Department of Agriculture and Rural Development are championing cannabis reform as part of the province’s goal to create jobs and boost the economy by processing hemp and cannabis at an industrial scale.

 

Companies interested in partnering with the provincial government must take into consideration in their application that their proposals must include:

details of funding mechanisms, 
cannabis-driven carbon reduction, 
rehabilitation of compromised mining land, 
and the inclusion of communities as partners.

 

In return Gauteng says it will provide support for private sector partners by:

offering leases on state owned or controlled land;
providing rentals at special economic zones, industrial parks 
subsidies at private facilities;
financing partnerships, 
funding input and administrative costs 
facilitating collaborations with other state organs, aimed at removing barriers on projects.

 

Antony Moloto is the man riding point on the project. His contact details are below:

Email enquiries: Anthony.Moloto@gauteng.gov.za

Queries: Mr Anthony Moloto 

Phone: 011 240 2684/ 083 408 5493 

SUBMISSION REQUIREMENTS 

Upload a completed form here with CV’s, BBBEE certificate /affidavit, tax clearance certificate and proof of CIPC registration as well as a proposal. Application inclusive of attached documents must be no longer than 20 pages. Please complete the checklist at the end of the application form.

The post Gauteng Signs Township Act into Law; Calls for Entrepreneurs to Pitch Proposals to Industrialize Cannabis appeared first on Cannabiz Africa.

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Now Musk’s Bought Twitter, Could This End The Cannabis Social Media Ban?

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By Bruce Barcott, First Published in Leafly on 25 April 2022

 

Does this spell the end of cannabis prohibition on social media platforms?

Elon Musk has been an outspoken opponent of prohibition. Now he owns Twitter. 

What began as a fun what-if last week ended as a startling fait accompli this afternoon: Twitter has accepted Elon Musk’s $44 billion bid to buy the company. 

In the cannabis world, that deal could have profound ramifications. 

The Tesla founder has been famously outspoken about his belief in cannabis legalization. In late 2018, Musk lit up a joint on the Joe Rogan Experience, inhaled, and launched a million memes. 

In the summer of 2020, Musk added his voice to the chorus of those working to free America’s cannabis prisoners. 

“Selling weed literally went from major felony to essential business (open during pandemic) in much of America & yet many are still in prison,” he wrote. “Doesn’t make sense, isn’t right.” 

Musk isn’t so much an advocate as an ally. He’s not the guy who’s bankrolling state legalization campaigns; he’s the uber-bro with massive cultural influence who says, loudly: Prohibition is stupid!

 

And now he owns Twitter. At a purchase price of $54.20 per share. Ahem. 

Will that change things? 

 

What needs changing? 

Anyone who works in cannabis can tell you: Social media platforms do not play well with weed. The continued federal prohibition of marijuana makes the major platforms—Facebook, Instagram, YouTube, Twitter, TikTok—extremely nervous. They often express that trepidation by blocking posts, enacting shadow bans, or deleting entire accounts. 

 

It’s hard to find a cannabis company that hasn’t been blocked or banned from at least one social platform.

It’s hard to find a cannabis company that hasn’t been blocked or banned from at least one platform at one time or another. 

Often the bans feel capricious. A post that seems utterly harmless can get flagged for violating a platform’s terms of service, while an edgier post can shine on with no trouble at all. ‘What did we do wrong? is an anguished cry that nearly every cannabis social media manager has shouted to the heavens. 

These mysterious cannabis policies exist on a spectrum. On the far side of strictness sits TikTok, which allows no cannabis content whatsoever. Don’t even try. The Google-owned YouTube can be tricky, but it allows cannabis content within reason. Then there’s Instagram and Facebook, both owned by the parent company Meta. Because of the nature of the cannabis audience, Instagram is currently the most important and influential platform, and also the one that gives social media directors absolute fits when it comes to cannabis content. 

Jungle Boys, one of the nation’s top cannabis brands, gave a wink to that situation earlier today: 

 

Will Musk change Twitter’s cannabis rules?

The platform Musk just purchased has a reputation as being one of the most liberal in its treatment of cannabis. There’s upside and downside to that. 

The upside is that Twitter is the best fit, culturally and temperamentally, with Musk himself. His public persona is much closer to that of the swashbuckling libertarian Jack Dorsey (Twitter’s founder) than to the aggressively flavorless Meta leader Mark Zuckerberg. 

If anything, we should expect Twitter’s cannabis policies to relax even further under Elon Musk. Consider this tweet he put out upon the acceptance of his bid this afternoon: 

 

Better gatekeeping, or an ugly free-for-all?

Musk’s championing of free speech could make Twitter the most 420-friendly platform—but it could also turn the entire Twitterverse into an ugly free-for-all of political propaganda, unchecked conspiracy theories, and hate speech. 

One year from now Twitter could be the social platform most welcoming to cannabis companies and consumers. But will cannabis companies and consumers want to appear on Twitter one year from now? 

 

It’s not just his company, it’s his voice

Beyond the changes he might enact at Twitter, Musk could change the environment for cannabis simply by virtue of his new role in the social media universe. After hearing about Musk’s bid over the weekend, I reached out to Arend Richard, the founder of WeedTube. Richard has been one of the leading advocates for social media freedom and fairness when it comes to cannabis. He founded WeedTube back in 2018 after finding himself blocked by YouTube for an innocuous cannabis post. Four years later the 420-friendly WeedTube is thriving, readying an ambitious new update to their app expected to launch later this summer. 

“As a cannabis business owner and influencer, Twitter has been relatively easy to work with,” Richard told me. “But I want to get in touch with Elon, because we need him to help bring awareness to the situation with Meta” and their platforms. 

Richard is currently gathering signatures on a petition demanding that Instagram reform its community guidelines “to treat all legally operating cannabis businesses equally.” 

The heart of the grievance? Unequal enforcement, according to the petition: 

“Instagram continues to suspend and delete the pages of licensed and legal cannabis companies for violation of their vague and outdated policy prohibiting “attempts by individuals, manufacturers and retailers to purchase, sell or trade” marijuana. This policy is not enforced equally, with large multi-state corporations being allowed to promote their products and locations, while smaller, independent operators lose access to their Instagram pages, which are essential marketing tools in 2022.” 

 

Influence others by eating their lunch

Can Elon Musk demand a change in the policies of Instagram? Of course not. This is a situation where he could force a change, however, by simply opening his arms to cannabis companies and then gaining ground on Insta. 

The Meta-owned giant has nearly ten times as many active monthly users as Twitter. Instagram is younger, hotter, and more hip. If a Musk-over of Twitter can change that perception and eat into that lead, Instagram could be forced to reconsider its stodgy and outdated cannabis policies. And that could lead to a change in the other Meta properties as well. 

There are no guarantees, but it could work. Elon Musk alone couldn’t force GM and Ford to start making electric cars. The success of Tesla forced them to follow his lead or become obsolete. Let’s see what he can do with social media.

The post Now Musk’s Bought Twitter, Could This End The Cannabis Social Media Ban? appeared first on Cannabiz Africa.

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