Cannabis
In a volatile marketplace, risk mitigation will separate success from failure.
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What to Expect in 2025
The cannabis industry faces new and amplified risks that could threaten long-term organizational viability. Successful companies will be vigilant in mitigating risk, addressing issues before they become overwhelming.
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1
Profitability
As margins shrink, insurance can help protect profits in 2025.
2
Vitality
As the industry matures, benefits will need to keep pace.
3
Resiliency
Severe weather and other risks will challenge the industry’s resiliency in 2025.
4
Research & Development Risks
Finding gold in R&D — but also major risk.
As margins shrink, insurance can help protect profits in 2025.
1 | Profitability
42%
of cannabis companies have been “considerably impacted” by economic pressures and inflation.
As the industry matures, benefits will need to keep pace.
2 | Vitality
24:
the number of billion-dollar weather events in the first ten months of 2024.7
Severe weather and other risks will challenge the industry’s resiliency in 2025.
3 | Resiliency
Product pricing in cannabis has been erratic, often leaving businesses struggling to stay solvent. Mergers and acquisitions have become the main vehicle for strong businesses to expand into new regions and weaker organizations to exit the market.
An increase in marijuana licenses has resulted in market saturation,1 and while overall cannabis sales have increased,2 competition has driven down individual organizations’ revenues: Prices dropped roughly 10% in 2023 and are only beginning to stabilize.3 And even the more mature markets were not immune, with sales falling off dramatically in Colorado, as legalization in neighboring Arizona and New Mexico siphoned customers away from the Centennial State.
According to the HUB International 2025 Outlook Executive Survey,4 nearly three-quarters of cannabis industry respondents say their organizations do not have adequate insurance to protect against risks that will harm profits. Companies are often left with a choice between unaffordable rates and no protection.
A tight market for commercial auto insurance means premiums for transportation have tripled. Rising costs and low capacity have made it challenging for cannabis businesses to secure appropriate coverage. However, there is hope on the horizon with alternative risk transfer options, including captives and parametric insurance. In addition, there is optimism around the possibility of new entrants and capacity in the insurance market as a result of the SAFE Banking Act.
Companies must make improved risk management a cornerstone of profitability, as many companies are one event — a weather disaster, supply chain breakdown or cybercrime — away from bankruptcy. Cannabis organizations who focus on organizational resiliency efforts will be poised for success through the implementation of a robust business continuity plan that can pressure test these potential loss scenarios.
As many operations will struggle, others will see opportunity in the form of M&A. Buyers acquiring distressed companies will need to proceed with caution to avoid taking on unnecessary liability. An insurance advisor with cannabis industry expertise can help educate both the buyer and the seller on best practices, making sure businesses secure proper runoff or D&O policies to protect the bottom line.
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Creating personalized benefits that engage workers has been a major challenge for the cannabis industry as it enters a maturation period. To improve high turnover and employee dissatisfaction, many businesses have brought in unions to proactively support workers’ rights. As a result, nearly 300 dispensaries and 36 grow facilities have organized under the United Food and Commercial Workers Union.5
One of the union’s areas of focus was employee benefits. According to the HUB survey, half of cannabis industry respondents identified retirement plan options as a priority. And the unions have fought for — and won — normalization of benefits on behalf of the workers – including 401(k) plans, as well as health and voluntary benefits. This presents an opportunity for cannabis companies to stand out from the crowd by using data analytics to determine what benefits their employees want and need.
Given the union impact coupled with ongoing struggles related to high turnover,6 personalized employee benefits based on data and analytics can have an outsized effect in the cannabis
industry. Organizations that use data to drive decision-making are better able to tailor their benefits program to meet the needs of their employee population and deliver a Quality Employee Experience (QEX). Working with an experienced benefits advisor who is on the pulse of new analytics capabilities, cannabis businesses can develop a multi-year plan to ensure implementation is streamlined and effective while not being overwhelming.
Delivering the best benefits can come at a high cost, and cannabis businesses looking for creative ways to enhance their benefits programs can also explore captive solutions to maximize their offering while minimizing cost increases.
Case Study
A cannabis-adjacent real estate business experienced a large renewal increase due to an employee’s child requiring expensive prescription drugs, totaling more than $200,000 in Rx claims alone. By joining HUB’s Cannabis Captive, the client was able to carve out their pharmacy plan to reduce specialty drugs claims to $5,000.
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Climate change and unusual weather patterns are particularly important to the cannabis business, from droughts and wildfires for outdoor growers to supply chain issues due to other catastrophe (CAT) events, like hurricanes, floods and convective storms. With few options for insurance coverage available, business leaders must be open to alternative solutions and embrace enterprise risk management to cope with climate change.
Last year’s hurricane in Los Angeles was their first tropical storm in more than half a century.8 Nearly a dozen billion-dollar disasters were recorded during the first six months of 2024.9 Even though severe weather is a real risk for the cannabis industry, many cannabis companies are apparently not acknowledging the risk.
According to the HUB survey, just 30% of cannabis executives claimed interest in disaster planning, and only 23% identified climate change as a major component in determining risk management practices. Coverage can be difficult to obtain, but businesses who secure insurance and have business interruption
plans in place will be the ones who survive such a volatile risk environment.
Cannabis operations can start with weather-related risk management by identifying relevant climate-related risks. Depending on location, this could include wildfire, flooding, tornadoes and even heatwaves or drought (particularly for growers). Climate and catastrophe modeling can help businesses determine their greatest risks.
Risk mitigation plans will be key in the coming year. Companies need to consider the cost and potential benefits of different options to mitigate risk. For instance, a flood wall can be expensive but will protect against water damage and can help drive down property rates.
It’s also important to consider alternative insurance solutions with a broker with deep industry expertise. Since cannabis coverages can be limited, it might be necessary to consider approaches such as parametric insurance, alternative risk transfer vehicles, or insurers lacking brand name recognition.
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Cannabis research and development (R&D) is expanding, helping drive growth and product innovation. The industry has been working with THC and CBD for some time but has recently expanded into cannabigerol (CBG) and other lesser-known cannabinoids.
New products and opportunities are always exciting. However, new cannabis products push the legal and risk envelope because of confusing legislation and evolving regulations.
For example, beverages infused with hemp-created THC have been sold through a loophole in federal farm legislation.10 But insurers are hesitant to underwrite such operations producing THC-infused beverages, as they leave a cannabis company open to product liability risk, as well as possible regulatory risk.
Whether it’s consumables or beverages, cannabis executives will need to evaluate risk exposure with any new product launch as it carries risks unique to the industry. Organizations should consider the best ways to protect themselves (i.e., product liability and product recall coverage) – from the manufacturing phase to distribution to sales.
Cannabis companies with active R&D operations also need to protection; however, many policies have product exclusions that limit coverage or offer none at all.
The right broker can help businesses review their new policies carefully to avoid these traps. An experienced broker can also offer alternative risk management practices while still allowing businesses to continue with R&D.
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Finding gold in R&D — but also major risk.
4 | Research & Development Risks
Navigating Your Next Steps
HUB cannabis insurance specialists will work with you to develop a tailored strategy for 2025.
1
Focus on strategically financing your risk.
With an uptick in significant weather events across the country and a challenging economic climate, many cannabis companies aren’t equipped to fund adequate insurance protection. Conduct a deep analysis of exposures with your broker and strategically finance that risk to build resiliency.
Rethink your benefits strategy.
2
Offer benefits your employees want to stand out from the competition with a Quality Employee Experience (QEX). With data analytics, you can offer a competitive — and personalized — benefits package to the workforce that promotes engagement, recruiting and retention.
Adding a new, related cannabis product to your product line makes sense as markets remain saturated with competition. But a new cannabis product launch carries risks unique to the industry. Work with your broker to understand the regulatory issues relating to an expansion and the additional risk it presents.
Do your due diligence before expanding.
3
Consistent communication with your broker will help you identify and mitigate issues in advance of your next renewal and position your company in the best light. Review exposures and insurance needs at least 90 days prior to policy renewal to allow your broker to find the optimal mix of coverage for your business needs.
Be transparent with your broker.
4
Be Prepared
Download our 2025 Cannabis Outlook and Insurance Market Rate Report to see what to expect in the coming year.
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Meet the Experts
Chief Sales Officer
Cannabis Practice
Jay Virdi
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Practice Leader
Brad Rutt
Cannabis Practice
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Risk Advisor
Chris Burgh
Cannabis Practice
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Expert
Kyle Judge
Cannabis Practice
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HUB Cannabis
When you partner with us, you’re at the center of a vast network of experts who will help you reach your goals. For more information on how to manage your insurance costs, reduce your risk and take care of your employees, talk to a HUB cannabis insurance specialist.
About Us
$70.8M
in commercial insurance premium brokered by HUB
850
cannabis clients
2,200
insurance policies managed
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North American Outlook
2. Cannabis Business Times, “Whitney Economics Forecasts US Regulated Cannabis Sales to Top $31.4 Billion in 2024,” March 20, 2024.
3. PR Newswire, “Leaflink’s 2024 Wholesale Cannabis Pricing Guide Now Available,” April 2, 2024.
7. National Centers for Environmental Information, NOAA, “Assessing the U.S. and Global Climate in September 2024,” October 24, 2024
9. Space, “Billion-dollar disasters have been sweeping across the US this year,” June 13, 2024.
CANN
Case Study
One HUB cannabis client was in the midst of a challenging purchase that looked like it might fall through at the last minute due to unresolved risk. With HUB’s assistance, problematic issues were identified and addressed. An expert was called in to perform a flood analysis, and creative solutions were designed to protect the buyer from unnecessary exposures. The deal was finalized soon after.
57%
of U.S. Cannabis companies consider their retirement plan to be a priority to enhance their employees’ financial wellbeing.
Almost 1/4 of cannabis business respondents of the HUB survey identified new product development as their top business priority.
4. HUB’s Outlook Executive Survey polled 900 C-Suite and VP-level executives on the issues facing them on profitability, employee vitality and organizational resilience.
5. UFCW, “Cannabis Union,” accessed October 9, 2024.
6. Headset, “An analysis of employee turnover in cannabis retail,” July 13, 2022.
1. MJBiz Daily, “Approved and pending marijuana licenses rise in US for first time in 2 years,” August 19, 2024.
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10. Commonwealth Beacon, “About those beverages with THC from hemp,” April 6, 2024.
8. AccuWeather, “Hurricane Hilary was a storm to remember for Southern California,” August 22, 2023.