AM Best Audio (AM Best Radio)
AM Best: Administration’s Executive Order Could Provide Impetus Towards Stabilizing the Cannabis Insurance Market
AM Best Audio (AM Best Radio)
•February 19, 2026•7 min
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AM Best Audio (AM Best Radio)•Feb 19, 2026
Why It Matters
Stabilizing cannabis insurance is crucial as the sector expands rapidly, yet many operators remain underinsured, exposing them to significant financial risk. By clarifying the regulatory landscape, the executive order could unlock more capital, improve risk management, and set a precedent for how emerging industries are insured, making this episode especially relevant for insurers, investors, and cannabis entrepreneurs.
Key Takeaways
- •Schedule III reclassification enables federal crop insurance for cannabis
- •Surplus lines insurers currently dominate cannabis coverage due to illegality
- •Reclassification will attract legacy banks and expand underwriting data
- •Limited claim history hinders mainstream insurers from entering market
- •Long‑term research will improve risk models and lower premiums
Pulse Analysis
The recent executive order moving marijuana from Schedule I to Schedule III marks a watershed moment for the cannabis sector. By reclassifying the plant as a medically prescribable substance, the federal government opens the door for Department of Agriculture crop‑insurance subsidies, giving growers a more standardized risk framework. This shift also legitimizes long‑term clinical trials, generating data that underwriters have long lacked. For insurers, the change promises clearer regulatory guidance and a pathway to integrate cannabis into traditional risk‑assessment models, reducing the premium volatility that has plagued the market.
Until now, excess and surplus lines carriers have shouldered most cannabis coverage because federal illegality barred standard insurers. These specialty firms can craft bespoke policies without filing rates, allowing them to price the high‑uncertainty exposures associated with cultivators, processors, and product manufacturers. However, the lack of historical claim experience and rapidly evolving product formats—edibles, topicals, and concentrates—have kept mainstream carriers on the sidelines. The new Schedule III status will gradually fill that data void, enabling actuarial teams to build robust loss histories and refine underwriting guidelines. As risk profiles become more transparent, insurers can move beyond ad‑hoc pricing toward competitive, data‑driven offerings.
Looking ahead, the reclassification is expected to unlock legacy banking services for cannabis businesses, fostering a more liquid financial ecosystem. With credit access and standardized insurance products, operators can invest in safety protocols, product testing, and compliance, further mitigating liability concerns. Over the next decade, accumulated claim data and longitudinal research will likely lower premiums and attract a broader array of carriers, stabilizing the cannabis insurance market. Stakeholders should monitor regulatory updates and actuarial trends to capitalize on emerging opportunities in this evolving landscape.
Episode Description
Associate Director David Blades and Associate Analyst Alexander Winant, both of AM Best, discuss a new Best's Commentary that finds the executive order doesn’t immediately resolve insurance issues for cannabis-related businesses, but the move to reclassify marijuana under federal law could be a significant step for the insurance market.
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