Cannabis captives face inherent conflict at federal level

There is an inherent federal conflict that creates licensing problems for businesses in the recreational and medicinal cannabis industries looking to form a captive.

This is according to a panel lead by Dave Provost, deputy commissioner captive insurance for the State of Vermont, who was speaking at the Vermont Captive Insurance Association annual conference in Burlington.

“As long as cannabis is a schedule 1 drug it’s going to be an uphill battle for that industry,” said Michael Scott, vice president at Archer Daniels Midland. “You can’t be in the cannabis business and comply with federal law.”

Provost said there is definitely interest from companies looking to fund their risk financing needs within the cannabis industry.

However, he said he didn’t feel like Vermont could license a captive with funds that come from the production or distribution of cannabis, a substance illegal at the federal level.
Julie Boucher, managing director at Marsh Captive Solutions, added that this interest is growing.

“People in the cannabis industry have risk financing needs as well, more so in the past 12 to 18 months. Their approach is similar to any other entity’s approach in terms of financing risk.”

However, Boucher confirmed there is an inherent federal-state conflict that exists.

Provost added: “I’ve always said if you substitute any other schedule 1 drug on the list, we wouldn’t even be talking about a heroin captive.”