The Secure and Fair Enforcement Banking Act (SAFE Banking Act), which was recently reintroduced in US Congress in March, may eliminate barriers at a federal level and create new opportunities for the captive insurance industry, specifically in relation to managing risks associated with the cannabis industry.
This was discussed at the ‘Regulatory Hot Topics’ session at the CICA conference in Tucson, Arizona. Speakers included: Dana Sheppard, acting deputy commissioner and associate commissioner, DC Department of Insurance, Securities and Banking; David Provost, deputy commissioner, captive insurance, Vermont Department of Financial Regulation; and Nancy Gray, regional managing director-Americas, Aon Captive Insurance Management
Provost said he had been looking at analysis of the SAFE Act and suggested that it “may open some doors” for the industry.
Once it becomes legal, however, Provost suggested that the traditional market may step in and there possibly won’t be a need for captives.
However, he added that there may be a short window where captives can act quick, or captives can possible erase some of the exclusions that would be in traditional policies.
“I think captives have a long history of responding to emerging risk where you can’t purchase insurance in the traditional marketplace,” said Gray.
She said she is currently working with some clients in the cannabis industry and believes that a captive might be part of the solution for the cannabis industry.
“A cannabis captive would probably be offshore as opposed in the US,” she added.
S.1152 would prohibit the federal banking regulator from terminating or limiting the deposit insurance or share insurance of a depository institution solely because the institution provides financial services to a legitimate marijuana-related business.
Furthermore, it would prohibit the regulator from stopping or discouraging an institution from offering financial services to such a business. Perhaps most importantly, an insurance company would not be liable or subject to forfeiture for providing a loan or other financial services to a legitimate marijuana-related business.
Sheppard said that DC would be interested in cannabis captives but is reluctant due to the federal laws around Schedule 1 substances. He said he is hopeful the SAFE Act gets passed.
CICA 2019, US Congress, The Secure and Fair Enforcement Banking Act (SAFE Banking Act), Cannabis, Captive, North America