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CBD Oil Processors:  A Rapidly Growing Insurance Market

Consumer sales of CBD oil in the United States is expected to top $1 billion in 2020, representing a 1000% increase in just the last five years.  By 2025, the total value of the CBD market is estimated to be $15 to $20 billion.

 With such rapidly increasing demand for CBD oil, many new players are entering the market -- which is also driving demand for liability and other insurance products businesses need to protect themselves.


As with any burgeoning industry, assessing liability exposure can be difficult. The technology is rapidly evolving, and new extraction processes are constantly being tested in hopes of reducing costs while increasing yield and purity. Many of these businesses have patents that are pending.  And government regulatory agencies watching closely as well, frequently considering new laws and regulations that could affect CBD oil businesses.

Related: 5 Things You Need to Know About Liability Insurance for CBD and Hemp Products

 Assessing Liability Exposure for CBD Oil Processors

When assessing the liability risks for CBD oil processors, there are two main types of exposure. The first involves ensuring the final product contains less than .3% THC oil, and is free from impurities such as trace amounts of pesticides, metals, bacteria, or residue from the solvents used in the extraction process. This can make evaluating the growers and supply chain key to assessing exposure, but the most important element is ensuring the final product is appropriately tested for impurities.

The second type of liability exposure insurers need to worry about involves the safety of the process itself. Because CBD oil is generally extracted under high pressures using combustible materials, having the appropriate equipment and training is critical.

Non-commercial or modified equipment can increase the danger of an explosion, especially when solvents such as liquid ethanol, propane, or butane are used in the extraction process. Liquid carbon dioxide is generally considered the least dangerous method since liquid CO2 is not flammable and does not leave a potentially dangerous residue, but it is also the most expensive.

Whichever technique is used, it is important that the equipment is certified to operate under the temperatures and pressures being used, and that the operator knows how to address any irregularities. It is also important that the business follows fire safety codes and has proper fire safety equipment and training. The extraction should generally be conducted in a fireproofed area, solvents need to be stored and disposed of properly, and renting the facility can also create additional liability.

Work With the Insurance Industry Experts in CBD Oil & Cannabis

When writing liability insurance policies for a rapidly evolving industry like CBD oil processing, it helps to have an expert who understands the regulations, technology and possible risks of exposure. Admiral Insurance Group provides that expertise to our wholesale brokers, and their retail brokers who work with businesses that grow, process and sell hemp, CBD oil and cannabis products. If you are a retail insurance broker, locate an Admiral wholesale partner. If you are a wholesaler, contact us about becoming a premier partner.

 


Tony Petaccio

Written by Tony Petaccio

Tony Petaccio is an Underwriter for Admiral’s Health, Nutrition, and Lifestyle Team. He is based in our New Jersey Office. Prior to joining Admiral in 2018, he started his career in the International Catlin Development Program at Catlin Reinsurance. As a reinsurance trainee, he was able to spend time with different reinsurance departments in London, Bermuda, and the US, where he gained a perspective of the industry through different sectors of the business. He worked as a Casualty facultative underwriter for three years underwriting business for various industries such as construction, manufacturing, oil & gas, retail, etc. Tony graduated from Temple University with a BBA in Risk Management and Insurance.



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