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Insurance Carrier Offering Pot Product Liability Insurance Downgraded

Knight Specialty Insurance Company Receives B++ Rating

A.M. Best has recently downgraded Knight Specialty Insurance Company (“Knight”) from  A- (Excellent) to B++ (Good) .   Knight is an insurer of product liability insurance to the marijuana industry through a California based Excess & Surplus Lines Broker.  The press release does not indicate any concern for the risks associated with the cannabis industry.  A.M. Best does cite underwriting losses and related uncertainty regarding loss-reserve and premium adequacy from new business:

Partially offsetting these positive rating factors are continued concerns with heightened execution risk due to significant business growth in recent years, coupled with underwriting losses and related uncertainty regarding loss-reserve and premium adequacy from this new business. These concerns are amplified by adverse loss development, and the potential for a continuation of that trend to adversely impact future operating results and risk-adjusted capitalization. In addition, the companies have moderate common stock leverage relative to the composite.

The significance of a rating decrease is likely measured on the insurance carrier’s ability to meet their obligations.  Knight went from excellent to good based on a range established by A.M. Best with numerous tiers starting from A++ to F.  Each downgrade is a reflection of the rating agency’s concern for meeting particular financial obligations.      

Should cannabis companies be concerned?

A difficult question to answer particularly when few insurance carriers are even offering product indemnification for the industry.  However, cannabis owners who have current coverage with Knight may need to contemplate if this impacts their business with established agreements or statutory mandates that obligate a certain rating standard.  This is not likely to occur in lease agreements, but may be relevant with vendor and supplier contracts.   

The good news for those cannabis companies insured by Knight and the Excess & Surplus Lines Broker (E&S Broker) who represent the carrier through email to Greenpoint Insurance Advisors, LLC indicated an alternative insurance carrier with an A rating had been secured and cancel-rewrites for the customer should be seamless.  

Knight Specialty Insurance Company has experienced a rating drop from A- to B++.  As a result of the Knight Specialty downgrade, we will be offering a “cancel – rewrite” option to the coverage for those accounts that require the “A” rated paper….  There will be no change in the rates/terms/ or premium and no fees charged.  We expect this to be a seamless transition. 

Furthermore, the E&S Broker will start offering cannabis product liability insurance with the new carrier effective August 1, 2016 for new applicants.  

The entire press release may be read here:


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