Opioids and cannabis are hot topics for the insurance industry, and both present challenges for brokers and risk managers.

Some of those risks and emerging risks were brought into focus by two US-based experts from global law firm Dentons, who spoke at a seminar hosted by Axa XL’s Bermuda insurance claims team.

Keith Moskowitz, partner at Dentons US, talked about current state of US litigation involving opioids, and the complexity of how those cases are working through the US judicial system.

“The ability to process the claims is complicated because you have different levels of government entities,” he said.

He explained how, in the US, there is the federal and state systems, and at the state level there is a multiplicity of entities, from the state itself, to cities, counties, and municipalities.

This means “different actors” in the state system can file individual actions against the same group of defendants, creating complexity.

“It complicates the ability to get a resolution. You have this group of government stakeholders and a class of defendants trying to figure out if and how they can work together to get a resolution. In a way that ties up all the liabilities and claims,” Mr Moskowitz said.

A comparable situation is what happened with US tobacco litigation.

“There are two differentiators, one is that only the states themselves, through their attorneys general, brought that litigation; none of the political sub divisions were involved as litigates. As a consequence, there was a much smaller group of actors on the plaintiff side bringing the case,” Mr Moskowitz said.

“The second distinction is that in tobacco there was a far smaller universe of companies that were the subject of the litigation.

“In opioids, you have such a wide range of defendant actors; big manufacturers, big distributors and large retailers, but also a multiplicity of much smaller retail entities.”

When asked how this information could be useful to brokers and risk managers, he said: “Insurance markets were insurers of the companies that were involved in the manufacturer, distribution and ultimately prescription of the product.

“Clearly the liabilities are novel, we would say hard economic losses, and not the types of losses that should be subject to insurance.

“But all the insurance industry has been put on notice of the losses, there is litigation revolving around whether and to what extent insurance is available.”

Meanwhile, the subject of cannabis was discussed by Eric Berlin, also a partner at Dentons US.

He said that in the US, all but four states have legalised cannabis “to some extent”, and one of those four had decriminalised it.

He said: “So it is only truly, fully illegal in three. At the same time, cannabis remains federally illegal. That creates a unique dynamic as to how all the laws and risks play out in the insurance industry and otherwise.”

He said there is a lot of confusion about what is legal and what’s not, particularly in respect to the legalisation of hemp.

In the US, hemp — defined as cannabis having no greater than 0.3 per cent THC [a psychoactive compound] — is legal, which has resulted in multibillion dollars of sales.

“On the other side you have cannabis, which is a much larger market, but much more controversial,” Mr Berlin said.

“New York is looking to legalise. Mexico is looking to legalise. If both of those do, seven of the 10 most populated North American cities will have legalised cannabis.”

He said revenue generated from legal sales last year was between $13 billion and $20 billion, and some people project that sales globally could reach $75 billion.

“There are going to be risks arising, not just the risk of violating federal law, but all the other insurable risks, and how those play out will affect this industry significantly,” Mr Berlin said.

“It’s not a substance that will kill you, so we are not likely to see the opioid litigation that we are having.

“But we don’t have our arms around all the safety profiles and benefits and all that sort of thing. In many ways we have the law getting ahead of the scientific knowledge, and what risks will arise from that is unclear, but there are things we should keep our eyes open to.”

So what types of risk are out there?

Mr Berlin said risks that exist in traditional farming, in many ways apply to cannabis and hemp farming.

In addition, risks arise in the extraction of and ingredients put into the products, together with their distribution and sale.

“You have hundreds of thousands of vendors selling into the industry; packaging, labelling, their additional ingredients. There are risks that arise from any of those activities that apply,’ Mr Berlin said.

“It’s a substance that is far more benign than opioids, but it is not 100 per cent safe in all aspects.”

The discussion was held at Axa XL’s O’Hara House, on Bermudiana Road.

Kim Wilkerson, vice-president, regional head of claims for insurance at Axa XL in Bermuda, said: “The room was full. There is a lot of interest. For Axa XL, this event was put on by our claims department. Our aim is to be thought-leaders.

“These issues, (and) we also had a section on auto liability and outrageous verdicts, are issues that impact the whole of the market place.

“We want to generate knowledge, so when we are in conversation with our market peers and having market responses, then we have the same level of knowledge of the risks that we have to respond to as a market place.”

She added that the event was for the education and enrichment of the Bermuda market as a whole.