A major security company is able to work with the American cannabis industry, thanks to Bermuda Monetary Authority innovation.

“Cannabis retailing is a cash-intensive industry,” Santiago Garcia, Brinks’s senior director, global risk management, said at the Bermuda Captive Conference.

Speaking during a panel discussion on why Bermuda is the jurisdiction of choice for captives, Mr Garcia said people in the cannabis industry often struggle to safely transfer cash to their financial institutions.

“Lloyd’s of London could not offer coverage in the US market,” he said. “Most insurance companies will not offer cover just because cannabis is not federally legal.”

In America, 39 states and the District of Columbia have legalised medical cannabis, and 24 states have legalised recreational cannabis, but the federal government still classifies it as a Schedule I drug under the Controlled Substances Act, which prohibits its use for any purpose.

“We do it in Canada through Lloyd’s because it is legal there,” Mr Garcia said. “We also have a pilot programme with the Dutch Government.”

Cannabis is decriminalised in the Netherlands.

Getting into the American market was more difficult for Brinks.

He said: “The only way we could find was through the BMA and structuring a programme that would insure the movement of cash through a contract with the state chartered banks in each of these states in the US.”

Mr Garcia said setting the programme up was an interesting process he had not experienced before.

“Now we use it as a way to sell and promote our services to this niche in the US,” Mr Garcia said. “We definitely had the help of the BMA to get it through, get it online, offer that product and ramp it up.”

He said the BMA offered a solution that commercial insurers were incapable of providing.

BMA deputy director Timae Flood said the authority intended to continue fostering and encouraging innovation within the market.

She said it was important for them to maintain the balance between their mandate of appropriate oversight of the captive market and understanding the needs and challenges of captive owners, and the parents of those captives.

“The BMA wants to ensure the appropriate capital levels and expertise is available within each captive,” she said. “We want to make sure that they have a proper understanding of long-term strategy, while also ensuring that we are maintaining the balance of bifurcation between the regimes.”

Rebecca Jones, chief risk officer, Nautilus Indemnity, said her firm had been domiciled in Bermuda for 40 years. One of the main drivers for choosing the island was the regulatory environment.

“The BMA has a very good reputation for balance of rigour and flexibility,” she said. “There is a balance of both European and US regulation in Bermuda, but flexibility as well.”

However, she said Bermuda’s cost of living is a threat to the island’s captive market.

“Bermuda is not a cheap place to live or raise a family,” she said. “Over time, it will become more difficult to retain people.”

She said it was fabulous that Bermuda is raising a generation of students who are eager to work in the insurance market.

“I have worked with students through the Bermuda Captive Network and the Bermuda Foundation for Insurance Studies,” she said. “There are young people here who are so passionate. The concern is how do we keep that passion and keep them wanting to work in Bermuda, so we are making the market itself sustainable.”

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