California's insurance commissioner believes he can give the state economy a bump by making coverage available for a newly legalized commodity: cannabis.

Since Golden State voters passed a proposition formally legalizing marijuana for adult recreational use in 2016, Dave Jones has convened meetings, sent letters, hosted roundtables and led tours of cannabis facilities in an effort to encourage insurers to offer products to cannabis-focused businesses. He also started a new working group of the National Association of Insurance Commissioners to collaborate with other states that have fully or partially legalized the use of cannabis.

"My objective is to make sure ... there is insurance coverage to cover all the aspects of the interactions with the broader public," Jones said in an interview. "Once the voters have made their decision to legalize the recreational use of cannabis, I found it important to make sure there was insurance available."

The commissioner touted his approval of CannaBOP, an insurance policy that covers business liability for dispensaries, storage facilities, processors, manufacturers, distributors and other cannabis-related businesses operating in the state. But despite Jones' efforts, large insurers are still wary of the "stigma" around cannabis, according to Kelly Sullivan, an insurance lawyer for Missouri-based law firm Polsinelli. Its drug derivative, marijuana, is still classified as a schedule 1 narcotic by federal regulators, the same category as heroin and LSD.

Even in states that have legalized the drug for recreational use, insurers hesitate to offer insurance due to overwhelming regulatory risks, Sullivan said. Recreational marijuana is legal in nine states and the District of Columbia, while medical use of marijuana is legal in 30 states.

In an interview, Sullivan said that when it comes to crop insurance, large companies like Chubb Ltd. and QBE Insurance Group Ltd. are unlikely to offer their products to cannabis growers due to regulatory fears.

"They're reluctant, based on common sense, there is still an uncertainty as it relates to the long-term viability of the industry because of the federal law. It's illegal," Sullivan said.

In 2017, Chubb received $80.9 million in direct premiums in the state, while QBE earned $80.5 million in the same year, according to an S&P Global Market Intelligence analysis of multiperil crop insurance writers. Multiperil crop insurance is a policy for farm owners that covers loss of crops due to natural disasters such as droughts, freezes, floods, fire, insects, disease and wildlife or loss of revenue because of commodity price declines.

Jones expressed disappointment that any company would hesitate to offer cannabis companies insurance. After receiving assurances from the White House that federal regulators would not prosecute companies that offer services to cannabis companies, Jones said he has tried to assuage insurers' fears. He also cited a section in a congressional appropriations bill signed in 2017 that barred the use of federal funds to prevent states from implementing their own laws that allow medical marijuana use, distribution, possession and cultivation.

While many large, traditional insurers remain hesitant about jumping into the space, insurtech startups backed by private equity and venture capital firms are more interested in answering Jones' call to offer crop insurance to cannabis growers, Polsinelli's Sullivan said.

"You contrast [big carriers] with the opportunity that someone who has the funds to start a insurance business," Sullivan said. "There are many investors interested in putting their money to back startup businesses to fill this gap," she said.

Patrick McManamon, CEO of cannabis-focused insurance brokerage Cannasure Insurance Services, LLC, said large insurers face a "compliance nightmare," and will remain skittish until federal regulators ease cannabis rules.

"The smaller carriers, the more regional carriers absolutely have a better chance," McManamon said in an interview. "More regional players are involved and have an opportunity to be nimble and quick on it."

Jones' term as California's insurance commissioner ends in January, but he hopes the next regulator will pick up where he leaves off.

"I hope this work certainly continue apace after my term ends, both nationally and also in California too," he said.