Jeremy Colombik is a licensed CPA and a member of the American Institute of Certiﬁ ed Public Accounts, and the North Carolina Association of Certiﬁ ed Public Accountants. Furthermore, he has been in the captive industry for over 10 years and is a member of the Captive Insurance Companies Association and the North Carolina Captive Insurance Association. In addition, he serves as Former Chairman for the North Carolina Captive Insurance Association. Colombik is the president of Management Services International (MSI). MSI currently manages over a hundred businesses that are utilizing a captive insurance company structure. Jeremy specializes in IRC Sec. 831(b) captives. He is a sought after speaker for professional groups, such as; CPAs, lawyers and ﬁnancial advisors, on how a captive structure works and could be a great beneﬁt to their clients.
Captive Review (CR): Can you explain the signiﬁcance of the farm bill on the new hemp industry?
Jeremy Colombik (JC): Many of our founding fathers grew hemp and advocated its uses and beneﬁts, and Thomas Jefferson composed the draft of the Declaration of Independence on hemp paper, but hemp farming was eventually ofﬁcially banned in 1970 with the passage of the Controlled Substances Act in which hemp was included as a Schedule 1 drug, grouping this crop with its twin: marijuana. After almost 30 years of being forbidden, US businesses were once again permitted to import dietary hemp products (seeds, oil) in 2004. The ﬁrst really big win for US farmers came in 2007, when two North Dakota farmers were granted hemp licenses – the ﬁrst time in over 50 years. Continuing that momentum, The 2014 Farm Bill was signed into law, which allowed various universities to research hemp cultivation. This was exciting news for the resurrected hemp industry, but still made it quite difﬁcult for businesses to operate with no access to crop insurance, property and casualty insurance, banking and no legal method of transport across state lines. Additionally, this bill was set to expire in 2019. The signiﬁcance to the 2018 Farm Bill means that all hemp cultivation, processing and operations are now legal across all states and business owners can have easier access to banking, transporting their products across state lines as well as securing insurance for their business.
CR: How will this affect businesses in setting up captives? Will there be a push towards setting them up or will they move away?
JC: This new law will make it a lot easier for the hemp industry to participate in captives as it is more expansive than pilot programs in various states. The hemp industry has always had a need for crop insurance coverage and with this new bill, growers can ﬁnally participate in the Multi-Peril Crop Insurance (MPCI) Federal crop program but this program like most insurance has many gaps, exclusions and limits. Captives, as they usually do, can be designed to ﬁll in those gaps and exclusions and give growers full protection seed to sale. Furthermore, gaining access to the federal crop insurance program will still take time as each state must register and then the application for the growers is a lengthy process. Our sister company, Emerald Risk Solutions, was launched last year to speciﬁcally ﬁll that need for hemp and marijuana industries. The captive solution, at least the one we offer, gives complete outdoor or indoor crop protection to permitted operations in under 30 days so I have already seen a huge push for getting a captive set up.
CR: How prepared is the commercial market for this? Are captives innovating at a greater pace?
JC: The commercial market was already offering some coverage for hemp-related businesses, but policy wording was problematic since many policies banned any business operations involved with cannabis (hemp is technically from the cannabis plant, so that included hemp.) These policies still exist even with the new bill in place. Therefore, many businesses will continue to buy those policies and have ineffective coverage. Again, this is where the captives are the best choice for hemp businesses since they are a great tailor-made business solution that can ﬁll in the gaps and exclusions while the commercial market works to update their policies.
CR: What long-term effect will the bill have on the hemp industry?
JC: The 2018 Farm Bill was a long-time overdue bill that legalizes a plant that not only provides industrial uses, but has also proven to be of medicinal use as well in the form of CBD, an extracted and very sought-after oil (short for cannabinoid oil.) CBD and its parent industry of hemp is projected to be a $22 billion industry by 2020. There will be an even bigger need for captives to protect businesses from risks, regulations and liabilities associated with a new and emerging industry.