Canadian cannabis companies must head south even if it means navigating insurance complexities

Published: July 28, 2019

Updated: August 28, 2019

Author: Luke Jones

CATEGORY:

Share:

Canopy Growth, the largest cannabis company in the world recently removed founder and CEO Bruce Lipton, but before he departed Lipton offered some advice for the cannabis industry in Canada. That advice was simple, look across borders to expand or face going out of business.

Speaking to BNN Bloomberg in April, Linton said Canada is a ripe for innovation, “but if you just stay in Canada, you’re doomed because the rest of the world has a lot more people. What we have to do is take everything we’ve learned and transport it to the bigger markets. That’s why we’re in Europe and that’s why we did this in America.”

The United States is the obvious expansion ground, considering its proximity and available cannabis markets. However, experts warn companies seeking to expand operations south of the border should consider the insurance situation.

“We are certainly seeing some complexities there. Some of our clients and other companies within the industry are looking to do cross-border operations,” said Kevin Lea, president at Fuse Insurance in an interview with Insurance Business Magazine. “If they are going to be setting up a US entity to be conducting operations in states where it’s currently legalized at the state level, it’s likely going to be a separate company that’s conducting those operations. You’re not seeing the direct Canadian arm operating directly in the US because that’s going to cause a lot of cross-border hassle.

“Within those legal states, there are also a number of insurance providers who are operating within the cannabis sector already – insurance companies that are regulated at the state level. One of the examples would be Next Wave, which has an office here in Canada now, but they pioneered insurance for cannabis down in the US. For our clients looking for cross-border [opportunities], we’re able to connect them with licensed brokers in those states, who are then in turn able to work with the appropriate specialist providers to find that coverage.”

Regulatory stumbling blocks are also hampering cross-border expansion, Lea says. Still, he agrees with Linton’s assessment that companies need to leave the Great White North to thrive.

“I do agree with him that if Canadian cannabis companies aren’t looking at potential future US expansion, with the likely change in laws at some point over the next five years, it’s something they may be missing out on strategically,” he said.