Cannabis brings new business insurance opportunities for brokers

Published: October 29, 2018

Updated: November 1, 2018

Author: Luke Jones

CATEGORY: |

Share:

Cannabis is now big business in Canada. No longer a black-market enterprise, the legalization of marijuana for recreational purposes has created a fully-fledged commercial market. As this market grows and evolves, new business insurance opportunities will emerge for brokers and carriers.

Swayed by traditional market forces, the Cannabis industry is likely to be susceptible to market consolidation. Mergers and acquisitions (M&A) will become a part of the now legitimate cannabis industry. Indeed, deals are already happening, such as Aurora Cannabis acquiring licensed producer CanniMed for $1 billion.

With the Cannabis Act now effective, the industry is made up from major organizations and smaller newly-licensed producers. There is a lot of room for consolidation with some companies wanting to sell and other looking to buy.

More insurance opportunities

As M&A’s in the cannabis industry become more frequent, the insurance industry will see fresh business opportunities. Brokers and carriers in Canada will see an increase in demand for tax, litigation, and other business insurance solutions that surround M&A deals.

“Some insurance companies are unable to offer R&W coverage – or any other insurance coverage – to companies and stakeholders in the cannabis industry due to the fact that they’re domiciled in the US, where cannabis is still illegal at a federal level,” said Jason Stone, vice president, transaction solutions at Aon.

“Here in Canada, we have various insurance companies willing to use their backing to provide R&W insurance coverage when there’s a deal in the cannabis space. You just have to look at the news every day and there seems to be another deal going on. Knowing that, we expect this [M&A insurance for cannabis organizations] to be a growing industry and something we want to be at the forefront of.”