A week is like a month’ for brokers in this growing industry
From licensed producers to retail stores, the many types of operations that make up the cannabis industry in Canada require specialized insurance coverage to address their unique risks and exposures.
One expert, who will be sharing his insight at an upcoming event, knows all about meeting the needs of businesses in this space – his brokerage has been working with licensed producers since 2016.
“Some of them didn’t even have a building yet, and they had to build their actual facility. Some of them were still applying for licenses. We connected with some [producers] who were in the early stages of their license application process, and helped them every step of the way,” said Fady Kamel (pictured), managing partner at All-Risks Insurance Brokers, and a speaker at the upcoming Cannabis Cover masterclass in Toronto. This assistance included selling cannabis companies directors and officers insurance when they were still raising funds.
In fact, D&O has been one coverage that’s kept pace with the growth of this sector, and the companies within it.
“When they first started off, they were just raising funds, and there weren’t any real business operations,” said Kamel. “Now, these businesses are fully operational, and they’re even buying and selling assets or moving into different countries – some that we’re working with are going international. That directors and officers policy has evolved a lot, and the industry is moving so fast. A week is like a month in the cannabis space.”
One of the key risks facing cannabis companies is product liability, which is still a question mark because there’s not much data on losses yet.
“It’s a brand new industry for everyone. Insurance companies don’t know what’s going to come in 10 or 15 years. Even the industry doesn’t know what to expect in terms of lawsuits and liability issues in the long run because the cannabis industry is still in its infancy stages,” explained Kamel, adding that property coverage is also critical. “Some of these companies spent millions and millions of dollars to build out these facilities, so making sure they have the right coverages and limits in place to protect the big investments [is important].”
Crop insurance is another big question mark, and one that needs an answer soon as the number of outdoor growers is expected to increase.
“I’m hearing some [insurance] companies are doing it, but I haven’t found those companies yet. From what we hear, some are starting to look at it,” said Kamel.
The managing partner will provide more insight on these and other specialized risks during the Cannabis Cover event in November, but in the meantime, he recommends that brokers use a different approach if they’re thinking of entering the cannabis market.
“Everybody probably wants in because it’s a new industry and it’s a big industry. The thing that I learned early on is to put in the work in terms of underwriting and in terms of risk exposure, as opposed to ‘let’s try to sell this policy’,” he said. “[You need] more of an underwriting risk management approach to make sure you’re protecting the client.”