Green light for cannabis edibles and topicals to boost insurance market growth
The Government of Canada introduced amendments to the Cannabis Act in June, which set out the rules governing the legal production and sale of edible cannabis, cannabis extracts and cannabis topicals. The new regulations, which will come into force on October 17, 2019, seek to displace the illegal cannabis market by diversifying the cannabis product options available to consumers.
According to Health Canada, a limited selection of cannabis edibles and topicals will start to appear in physical or online stores around mid-December 2019. This delay after the enforcement date factors in the 60-day notice period that federal license holders have to express their intent to sell the products, as well as the time it will take authorized distributors and retailers to obtain the new products and make them available for sale.
Bill Blair, minister of border security and organized crime reduction, commented: “The amended regulations are the next step in our process to reduce the risks to public health and safety from edible cannabis, cannabis extracts and cannabis topicals and displace the illegal market for these products in Canada. We are committed to working closely with the provinces and territories as well as industry in the weeks ahead to prepare for effective implementation of these new regulations.”
Based on data from Statistics Canada, the cannabis industry in Canada is currently worth around $6 billion, with less than a quarter coming from sales by legal entities. With the amended regulation around edible cannabis, cannabis extracts and cannabis topicals, the size of the market is likely to “increase substantially,” according to A.M. Best financial analyst, Dan Heitlinger.
“As edibles and topicals are more versatile than traditional leaf-based cannabis, it will likely widen the influence that cannabis has for other industries, for example medical supplies, beverages and cosmetics,” said Heitlinger at A.M. Best’s Canadian Insurance Market Briefing in Toronto. “We expect that the market for cannabis-based insurance products will grow in tandem with the cannabis industry and likely enable future commercial and personal line opportunities for insurance. We also see significant oversight within the cannabis industry as a key risk mitigating factor, which could also be a catalyst for future coverage.”
However, despite the ample opportunities for insurance within the cannabis space, there are still a number of larger entities that remain hesitant to jump in. Primary concerns include reputational risks to the insurers or the stakeholders, limited legal precedents and “other unknown unknowns,” Heitlinger explained. Consequently, the cannabis insurance market has been dominated by more opportunistic SME insurers, but this may change as product demand quickly continues to grow.
“We know that product liability policies and other related insurance products all remain in high demand for cannabusiness owners,” Heitlinger added. “Personal commercial cannabis stakeholders are becoming more sophisticated as the market and the user demographics mature. Commercial stakeholders are also expecting higher limits as they scale and greater customization as our understanding of the relevant risks harden.”
The opportunities for insurers in Canada’s budding cannabis industry are enormous. To learn more, attend Cannabis Cover Toronto at Vantage Venues on November 06, 2019.