After much deliberation and debate, Canadian Cannabis Act came into force on 17th October 2018, allowing for the recreational use of marijuana together with freedom to produce, distribute and consume the plant. This comes on top of previous legislation in 2013 allowing the medicinal use of marijuana.
Canada is now the second country in the world to legalise the drug’s recreational use – Uruguay became the first in December 2013 – and there are a number of US states who have also voted to permit it while others are deliberating. Whilst this is not exactly a gold rush, the general trend is there for all to see.
Time for innovation
Cannabis risk is a complex emerging insurance opportunity. True to form, the London Market is stepping up to the challenge.
Lloyd’s issued a market bulletin to managing agents on 30th August which said, “having taken advice from specialist Leading and Junior Counsel” it is “satisfied that, if properly done, Lloyd’s underwriters are well positioned to write Canadian cannabis business subject to compliance with local Canadian requirements.”
The risks associated with the legalisation of cannabis can be incorporated into commonplace commercial insurance policies, rated according to occupation as underwriters would apply for any organisation, but it is the potential on product liability and D&O risks that may be more difficult to rate and cause underwriters insurers some angst.
We can look at tobacco, alcohol or parapharmaceutical for guidance on how the health risk is managed in respect of these industries; but the risk posed by Cannabis legislation requires much more consideration because of social and moral implications which some insurers are struggling to rationalise.
We see that as one of our key challenges to identify and work through any perceived barriers with insurers to bring relevant products to the market.
Australia, Canada, Chile, Colombia, Germany, Greece, Israel, Italy, the Netherlands, Peru, Poland, Sri Lanka and the United Kingdom have all legalised medical use of Cannabis, so we feel we can expect more recreational approval in certain countries over the next few years. This brings is a great deal of potential gross written premium to the market for those willing to explore and exploit this new market.
Meeting demand for new coverage
SSL Endeavour is spearheading new product development in this field. SSL Endeavour’s Executive Chairman David Lawrence said, “Understandably there is excitable hype around the legalisation of cannabis in Canada – and for us this represents the emergence of new, related risks which have presented the insurance industry with an opportunity to further demonstrate its ability to innovate.
We have already moved forward quickly to meet demand, binding Commercial General Liability insurance policy for the first formal cannabis distributor in Quebec last month via the Quebec government regulated entity. We are seeing a plethora of cannabis-related organisations looking for cover – we will work with partners and coverholders to assess all risks, and develop tailored solutions that provide effective cover and valuable insight into this emerging area”
In an interview with the Financial Times, Lloyd’s remarked on its “long history and reputation for innovation, as well as insuring new and emerging industries.” A spokesman added: “As with any other legitimate sector of the economy, Canadian cannabis businesses will require insurance support as they develop and grow.”
This commitment shows that Lloyd’s and the London Market are still relevant, and that expert practitioners are bringing entrepreneurial, problem-solving skills to new risks.