Despite solid and consistent growth over the past decade, the Canadian cannabis industry is still stuck in what seems to be a never-ending maze of provincial and federal laws. This maze, coupled with the fact that cannabis as a whole is an emerging industry, makes it difficult for cannabis businesses to find reliable insurance coverage. NFP's business insurance experts are here to help you with compliance and keeping your risk low.
Why Do You Need Cannabis Insurance?
Businesses within the cannabis industry typically purchase cannabis insurance for multiple reasons. These reasons include government-mandated insurance to keep your operating license, mitigating the risks arising from customers and investors using cannabis products, or the risk of product loss and natural perils, such as fire and water. Knowing your business and its exposures is important in setting up the right coverage as any one loss has the potential to financially cripple a cannabis company if something goes wrong. Companies within the cannabis space hoping for long-term success need an effective set of risk management solutions tailored to the types of risks they face.
What Risks Does Cannabis Insurance Address?
Cannabis Product Recall Insurance
Cannabis product recall insurance provides protection in the event you need to recall any of your products. No matter where your business sits within the cannabis supply chain, cannabis product recall insurance is a good thing to have in the event of severe product contamination, especially for cultivators. The coverage will typically cover expenses caused by the recall and can extend as far as lost profits and brand rehabilitation expense. Not only is it a good idea to carry, it's mandatory in Ontario (and other provinces) to sell cannabis on the adult-use market. Subject to policy terms and conditions, a cannabis product recall insurance policy covers:
- Cost of taking products off the shelf
- Lost revenue
Cannabis Directors and Officers (D&O) Liability Insurance
Much like cannabis product recall insurance, cannabis D&O liability is a must-have for both private and public companies. At its best, this coverage is designed to protect both the company and its directors against claims due to wrongful acts as defined by the policy. With the industry under a microscope, lawsuits are becoming more common, making this particular line of coverage both hard to obtain and afford. It's important to understand not only the exposure but the work and information required to fit within a œbox that any insurer is looking for. Not all policies are built that same - you may save a few dollars going with XY insurer but are you covered? There have been cases of cannabis companies buying directors and officers insurance policies that exclude cannabis, so it's important to work with your broker and understand what you're buying.
Cannabis Crop Insurance
Cannabis crop insurance protects the cultivator against a crop lost to a number of causes. While cannabis crop insurance is available to a company of any size for indoor cultivation, insurers are now moving into the outdoor cannabis space to protect your crop. The risks faced by indoor and outdoor growers are distinct, so it's important to purchase a policy that reflects these different needs.
- HVAC system not turning on or shutting off prematurely causing the crop to be fried
- Mold
- Pests and infestation
- Contamination (accidental, malicious, etc.)
- Wind
- Excessive rain
- Frost
- Hail
Cannabis Cargo Insurance
As international cannabis markets grow, so do the exposures and costs. However, what's right for your company will depend on the number, volume and logistics of your shipments. You can purchase cannabis cargo coverage through the logistics company that is currently transporting your cannabis or you can purchase it individually. The insured would be subscribing to the current logistics company's policy, effectively using that carrier's cargo coverage to cover their product while in transit, at a fee . To reduce overhead costs, buying your own transportation and logistics insurance is something to consider.
Cannabis Trade Credit insurance
Cannabis trade credit insurance can help you protect your bottom line and may protect you against losses from nonpayment of a commercial trade debt. If your largest buyer defaults, stops paying or pays very late, the trade credit insurance policy will typically pay out a percentage of the outstanding debt. Since the cannabis industry is still in its infancy, cannabis trade credit insurance may be another way to protect yourself and your business so that you can grow along the industry.
Cannabis Cyber Insurance
Almost every industry utilizes digital storage and the cannabis industry is no different. However, it's important to understand that not all cyber insurance policies are the same. Even if cyber insurance is built into your overall liability policy, it's probably very limited and does not cover the majority of exposures that exists and not to the sufficient limits. It is likely that all sensitive information is stored and accessible online, from medical and financial details to the day-to-day operational software; one breach can shut a company down.
NFP: Your Partner to Navigate the Ever-Evolving Cannabis Space
Whether you operate a cultivation operation, cannabis distribution or dispensary, NFP's knowledge and extensive relations with top cannabis insurance carriers can help you secure the policy you need. We'll work with you to keep your business, your people and your products covered.
Partner with us today, and together we’ll put a protection plan in place that fits your organization just right. Request a quote or call us at 1-844-811-1118