Cannabis Insurance

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Cannabis Insurance for Businesses

Since 2015, FCA’s dedicated cannabis practice has been providing the industry with active risk management and insurance placement solutions.  Our seasoned team has demonstrated expertise across all phases of company development; from construction & facility buildouts, licensing, IPO issuance and M&A activities.

We understand the unique set of risks associated with cannabis production and can effectively navigate the complexities of the insurance marketplace.  FCA has supported Canadian organizations for over 100 years with deep-rooted connections across the global insurance market.

Areas of Focus:

Our practice supports cannabis organizations across the country, including:

  • Licensed Cannabis Producers
  • Publicly Traded & Dual U.S Listed
  • Micro License Holders
  • Outdoor Grow Operations
  • Transportation & Logistics
  • Whitelabel, Contract & Toll Processors
  • Laboratories & Testing Facilities
  • Retail Dispensary & Franchise Operations
  • Event & Security Operators
  • Consultants & Ancillary Business

Common Cannabis Insurance Coverages

Cannabis producers are faced with a number of risks unique to their operations.  This goes far beyond the traditional view of insurance for physical buildings, equipment and biological assets.  Companies must also consider the financial impacts of  a  product recall, cyber breach or potential litigation arising from disgruntled customers, suppliers or investors.  Below we have summarized the 6 most common insurance coverages for cannabis producers:

Directors & Officers (D&O)

D&O provides personal financial protection to the company’s directors and officers in the event they are sued for the decisions they make in their role with the company.  We specialize in sourcing D&O insurance for both publicly traded and privately-owned licensed cannabis producers.

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Product Recall Insurance

Product Recall insurance protects cannabis producers against the financial impacts associated with either a voluntary or government-mandated recall. This extends to include the cost of the recalled product along with any extra shipping, disposal and storage expenses.

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Excise Duty Surety Bond

Cannabis excise (tax) bonds can be used to satisfy the CRA’s security requirements imposed under the Cannabis Excise Duty Regime. Our proprietary bonding program allows license holders to free up working capital while maintaining compliance with the CRA.

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Property, Plant & Equipment

Often the most obvious form of coverage – property insurance is available to protect against physical loss or damage to owned property.  This extends far beyond buildings and production equipment to include biological assets (crops), inventory and goods in transit.

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Commercial & Product Liability

Commercial General Liability (CGL) is an essential form of coverage that protects organizations from the financial costs associated with allegations of 3rd party property damage or bodily injury.  This includes the cost of legal defense and/or potential settlements should you be sued. Coverage extends to cannabis products.

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Cyber Insurance

The need for cyber insurance continues to grow as we observe an increase in attacks targeted towards manufacturing operations.  Coverage is available for a host of cyber-related losses including; ransomware, theft of funds, cyber breaches and even the loss of income due to a cyber induced system shutdown.

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Common Cannabis Insurance Questions

A collection of our most frequently asked questions.

As the name suggests, Product Recall insurance protects cannabis producers against the costs of recalling a faulty product.  This includes both voluntary and government mandated recalls.

Under a comprehensive product recall policy, coverage is afforded to protect against:

  • Cost of the recalled product
  • Customer & retailer notification costs
  • Shipping & transportation expenses
  • Disposal costs
  • Additional labour & storage costs
  • Adverse PR (public relations team)

The cost of a recall should not be underestimated.  Given the stringent package and labeling requirements under the Cannabis Act – one simple mislabel could result in significant costs and lost revenue.

 

The above question is one we get often; and for good reason.  Given the limited number of experienced cannabis insurance brokers in Canada, many LPs often find themselves overpaying for their insurance coverage.

The cost of insurance for cannabis companies will vary depending on a number of factors.  This includes, but is not limited to:

  • Type of insurance coverage needed
  • Value of property & limits required
  • Historical claims history
  • Revenue, # of employees & years in business
  • Types of products sold
  • Corporate structure (privately owned vs. publicly traded)
  • Asset locations (Canada, USA, EU…etc.)
  • & more…

Although each organization is unique, our team is able to offer proprietary insurance price benchmarking – allowing Licensed Producers to compare how their insurance stacks up against the wider cannabis industry.

The Ontario Cannabis Store or “OCS” requires licensed cannabis suppliers to carry $15,000,000 of Commercial General Liability insurance.  This insurance must also include Products and Completed Operations coverage.

LP’s are required to provide the OCS with a Certificate of Insurance which shows they carry this limit of insurance.

The specific insurance requirements are further detailed in the Master Cannabis Supply Agreement (MSA).   While no longer a requirement, we would also recommend that LP’s consider carrying Product Recall insurance.  This coverage is specifically designed to cover the costs associated with either a voluntary or government-mandated recall.

The BCLDB requires licensed cannabis producers to carry $10,000,000 of Commercial General Liability and $10,000,000 of Product Recall Insurance.

However, this requirement does differ depending on the license class and type(s) of products sold.

Micro-Cultivation, Micro-Processing & Nursery license holders are required to carry the following.

Commercial General Liability limits:

  • $2,000,000 for cannabis plants & seeds
  • $5,000,000 for dried or fresh cannabis
  • $10,000,000 for all other cannabis products

Product Recall Insurance Limits:

  • $2,000,000 for cannabis plants & seeds
  • $5,000,000 for dried or fresh cannabis
  • $10,000,000 for all other cannabis products

BDLDB is the acronym for the British Columbia Liquor Distribution Branch.

The answer to this is really in the question itself.

Most cannabis industry participants can appreciate the additional challenges imposed on their operations by outside service providers.  Lingering public perceptions and ties to U.S financial institutions have  generally resulted in the marginalization of Canadian cannabis companies.

Unfortunately, the same can be said within the insurance industry.  This therefore requires a knowledgeable broker who can effectively navigate the nuances of the rapidly evolving cannabis insurance market.

In addition, it is imperative that you work with an insurance broker who has an intimate understanding of the risks involved with cannabis production.  This will ensure that you have the proper coverage tailored to the unique risks facing your operations.

Our dedicated cannabis practice team has supported the industry for close to a decade and truly understands the needs of cannabis production.  We welcome a free consultation to discuss your insurance needs.

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Our mission is to make insurance accessible for the Canadian cannabis industry. We put you in control of your insurance experience. FCA informs and empowers you, so you can choose amongst robust options, confident in the value of your protection and in the broad reach of your advocates.

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