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Despite market correction, Cannabis 2.0 will bring huge opportunities for insurers in 2020

  • Market Insight 23 December 2019 23 December 2019
  • Americas

  • Retail & Consumer

Legalization of edibles in Canada opens up a potentially vast market.

Despite market correction, Cannabis 2.0 will bring huge opportunities for insurers in 2020

Recent regulatory developments in Canada are set to accelerate the growth of the legal cannabis industry, with sales already projected to grow to around USD 5 billion within five years, presenting significant opportunities to insurers.

Recreational cannabis in dried or plant form was legalized in Canada in October 2018. But a second wave of cannabis legalization in Canada, or Cannabis 2.0, in October 2019 legalized cannabis edibles, extracts and topicals, opening up a potentially vast market. 

The first wave of legalization in 2018 showed tremendous promise but was also subject to market overheating. In 2019, we saw market corrections to reflect lingering issues with regulatory compliance, supply and bringing products to market.

Cannabis 2.0 will bring wind to the industry's sails: although edibles were legalized in October 2019, the first products are expected to hit the market mid-December 2019. Smoking a joint might not appeal to large parts of the population, but they may not be averse to trying cannabis candies, chocolate or beer and other products which incorporate cannabis. As a result, the cannabis market in Canada is set to increase significantly with this second wave of legalization, which will provide more opportunities for operators who were not involved in the first wave, such as food and beverage companies, and further opportunities for first-wave cannabis companies.

However, as with the first wave of legalization, everyone involved in production, distribution and sales in the cannabis industry will need to comply with the regulatory requirements. Failure to do so would present risks to these businesses and their boards and management. This presents huge underwriting opportunities for insurers to provide D&O cover as well as other insurance classes including property, fidelity/crime and product liability.

Read the rest of our insurance predictions here.


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