In 2018, cannabis was legalized in Canada and a brand-new industry was thrust into the formal economy. But while the headlines focused on recreational use and economic potential, one critical infrastructure piece lagged behind: insurance.
For insurers, the risk was too new. For cannabis businesses, the value of coverage was unclear. Seven years later, that mutual skepticism has largely given way to mutual understanding – and in large part, the industry has itself to thank.
According to Kelli Hunt (pictured), executive vice president at CannGen Canada, the cannabis insurance market has gone through a dramatic maturation process since its inception.
“Seven years ago, our company opened… and we didn’t really have too much of a clue what was going to happen,” she said. Insuring cannabis, she explained, was virtually unprecedented: “This had never been insured, really, legally in the world, ever.”
That lack of historical data made underwriters uneasy. Normally, they rely on decades – if not centuries – of claim history and actuarial analysis. Cannabis had none of that.
On top of that, Hunt said, the two parties involved weren’t initially aligned. “You had insurance companies going, ‘I don’t think I want to insure these people.’ And then you had the clients going, ‘Well, I don’t think I need insurance.’”
The cannabis sector had operated in the shadows for so long that formal coverage was unfamiliar and untrusted. That uneasy dynamic gradually shifted as both sides started to see the benefits of collaboration. The insurance industry got more comfortable with the risks. Cannabis entrepreneurs began to see the value in protecting their operations – especially as claims started to emerge.
“There’s been extremely large losses in this space over the last seven years,” Hunt said. While insurers anticipated traditional Canadian perils like wildfires and floods, the cannabis industry brought its own unique challenges.
Losses tied to cultivation methods, extraction equipment, and facility-specific hazards defied conventional risk models. Worse still, valuations were unclear. “No one really knew what the stock was worth… or how it should go” when paying a claim.
The turning point, Hunt explained, came when the cannabis industry itself stepped up. As property losses mounted – particularly from unexplained fires – CannGen put out what she jokingly called “the Kelly Cannabis bat signal.”
They sent a message to licensed producers and legacy growers: help us understand your risks, or cannabis could become uninsurable.
“And all credit to the cannabis industry,” she said. “We had all sorts of legacy growers come out, talk to us about best risk management practices… and they really helped us create the underwriting guidelines we use today.” From light bulb types to cultivation room configurations, cannabis professionals began sharing insights that helped insurers reduce risk and refine coverage criteria.
The outcome was a cooperative approach to underwriting that, Hunt says, continues to bear fruit. While large losses still occur, they’re no longer as frequent – and insurance is more accessible than ever. “That’s why it’s still insurable today,” Hunt said, “and that’s why it’s easier to get insurance today than it was seven years ago.”
That growing comfort has translated into meaningful capacity growth – not just in Canada, but globally, Hunt noted. CannGen, however, was fortunate to secure strong backing early on.
“It was helpful that our domestic carrier was just a Canadian-owned insurance company. They didn’t have any ties to the US and the federal illegalities that come into play there,” she said. That independence was instrumental in avoiding regulatory roadblocks and establishing a strong domestic base for cannabis coverage.
While property insurance has evolved, Hunt said the real challenge has been liability.
“The liability of this is a whole other beast.”
From novice users to uncertain social consequences, the risks were wide-ranging and hard to price. Hunt described scenarios like “soccer mom Sally” trying edibles for the first time, then getting behind the wheel. “You didn’t know if cannabis was going to become the next big bad tobacco,” she said.
Perhaps most striking is how the cultural perception of cannabis – and its insurability – has evolved alongside consumer habits. Hunt compares it to her own father’s change of heart. “My 82-year-old dad takes a gummy every day,” she said.
That shift has been mirrored in the insurance sector, where carriers and reinsurers have warmed up to cannabis as they understand it more. With that familiarity has come stability. “There’s now an insurable product for cannabis around the world,” Hunt said, noting that Canada’s example has helped pave the way for other markets.
“Had the cannabis industry and insuring it failed here, there probably wouldn’t be insurance today in Germany… or all the places where it’s expanding.”
The early years, Hunt admits, were rocky. But by engaging with underwriters, educating the market, and taking risk management seriously, cannabis companies earned the trust of insurers – and helped build a global template for coverage in the process.
“It took a village,” Hunt said.
