RSA responds to changes to Canada’s cannabis regulations

By: Domingos Lopes
Assistant Vice President, Property Underwriting I Global Specialty Lines
As you are likely aware, Recreational Cannabis Bill (C45) passed, and the legalization of cannabis will come into effect on October 17, 2018.
Under the new regime, the federal government is granting licenses to small, medium and large producers across Canada at a fast rate.  As of early August, Health Canada has issued 115 cultivation licenses. This is largely due to the fact that demand from provincially approved retail outlets and consumers is anticipated to sky rocket once the recreational law is enacted. A full list of licensed producers can be found on the Health Canada Website
Health Canada has ensured that modern cannabis cultivation is tightly controlled, efficient and extremely clean. The high level of regulation, particularly on the production side of the industry, makes the opportunity to enter the market as an insurer very appealing from a risk perspective. However, like any emerging sector that is still in its early stage, we understand the need to approach the production side of the business with caution.  
We anticipate that you will be faced with questions from your customers on the risk implications around cannabis production, processing, retail, storage and transport. As such, we wanted to provide you with an update that is reflective of the industry perspective on the issue, as well as RSA’s risk appetite in this sector as of October 17, 2018.
RSA is open for business
RSA is looking to be a commercial market leader for this class. In particular, RSA is seeking to write the property exposures and realty risks for federally licensed, large-scale cultivators and producers of cannabis and cannabis products within our Mid-Market and Specialty lines of business. RSA will not write cannabis risks in SME. 
From a retail perspective, all storefront operations are currently outside our risk appetite. Once provincial rules and regulations for dispensaries are finalized, we will revisit our position, but appetite will likely vary from province to province depending on who is authorized to sell cannabis. 
Key regulatory considerations
  • Once Bill C-45 is enacted, the Cannabis Act will regulate all cannabis operations. The Cannabis Act will outline the licensing requirements based on the type of operations and activities. Here is a link to an infographic on the proposed Federal Licenses
  • Although the legalization of cannabis may impact other classes of business, such as research laboratories, this guideline outlines our appetite relating to the following activities: 
    • Cultivation
    • Processing (Cannabis products, such as oils, oil capsules or oral sprays, etc.)
    • Retail Dispensaries
    • Realty
    • Transportation and Warehousing
Over the course of the next three months leading up to when legalization will come into effect, we will continue to keep you updated on the regulatory environment and provide more specific details on our risk appetite. We are committed to supporting you as you navigate this new market opportunity by providing you with the resources you need to address client questions and build a profitable book of business for the longer term.
If you have any questions about the changes above, please contact your local underwriter. 
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