Cannabis
In a volatile marketplace, risk mitigation will separate success from failure.
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What to Expect in 2025
The cannabis industry will face new and amplified risks that threaten company viability in 2025. Companies will need to be vigilant and avoid a “set it and forget it” mindset when it comes to insurance coverage. Alternative risk transfer options are on the horizon to help cannabis operations cope with high costs. Until then, companies that focus intently on risk mitigation will drive profits and greater resilience.
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1
Profitability
As companies flirt with insolvency, insurance protections become even more critical.
2
Vitality
Data analytics will drive decision-making on employee benefits.
3
Resiliency
Catastrophic weather poses a tremendous threat to the industry throughout 2025.
4
Research & Development
Finding gold in R&D — but also major risk.
As companies flirt with insolvency, insurance protections become even more critical.
1 | Profitability
80%
of Canadian cannabis companies identified rising costs as the biggest challenge to profitability, but only 65% feel prepared to address it.
Data analytics will drive decision-making on employee benefits.
2 | Vitality
Extreme weather event claims have risen by more than 93% from just a decade ago.11
Catastrophic weather poses a tremendous threat to the industry throughout 2025.
3 | Resiliency
Profitability continues to be a significant issue for cannabis businesses. From price fluctuations, uneven supply and demand to a burdensome tax regime, many companies are struggling to survive. In fact, few — if any — Canadian cannabis companies are consistently profitable.1
One major factor is Canada Revenue Agency (CRA) requirements demanding full payment of excise taxes prior to delivery of the product to the stores. By the end of 2023, roughly 250 licensed cannabis producers owed the CRA approximately $274. 3 million in unpaid excise taxes.2
With the government cracking down, even garnishing payments directly from the companies,3 the industry has seen an unprecedented level of Companies’ Creditors Arrangement Act (CCAA) filings. In fact, 12% of filings nationwide are cannabis-related businesses.4 Acquisitions related to these CCAA filings require extra caution, as these deals often come with an additional layer of liability.
An experienced broker can help review these complex policies and provide guidance to cannabis companies navigating potential acquisitions or dealing with the CCAA process. Additionally, a broker who has experience with “change of control” language is essential to help clients understand the
reporting requirements for underwriters. Coverage can be affected or limited if reporting requirements are missed.
On the insurance protection side, costs and capacity continue to pressure the bottom line. Nearly three in 10 cannabis industry respondents of the HUB International 2025 Outlook Executive Survey5 reported that they do not have adequate insurance to protect their profits. In part, this may be due to the limited number of carriers willing to insure the industry.
There is also a trickle-down effect of other struggling industries. For example, with gas prices rising6 and few carriers available, transportation insurance has nearly tripled for cannabis businesses. Some carriers may try to change the terms of the coverage, so be sure to review policies carefully at renewal time.
Case Study
One HUB cannabis client was working on a challenging acquisition that looked like it might fall through at the last minute due to unresolved risks. With HUB’s assistance, problematic issues were identified and addressed. An expert was called in to perform a flood analysis, and creative solutions were designed to protect the buyer from unnecessary exposures. The deal was finalized soon after.
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With one step at a time, the cannabis industry is pushing toward normalization. Organizations that prioritize employee benefits will be better able to attract talent, as well as demonstrate care and support for existing employees. However, delivering the right benefits can be difficult.
Amid one round of layoffs8 after another9 — not to mention rising numbers of insolvent companies10 — cannabis businesses will need to double down on attracting and retaining talent.
According to the HUB survey, three-quarters of Canadian businesses are focused on employee productivity this year. So, whether an organization is tightening its staff count or struggling with high turnover, cannabis businesses need to find ways to keep their best people on board.
The best way to increase employee satisfaction and engagement is through strengthening benefits offerings, which have grown in importance over the last year. In fact, the key is through personalized benefits, in which employees can select appropriate benefits from a range of options. When done correctly, personalized benefits create quality employee experiences (QEX), which drives employee loyalty, trust and productivity.
Finding the right way to personalize benefits can be challenging. For the best outcome, conducting tools like HUB’s Persona Analysis can reveal which benefits are important to which employees. These personas are built through data that many companies already have, making this solution a simple one. In fact, according to the HUB survey, half of cannabis leaders are already relying on analytics to guide their benefits strategy.
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Climate change and unusual weather patterns are particularly important to the cannabis business, from droughts and wildfires for outdoor growers, to supply chain issues due to other catastrophic (CAT) weather events like hurricanes, floods and convective storms. With few options for insurance coverage available, cannabis business executives must be open to alternative solutions and embrace enterprise risk management (ERM) to cope with climate change.
Extreme weather event claims have risen by more than 93% from just a decade ago, and some of the most damaging hailstorms, floods and wildfires on record have occurred in the last year.11 Even though severe weather is a real risk for the cannabis industry, many cannabis companies are apparently not acknowledging the risk.
According to the HUB survey, just 30% of cannabis executives expressed interest in disaster planning, and only 23% identified climate change as a major component in determining risk management practices. Coverage can be difficult to obtain, but businesses who secure insurance and have business interruption plans in place will be the ones who survive such a volatile risk environment.
In the case where no coverage is available, cannabis companies must focus on risk management techniques to protect themselves. Consider these steps:
Identify potential risks. Whether your business is in a place that is susceptible to wildfires or floods, identify the challenge and quantify the exposure.
Design a plan. A risk mitigation plan can help identify other ways to avoid risk and lessen the impact of a catastrophic weather event. For example, building a flood wall might cost the same as a single year of flood insurance while helping protect the business during major rainstorms.
Seek out alternate protections. The obvious choice is to set aside a reserve fund to cover it. But businesses should also consider non-traditional approaches, such as parametric insurance that offers a payout based on a trigger event (i.e., hurricane or a wildfire).
Cannabis businesses that work with an experienced industry broker will find more success managing their risk and protecting their assets.
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In this relatively young and still growing industry, new products and consumables are coming out all the time. Yet because the science is new and evolving – and because the substances are chemically altered in new and different ways – insurers are reticent about offering policies when there’s so much that can go wrong.
Cannabinoid research and development (R&D) continues to expand rapidly. In Canada, developers are isolating lesser-known cannabinoids to use them in new products and consumables. Some of these are chemically altered to create health benefits, such as improving mood, sleep or creativity.
From beverages designed to increase rest and sleep12 to bath salts and body butters,13 the potential of these products is
exciting for the industry. Yet at the same time, new products are challenging for insurers. The psychoactive properties in these new products create a serious product liability risk, so it’s likely that many of these will be explicitly excluded from coverage.
Cannabis businesses heavily involved in R&D will need to keep the risks in mind going forward. New products come with new risks, and organizations will need to take steps to mitigate the risk while still investing in the research.
The right broker can help businesses review their policies carefully to avoid these potential areas of concern. An experienced broker can also offer alternative risk management practices while still allowing businesses to continue with R&D.
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Finding gold in R&D — but also major risk
4 | Research & Development
Navigating Your Next Steps
HUB cannabis insurance specialists will work with you to develop a tailored strategy for 2025.
1
Focus on strategically financing your risk.
With an uptick in significant weather events across Canada and a challenging economic climate, many cannabis companies aren’t equipped to fund adequate insurance protection. Conduct a deep analysis of exposures with your broker and strategically finance that risk to build resiliency.
Rethink your benefits strategy.
2
Offer benefits your employees want to stand out from the competition with a quality employee experience (QEX). With data analytics, you can offer a competitive — and personalized — benefits package to the workforce that promotes engagement, recruiting and retention.
Adding a new, related cannabis product to your product line makes sense as markets remain saturated with competition. But a new cannabis product launch carries risks unique to the industry. Work with your broker to understand the regulatory issues relating to an expansion and the additional risk it presents.
Do your due diligence before expanding.
3
Consistent communication with your broker will help you identify and mitigate issues in advance of your next renewal and position your company in the best light. Review exposures and insurance needs at least 90 days prior to policy renewal to allow your broker to find the optimal mix of coverage for your business needs.
Be transparent with your broker.
4
Be Prepared
Download our 2025 Cannabis Outlook and Insurance Market Rate Report to see what to expect in the coming year.
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Meet the Experts
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Cannabis Practice
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Evan Stait
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Risk Advisor
David Laks
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Reid Irwin
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HUB Cannabis
When you partner with us, you’re at the centre of a vast network of experts who will help you reach your goals. For more information on how to manage your insurance costs, reduce your risk and take care of your employees, talk to a HUB cannabis insurance specialist.
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insurance policies managed
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Related Resources
3. MJBiz Daily, “Canada says cannabis wholesalers must garnish payments over unpaid taxes,” March 13, 2024.
4. MJBiz Daily, “Canadian cannabis insolvencies persist in 2023 amid industry woes,” December 18, 2023.
5. HUB’s Outlook Executive Survey polled 900 C-Suite and VP-level executives on the issues facing them on profitability, employee vitality and organizational resilience.
6. Yahoo!Finance, “Gas prices fall across Canada following ‘summer peak’ prediction,” August 23, 2024.
8. Calgary Herald, “Calgary-based cannabis company announces another round of layoffs as industry continues to struggle,” July 17, 2024.
9. StratCann, “BZAM cuts more than 90 personnel as company refocuses to two production sites,” September 19, 2023.
10. MJBiz Daily, “Canadian cannabis insolvencies persist in 2023 amid industry woes,” December 20, 2023.
11. Insurance Journal, ”Canada’s Insurance Sector Faces Deluge of Climate-Related Catastrophe Claims,” September 3, 2024.
12. Globe Newswire, “Solei Launches New THC Infused Sparkling Beverages and Topicals,” August 15, 2024.
13. Cision, “Jublee Announces New Minor Cannabinoid Edibles and Unveils Body Care Offering,” February 29, 2024.
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1. MJBiz Daily, “Canada’s finance minister warned about cannabis industry ‘financial distress’,” March 15, 2024.
2. MJBiz Daily, “Canada’s unpaid cannabis taxes soar 72% to almost CA $300 million,” March 4, 2024.
90%
of Canadian cannabis companies plan to prioritize improving employee productivity in 2025.7
Almost 1/4 of cannabis business respondents of the HUB survey identified new product development as their top business priority.
0%
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