Lloyd’s of London is to enter the cannabis insurance market, offering cover in Canada to people who produce, distribute and sell it.

The Canadian Cannabis Act, which comes into force in October, allows recreational use of marijuana. The law was passed earlier this summer.

In a note to underwriters, Lloyd’s said: “It is anticipated that this legalisation of cannabis-related activities will give rise to new opportunities for insurers considering writing related risks.”

Insurers at Lloyd’s have been looking for new ways to grow as traditional markets, such as property catastrophe insurance, have been hit by years of falling prices and higher claims because of natural disasters.

Cyber insurance and emerging markets have been seen as promising areas for growth, but the legalisation of cannabis points to other new markets.

Lloyd’s remarked on its “long history and reputation for innovation, as well as insuring new and emerging industries. As with any other legitimate sector of the economy, Canadian cannabis businesses will require insurance support as they develop and grow.”

Lloyd’s said that, after taking legal advice, it had decided that offering insurance to the cannabis industry in Canada would not fall foul of the UK’s Proceeds of Crime Act.

This is not the first time that Lloyd’s has covered cannabis. The market used to offer insurance in the US, but pulled out in 2015 because of fears about the legal status of the substance at a federal level. Cannabis is legal for some uses in some US states, but not nationwide.

Lloyd’s advice to insurers — otherwise know as managing agents — issued on Thursday, warned that: “In view of the proximity of the USA to Canada and the potential to write cross-border exposures, it is important that managing agents ensure that any cannabis risks have Canadian risk location only.”

Earlier this year, Lloyd’s banned its syndicates from writing business for the US National Rifle Association. The move came after US regulators had found some NRA-branded insurance schemes were unlawful.