Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

Palomar CEO says new cat bond to support growth of earthquake book


As we’ve been reporting, Palomar Insurance Holdings has been in the catastrophe bond market and secured $200 million in earthquake reinsurance with a Torrey Pines Re Ltd. (Series 2023-1) issuance.

mac-armstrong-palomarPalomar’s CEO Mac Armstrong commented on the new catastrophe bond issuance and on the renewal of the insurers reinsurance tower, during his firm’s recent earnings call.

Armstrong said that, “We are currently in the midst of our 6/1 reinsurance placement, with firm order terms out in the market this week. As always, we intend to share comprehensive details once complete.”

As part of that reinsurance renewal he explained that Palomar is seeking capital markets support.

“We are marketing a multiyear, earthquake-only catastrophe bond, the fourth such issuance from Torrey Pines Re, that will provide incremental limit to support our growth in our bellwether line of earthquake,” Armstrong said.

Adding that, “We continue to see value in the incorporation of multiyear ILS solutions into our comprehensive reinsurance program.”

Palomar has been growing into the earthquake line of business in recent years and also placed more earthquake cover in the first-quarter of the year, as we had previously reported.

Commenting on this, Armstrong said, “The first quarter was a demonstration of the quality of our book of business and our ability to navigate the choppy waters of this hard reinsurance market.

“During the quarter, we were pleased to successfully place $188 million of incremental excess of loss reinsurance limit, to support the growth of our residential and commercial earthquake business.

“We are encouraged by the pricing, approximately 27% up on a risk-adjusted basis and the terms that we secured, as they are in line with the assumptions used to formulate our adjusted net income guidance.”

However, Palomar also opted not to renew its aggregate catastrophe reinsurance cover, with Mac Armstrong saying that despite capacity being available to it, the economics did not make sense.

Armstrong told the Palomar earnings call listeners, “On April 1st, we elected not to renew our aggregate cover, after determining that its utility and protection was materially diminished by the considerable reduction in our continental hurricane exposure and probable maximum loss.

“To provide more context on the impact of our material PML reduction and the underwriting changes made over the last several years, if 2020’s wind season were to transpire in 2023, the $64 million of net losses incurred from the numerous storms of the 2020 vintage will be less than $10 million in aggregate today and only one of the storms would qualify for recovery under the expired aggregate.

“While there was reinsurance capacity available to support the aggregate cover, it did not make economic sense to renew.”

Finally, Armstrong said that plans to renew Palomar’s reinsurance at the mid-year are moving according to plan.

“We are encouraged with the progress to-date on the core program and are confident that we can secure the capacity to achieve our strategic objectives in 2023 and beyond,” the CEO explained.

Adding, “We are optimistic that we will exit our 6/1 reinsurance placement with risk transfer programs similar to that of years past, and that the cost of reinsurance will be in-line with the assumptions used to provide our full-year 2023 guidance.”

With the catastrophe bond having upsized and priced down, the execution has been positive for Palomar, with the cat bond set to support the additional earthquake insurance market growth the CEO was referring to.

You can read all about Palomar Holdings new Torrey Pines Re Ltd. (Series 2023-1) catastrophe bond and every deal issued since 1996 in the Artemis Deal Directory.

Register today for ILS Asia 2023, our next insurance-linked securities (ILS) market conference. Held in Singapore, July 13th, 2023.

Artemis ILS Asia 2023 - Insurance-linked securities conference in Singapore

Get a ticket soon to ensure you can attend. Secure your place at the event here!

Print Friendly, PDF & Email

Artemis Newsletters and Email Alerts

Receive a regular weekly email newsletter update containing all the top news stories, deals and event information

  • This field is for validation purposes and should be left unchanged.

Receive alert notifications by email for every article from Artemis as it gets published.