Palomar lifts earthquake reinsurance 18%, hurricane 14% at renewal

Palomar Insurance Holdings, the speciality California-headquartered insurer that provides largely catastrophe exposed property products, lifted the top of its reinsurance tower for earthquake losses by 18% to $1.65 billion and its reinsurance for hurricanes by 14% to $700 million, in a successful renewal placement.

Core to the expansion of Palomar’s reinsurance protection on the earthquake side of its business, was the integration of a new $400 million Torrey Pines Re Pte. Ltd. (Series 2021-1) catastrophe bond transaction.

As our readers will know, the company was encouraged by the investor response to its largest catastrophe bond yet, expressing satisfaction at the successful upsizing of the issuance and the pricing achieved at the low-end of guidance.

Palomar also added a new $25 million aggregate reinsurance layer in the first-quarter of 2021, further bolstering its program.

Analysts noted that Palomar’s new reinsurance program has successfully filled holes left by the active wind season of 2020 and the US winter storms earlier this year.

The company, in announcing the completion of its June 1st reinsurance renewal, said that it has added $180 million of incremental limit for earthquakes and $100 million of incremental limit for windstorms, over the prior year.

Palomar’s reinsurance protection now exhausts at $1.65 billion for earthquake events and $700 million for hurricane events, which the insurer said provides the headroom needed to support its growth initiatives and is in excess of its 1:250-year zone peak zone Probable Maximum Loss (PML).

Palomar will retain a little more risk though, with its catastrophe event retention rising from $10 million to $12.5 million for all perils at this renewal.

However, at the same time, Palomar has removed its co-participation and retention in selected excess-of-loss layers of its reinsurance tower.

The upshot is that having previously had $3 million of co-participation within its reinsurance program, from June 1^st Palomar has lowered its net retained loss for covered events by $500 thousand.

“We are very pleased to successfully complete our 6/1 placement,” Mac Armstrong, Palomar’s Chairman and Chief Executive Officer said. “We were able to procure an incremental $280 million of limit to support our growth, adjust our retention modestly down when factoring in co-participations to $12.5 million and incorporate a well-received ILS issuance in the form of Torrey Pines Re into our comprehensive reinsurance program. We greatly appreciate the strong support from our reinsurance panel.”

Adding, “The consummation of the 6/1 renewal along with the Aggregate Cover are further examples of Palomar’s commitment to providing consistent earnings and profitable, predictable growth. These reinsurance programs are central to our ability to produce an attractive earnings stream and return on equity.”

Palomar also said that it added six new reinsurers to its panel at this renewal, taking it to roughly 82.

Palomar President, Heath Fisher said, “We thoughtfully navigated a complicated renewal given the 2020 hurricane season as well as Winter Storm Uri in Texas.   Over the past two quarters we took decisive action to improve underwriting results, and it is gratifying to see our panel endorse this strategy and offer increased support. We are fully invested in optimizing the portfolio for the betterment of Palomar, our reinsurers and our investors. The successful 6/1 placement is emblematic of the strength and collaborative nature of our reinsurance relationships and moreover positions us to take advantage of compelling market conditions. We remain grateful to reinsurers for their partnership and continued support of our business.”

You can read all about Palomar’s new Torrey Pines Re Pte. Ltd. (Series 2021-1) catastrophe bond in the Artemis Deal Directory.