Palomar estimates up to $15.5m of Q3 hurricane losses

Palomar Insurance Holdings, the speciality California-headquartered insurer that provides largely catastrophe exposed property products on its own balance-sheet and also provides fronting for a growing range of risks, expects up to $15.5 million of catastrophe losses from the third-quarter hurricanes.

The company said that it expects to report pre-tax catastrophe losses of between $14.5 million and $15.5 million, net of reinsurance for the Q3 period when it announces its results.

The losses are just from hurricane activity during the period, with hurricanes Ida and Nicholas both driving some of the catastrophe burden for the insurer.

Encouragingly for the company, the losses are largely from lines of business it has now exited.

Palomar said that around 70-75% of the gross loss from these hurricane events hit the discontinued Admitted All Risk and Louisiana Specialty Homeowners products, both of which it stopped underwriting in the fourth quarter of 2020.

The insurer noted these estimates are subject to change, given the complexity of the claims involved and also the preliminary nature of the information used to prepare the estimates.

Given the comparable sizes of hurricanes Ida and Nicholas, with Ida a significantly larger industry loss, while Palomar’s catastrophe retention for its excess of loss reinsurance tower is $12.5 million, it appears entirely possible that losses from hurricane Ida may have driven a reinsurance recovery for the insurer.

The insurer had worked hard this year to adjust its reinsurance program to reduce its net retained losses from any major catastrophe events, which with this low retention would seem to suggest that Ida may have resulted in some recoveries for Palomar.