Palomar expands cat reinsurance, adds quota share & XoL program cover as well

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Speciality California-based catastrophe exposed property insurer Palomar Insurance Holdings added $200 million to the top of its catastrophe reinsurance tower and added new quota share and excess-of-loss coverage for its specialty homeowners programs at the June renewals.

palomar-specialty-insurance-logoThe insurer, which recently completed a public listing to raise new funds for its expansion, is a significant user of catastrophe reinsurance, from both traditional and capital market sources.

The company issued a catastrophe bond back in 2017, a $166 million Torrey Pines Re Ltd. (Series 2017-1) issuance, and also leverages other ILS fund backed capacity within its reinsurance tower.

In securing its new catastrophe reinsurance program for 2019, the company said it tapped a panel of around 80 reinsurers that are either rated “A-“ (Excellent) (Outlook Stable) or better by A.M. Best or that post collateral.

For the June renewal, Palomar renewed $470 million of its core reinsurance program, which includes the Torrey Pines Re catastrophe bond, and also purchased an incremental $200 million of limit at the top of its reinsurance tower.

With this purchase, Palomar now has reinsurance program coverage up to $1.05 billion for earthquake events, giving the insurer a cushion of protection above the 1:250 year peak zone probable maximum loss and significantly exceeding simulated losses from any recorded historical quake event.

Palomar said that based on a current portfolio, a theoretical earthquake equivalent to the 1994 Northridge or 1906 San Francisco earthquake would only generate a gross loss of $669 million or $580 million, respectively to its business.

The catastrophe reinsurance program features a $5 million per-event retention, as well as prepaid reinstatements on all renewing and new layers where applicable, and offers Palomar $331 million of cascading limit as well.

Palomar also completed the first reinsurance placement to support its Specialty Homeowners Facility (SHF), which provides quota share and excess of loss reinsurance specifically for the insurers Specialty Homeowners business in Texas, Mississippi and Alabama.

The facility also offers Palomar the flexibility to cover additional states that it has identified as expansion opportunities.

“We are very pleased to successfully complete our 6/1 renewal,” explained Mac Armstrong, Chief Executive Office and Founder. “We were able to procure an incremental $200 million of limit to buttress our growth with the requisite reinsurance capital, preserve our retention at $5.0 million per event and introduce a well-received new quota share and excess of loss program in the SHF. The SHF is emblematic of our strategy of generating a balanced combination of fee and underwriting income.

“This renewal cycle has seen prices tighten and we are thrilled that our non-loss affected layers of reinsurance renewed flat to modestly up on an exposure adjusted basis. Our loss impacted layer, a $10.0 million layer of wind-only coverage attaching at excess of $5.0 million, did see an increase of approximately 15%. Our renewal pricing is a testament to the unique attributes of our program and the historical results we have generated for our reinsurance partners.”

Palomar President, Heath Fisher added, “Palomar continues to thoughtfully refine and improve its reinsurance program. Our robust panel of reinsurers have been instrumental in our success to date. The 6/1 renewal was no different and we are very grateful for their support.”

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