Speciality California-based catastrophe exposed property insurer Palomar Insurance Holdings has continued to expand its reinsurance arrangements at the January 2020 renewals, adding another $145 million of limit while renewing $300 million.
Palomar has been growing its business rapidly and leveraging reinsurance capital to support its expanding underwriting portfolio.
Earlier this year, the company added $200 million to the top of its catastrophe reinsurance tower as it secured more support for its book, also adding new quota share and excess-of-loss reinsurance coverage as well to cover its specialty homeowners programs at the June renewals.
Palomar, which also completed a public listing to raise new funds for its expansion earlier in 2019, is a significant user of catastrophe reinsurance, sourced from both the traditional reinsurance and capital markets.
The company sponsored its first 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.
Now, in renewing certain of its reinsurance programs for contracts incepting at January 1st 2020, Palomar has again expanded the top of its tower, renewing roughly $300 million of its core reinsurance program and purchasing an additional $145 million of limit to support its continued growth and expansion.
As a result, Palomar’s reinsurance tower will extend to $1.2 billion of coverage for earthquake events from January 1st 2020.
The additional $145 million of incremental limit allows it to maintain a cushion above the 1:250 year peak zone probable maximum loss, which it says significantly exceeds simulated losses from any recorded historical event.
In fact, the company said that a modeled earthquake equivalent to the 1994 Northridge or 1906 San Francisco earthquake would only drive a gross loss of $763 million or $680 million, respectively, as of September 30th 2019.
Palomar has also managed to keep its per event retention at $5 million, a level it is set at until the June 1st 2020 renewals.
“We are pleased to successfully complete our 1/1 renewal,” explained Mac Armstrong, Chief Executive Officer and Founder. “We were able to procure an incremental $145 million of limit to support our growth and moreover allow us to capitalize on emerging opportunities in several of our lines of business. We thank our reinsurance panel for their partnership and confidence in Palomar. We will continue to work hard for them.”
Palomar President, Heath Fisher also said, “Palomar continues to thoughtfully refine and optimize its risk transfer strategy. Our robust panel of reinsurers remain instrumental in our success. We thank them for their support at 1/1 and look forward to working with them on our June renewal.”
Importantly, as Palomar has expanded the amount of reinsurance limit it uses, the company has also expanded the size of its reinsurance panel, adding new partners which will help it secure the limit it needs for its future growth.
Insurance-linked securities (ILS) funds play a role, we understand, with the panel now amounting to more than 85 reinsurers in total, all of which are either rated “A-“ (Excellent) or have a better financial strength rating from A.M. Best, or post collateral.
Reinsurance capital including support from the capital markets and ILS funds are key in enabling catastrophe exposed insurers like Palomar to drive consistent growth and expand their underwriting appetite.