Palomar extends earthquake reinsurance tower to $3.92bn at June renewal, cites ILS capacity

Palomar Insurance Holdings, the speciality US insurer that offers largely catastrophe exposed property products, has lifted the top of its reinsurance tower to provide as much as $3.92 billion of earthquake reinsurance protection at the renewals, with multi-year catastrophe bonds set to provide $1.28 billion of coverage for 2026.

Much like in previous years, protecting against major earthquake events in its home state of California, as well as other quake-exposed regions of the US, remains a core focus of Palomar’s reinsurance program.

For its reinsurance renewal for the 2026-2027 year, Palomar has added $421 million in incremental limit, to lift its tower to the new $3.92 billion level, up from $3.53 billion a year ago.

A key part in that effort was the sponsorship of the firm’s Torrey Pines Re Ltd. (Series 2026-1) catastrophe bond issuance, which came to market at the beginning of May, securing the firm with $410 million of capital markets backed California earthquake and Hawaii named storm reinsurance.

Mac Armstrong, Chairman and Chief Executive Officer of Palomar, commented: “We are very pleased with the outcome of our June 1 reinsurance placement and remain grateful for the support of our broad and diversified reinsurance panel.

“We added meaningful incremental limit to support growth, maintain event retentions at levels consistent with the expiring treaty despite significant earnings and exposure growth, and expanding the role of collateralized reinsurance through another Torrey Pines Re catastrophe bond issuance.”

He continued: “Importantly, we achieved these objectives at attractive economics which well-positions Palomar to deliver profitable growth and attractive returns for shareholders. As a result, we are increasing our full-year 2026 adjusted net income guidance range to $266 million to $280 million from the previously indicated range of $262 million to $278 million.”

As well as the $3.92 billion of quake reinsurance limit, Palomar also has a further $135 million for US hurricane losses in 2026.

Palomar’s per occurrence event retentions will also remain at $11 million for hurricane events and $20 million for earthquake events, levels that sit meaningfully within management’s stated guideposts of less than one quarter of adjusted net income and less than 5% of stockholders’ equity.

Of the $3.92 billion of earthquake reinsurance limit available, some $1.23 billion will come from the catastrophe bond market over the next year.

Moreover, Palomar also renewed its standalone reinsurance treaty supporting the Hawaii hurricane policies issued by Laulima Exchange.

The programme provides Laulima with up to $865 million of per-occurrence coverage, a $130 million increase year-on-year, including $50 million sourced through the Torrey Pines Re platform.

It’s also important to highlight that the placement marked the first inclusion of a standalone Hawaii hurricane tranche within Torrey Pines Re, further diversifying Palomar’s sources of reinsurance capacity. The programme’s per-occurrence event retention remained unchanged at $1.5 million.

To conclude, Palomar’s Chief Risk Officer, Jon Knutzen highlighted how the expanded insurance-linked securities (ILS) capacity improves both the efficiency and diversification of Palomar’s overall reinsurance program.

“This June 1 renewal further strengthens Palomar’s ability to manage peak catastrophe volatility while supporting continued profitable growth. The combination of incremental limit for our peak peril zones and expanded ILS capacity improves both the efficiency and diversification of our overall reinsurance program,” Knutzen said.

“We appreciate the continued support from our global reinsurance partners and believe this placement positions the Company favorably from both a capital management and earnings stability perspective.”