Palomar completes reinsurance renewal, includes $875m of multi-year ILS capacity

Palomar Insurance Holdings has purchased a reinsurance tower extending to $2.68 billion for earthquake events, with multi-year ILS capacity from its catastrophe bonds now providing $875 million of limit, thanks to its recently completed fourth cat bond deal.

Palomar’s reinsurance coverage after this renewal now exhausts at $2.68 billion for earthquake events, including $17.5 million of additional limit incepting September 1st 2023.

The company has $900 million of reinsurance limit protection for Hawaii Hurricane events, and $100 million for all continental United States hurricane events.

Palomar said that the renewed reinsurance program provides ample capacity for the its growth and provides coverage to a level exceeding its 1:250-year peak zone Probable Maximum Loss (PML).

The insurer has now purchased $550 million of reinsurance limit to support the expected growth of its earthquake insurance book in 2023.

$200 million of the new limit was sourced through its new catastrophe bond, the recently completed Torrey Pines Re Series 2023-1 notes.

That was the fourth catastrophe bond that Palomar has sponsored and the company now has $875 million of limit available, all multi-year ILS and fully collateralized backed capacity, from its cat bond issuances since 2021.

Palomar’s per-occurrence catastrophe event retention is now $17.5 million, up from $12.5 million a year ago.

The insurers said that this remains well within previously stated guideposts, on an after-tax basis, equating to less than one quarter’s earnings and less than 5% of the its surplus.

“In what most have deemed the hardest reinsurance market in thirty years, we successfully completed our 6/1 renewal. Importantly, we maintained our retention within our previously stated expectations, bought incremental limit to support our growth, preserved important terms and conditions such as prepaid reinstatements, and successfully completed our fourth catastrophe bond,” Mac Armstrong, Palomar’s Chairman and Chief Executive Officer commented. “While risk-adjusted pricing increased, the total expense was within our previously stated expectations. The success of this placement along with our strong start to the year allow us to raise our full year 2023 adjusted net income guidance to a range of $88 million to $92 million.”

In total, 78 reinsurers signed on to the renewal of Palomar’s program, including multiple new reinsurers, the company said.

Prepaid reinstatements are in effect for the majority of layers with a reinstatement provision, which reduces the pre-tax net loss to the $17.5 million retention, with modest additional reinsurance premium due.

Chief Risk Officer, Jon Knutzen, said, “We successfully navigated the June 1 renewal in an orderly fashion having achieved results in-line with our expectations and are pleased with the support of our reinsurance partners. Our reinsurance placement is a testament to the proactive and deliberate underwriting changes that we have implemented over the last few years designed to reduce our risk profile and deliver more predictable results.”

CEO Armstrong concluded, “Looking forward, we have the reinsurance capacity to sustain our profitable growth trajectory, execute our Palomar 2X strategic objective and build a preeminent specialty insurance company.”

You can read all about Palomar Holdings new Torrey Pines Re Ltd. (Series 2023-1) catastrophe bond and every deal issued since 1996 in the Artemis Deal Directory.