Palomar Specialty Insurance Company said today that it is thrilled with the successful execution of its first catastrophe bond transaction, the $166 million Torrey Pines Re Ltd. (Series 2017-1) which will provide the insurer with a capital markets source of earthquake, named storms and severe thunderstorm reinsurance protection.
“We are thrilled to successfully complete this strategic transaction,” commented President of Palomar Heath Fisher.
In effecting its first 144A cat bond deal, Palomar entered into a three-year reinsurance arrangement with Torrey Pines Re, its newly established special purpose Bermudian insurance vehicle, with $166 million of notes sold to ILS investors to provide the collateral to back the reinsurance covering the insurer against losses from U.S. named storms, U.S. earthquakes and U.S. severe thunderstorms.
The indemnity based reinsurance protection from the cat bond was “designed to seamlessly fit into Palomar’s existing traditional reinsurance program” the insurer said. GC Securities led the transaction for Palomar, acting as lead structurer, sole bookrunner and sole initial purchaser for the notes, while TigerRisk Capital Markets & Advisory acted as co-structurer and co-manager for the transaction.
Three tranches of notes were issued by Torrey Pines Re. A $45 million Class A tranche and a $66 million Class B tranche, both providing reinsurance against earthquakes. A $55 million tranche of Class C Notes provide reinsurance protection against earthquake, named storms and severe thunderstorms as well.
The cat bond features a cascading structure and will also enable Palomar to add subject business in subsequent years across a broader covered area than in the first year of issue.
Mac Armstrong Chief Executive Officer of Palomar commented on the deal’s completion; “The transaction with Torrey Pines Re marks another important step in Palomar’s development into a market leader in the catastrophe insurance space. It further strengthens Palomar’s financial condition and robust reinsurance program which will ultimately benefit our customers and distribution partners.”
“The cat bond not only further optimizes our risk transfer program it also diversifies our panel of reinsurance capital providers,” Fisher also said.
The $166 million transaction was upsized from the initial targeted size of $143 million, as ILS and catastrophe bond investors showed their support for Palomar’s first visit to the cat bond market.
It’s encouraging to see another happy first time cat bond sponsor, as the market continues to expand with new issuers in 2017. Palomar is a growing insurer which suggests that any future visits to the catastrophe bond market could see the company issuing larger deals and increasing the size of its relationship with ILS funds and cat bond investors.
Join Artemis in Singapore on July 13th 2017 for ILS Asia, tickets on sale here