AM Best gives Palomar Bermuda strong rating

AM Best has assigned a financial strength rating (FSR) of A- (Excellent) to Palomar Specialty Reinsurance Company Bermuda, along with a stable outlook.

At the same time AM Best has also affirmed the FSR of A- (Excellent) of California-based Palomar Specialty Insurance Company (PSIC), again with a stable outlook. Both companies are members of GC Palomar Holdings (Palomar).

According to AM Best these ratings reflect Palomar’s balance sheet strength, which the rating agency categorises as ‘very strong’, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.

AM Best said that Palomar’s capital assessment reflects moderate underwriting leverage, a sound liquidity position and consistently favorable loss reserve development that is partially offset by significant reinsurance dependence. Adequate operating performance reflects the geographic concentration in catastrophe prone areas, which results in some potential for volatility. This was evident in 2017, when Palomar’s underwriting results were adversely impacted by net losses from Hurricane Harvey and Texas wind and hailstorms. However, despite these losses, Palomar managed to generate favourable operating earnings for 2017.

AM Best stated that: “Palomar’s limited business profile reflects a concentration of business, given its exposure to catastrophes, primarily a severe earthquake event. Gross catastrophe leverage for a 1 in 250-year earthquake is elevated, as depicted in a probable maximum loss analysis. Palomar also maintains significant dependence on reinsurance to reduce its gross earthquake exposure. However, given management’s extensive experience in the residential and commercial earthquake markets and comprehensive reinsurance program, Palomar has reduced its net catastrophe leverage to a manageable level with risk management capabilities in line with its profile.”