Palomar gets ratings upgrade

Palomar Holdings, which has a subsidiary in Bermuda, has had its subsidiaries financial strength rating upgraded to A from A-. The outlook has been revised to stable from positive. 

AM Best said the ratings reflected Palomar’s balance sheet strength, which AM Best assessed as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management. 

Palomar's Bermuda subsidiary is Palomar Specialty Reinsurance Company Bermuda Ltd. (Palomar Re). Palomar is headed by CEO Mac Armstrong. 

"The upgrades reflect Palomar’s strong operating performance in recent periods, which compares favorably to composite averages," AM Best said. "Palomar reported net income in each of the last five calendar years, achieving comparatively greater levels of profitability in more recent years. The combined ratio, based on GAAP reporting, was well below 90 in each of the last three years, improving the five-year average to the mid-80s, coupled with formidable return measures. 

"Management actively evaluates and culls the portfolio to ensure adherence to strict underwriting standards, which lends itself to comparatively favourable loss experience, offset by an elevated expense ratio position."

AM Best said the organisation recorded material premium growth, which is led by quake coverage, but management has considerable experience underwriting other areas of premium growth that include general and excess casualty, as well as professional liability. 

Offsetting this, AM Best said loss reserve development had been "somewhat inconsistent" but reported deficiencies have not had a material impact on results. 

"The group maintains an elevated reinsurance dependency, reflective of its catastrophe exposed risk profile with the strategic use of excess of loss and quota share arrangements to mitigate potential volatility," AM Best said.

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