Palomar hikes quake capacity to $3bn
Palomar Holdings, which has a Bermuda-based reinsurer, has increased its capacity for earthquake coverage to more than $3 billion, the company said.
Much of the increased limit was secured through the issuance of a new catastrophe bond, Torrey Pines Re Series 2024-1, which raised $420 million.
The company procured $400 million of incremental limit to support the growth of its earthquake franchise. Palomar’s reinsurance coverage now extends to $3.06 billion for earthquake events, $735 million for Hawaii hurricane events, and $117.5 million for all continental United States hurricane events. The reinsurance programme provides ample capacity for the Company’s growth in the subject business lines as well as coverage to a level exceeding Palomar’s 1:250-year peak zone probable maximum loss.
Palomar’s per occurrence event retention is $15.5 million for hurricane events, reduced from $17.5 million the previous year, and $20 million for earthquake events, levels that continue to be meaningfully within management’s previously stated guideposts of less than one quarter’s adjusted net income and less than 5% of the Company’s surplus on an after-tax basis.
The new catastrophe bond issuance is the fifth Insurance Linked Securities (“ILS”) transaction Palomar has sponsored and is listed on the Bermuda Stock Exchange.
“We are very pleased with the successful June 1 placement and are very grateful for the continued support of our reinsurance and ILS partners,” commented Mac Armstrong, Palomar’s chairman and chief executive officer. “Importantly, we renewed our reinsurance program at terms and pricing that were better than our initial expectations and reduced our hurricane event retention. As a result, we are raising our full year 2024 adjusted net income guidance to a range of $122 million to $128 million from the previously indicated range of $113 million to $118 million.”
Other highlights of the Company’s reinsurance program include:
$895 million of multi-year ILS capacity providing diversifying collateralized reinsurance capital;
A reinsurance panel of 90 reinsurers and ILS investors, including multiple new reinsurers, all of which have an “A-” (Excellent) or better financial strength rating from A.M. Best and/or S&P (Standard & Poor’s) or are fully collateralized;
Prepaid reinstatements for substantially all layers that include a reinstatement provision, thereby limiting the pre-tax net loss to $15.5 million for hurricane events and $20 million for earthquake events, with modest additional reinsurance premium due.
Palomar’s chief risk officer, Jon Knutzen, added, “We are grateful for the broad-based support we received from the reinsurance market. It is a testament to our business mix and risk profile, which has been curated with the goal of delivering more stable, predictable results. We appreciate all our incumbent and new reinsurance partners who have helped us successfully complete our June 1 placement.”
