The June 1 placement marks the firmest reinsurance market Palomar has faced since its inception, according to Chief Executive Officer (CEO) and Director Mac Armstrong.
Speaking alongside the release of Palomar’s Q2 results, Armstrong said the rising cost of reinsurance in the property market should create “several opportunities” within the company’s portfolio.
The California-based insurer reported a 79.3% jump in net income in Q2 at $12 million, compared to $6.7 million for the same period last year.
“We are very pleased to have earned the requisite capacity to sustain our growth and margin profile,” said Armstrong.
“While the costs are higher with the risk-adjusted rate increase of approximately 11%, they are manageable when compared to the rate increases we are seeing on a primary basis,” he added.
From a distribution standpoint, carrier partnerships continue to be a differentiated channel for Palomar’s business, Armstrong explained.
In the second quarter, it also entered into two new residential earthquake partnerships while making progress on several others.
“Our portfolio is unique,” Armstrong said. “It’s unique from a historical loss perspective. That’s been very little, there’s been no earthquake losses paid. It’s unique and that it is indeed diversifying. It’s unique in that we have a very broad and robust panel.
“It’s not overly concentrated, no one’s more than approximately 7% of limit,” he added. “So we’ve got great partners that can accommodate our growth.”
Looking at the overarching 11% rate movement, Palomar saw the most pronounced increases where there was wind exposure, wind and earthquake exposure versus standalone earthquake.
“As we add more limit, it’s going to be driven by our prevailing exposure, which is earthquake,” Armstrong continued.
“I think that will allow us to sustain modest or not nearly to the level that you’re seeing in wind rate increases. So I think the unique complexion of our book and the strength in our panel allowed us to get it done.”
