Palomar Holdings, the California-headquartered specialty insurer that provides largely catastrophe exposed property products, is planning to begin underwriting some reinsurance lines that are “uncorrelated” with its broader portfolio.
The company is a leading insurer of earthquake exposed residential and commercial property in the United States and also writes business exposed to hurricanes and flood risks, targeting areas of the market it feels are underserved.
As the company grows its balance-sheet, it appears to have identified an opportunity to underwrite business that is diversifying and which could provide complementary sources of risk premium.
Part of this includes a plan to underwrite outwards reinsurance business, Reinsurance News has now learned.
Palomar is considering underwriting certain reinsurance lines of business that would be uncorrelated with the core primary insurance exposures that the company underwrites.
The insurer believes it has identified a number of areas it feels it can participate in the reinsurance market, focusing on “uncorrelated exposures” at what it calls “compelling economics”.
Given the hardening of reinsurance pricing as we swiftly approaches the key January renewals, the market looks set to offer attractive opportunities to companies that have additional capacity they can deploy.
With reinsurance capacity estimated to have reduced through 2022, while reinsurer appetites have also been adjusting, this could position a company like Palomar well to capitalise on reinsurance underwriting opportunities that could emerge, and that provide diversifying and complementary sources of revenue to its business.
The company is understood to be involved in conversations with trading partners about beginning this incremental outwards reinsurance underwriting, although at this stage we don’t know when Palomar plans to start this latest expansion of its business.
Current reinsurance market conditions means that an underwriter such as Palomar can look to capitalise on the increasing demand for coverage, at a time where market capacity has reduced, in order to secure attractive and incremental opportunities for itself.
