Specialty insurer Palomar Holdings has renewed certain reinsurance programs incepting at June 1st, which includes the purchase of an additional $180 million of limit for earthquakes and $100 million of incremental limit for windstorms.
Its reinsurance coverage now exhausts at $1.65 billion for earthquake events and $700 million for hurricane events, providing enough headroom to support the company’s growth initiatives as well as coverage in excess of Palomar’s 1:250-year zone peak zone Probable Maximum Loss.
Additionally, the company increased its catastrophe event retention from $10 million to $12.5 million for all perils.
Palomar also completely placed the excess of loss layers of its catastrophe program; eliminating its co-participation and retention in selected layers.
Previously, Palomar had $3 million of co-participation within its reinsurance coverage, and from next month the insurer will have reduced its net retained loss for covered events by $0.5 million.
The $12.5 million per occurrence pre-tax retention is further backstopped by the $25 million catastrophe aggregate excess of loss cover put into place April 1st.
Palomar has also issued $400 million of collateralised capacity through its March 2021 catastrophe bond issuance, Torrey Pines Re Pte. Ltd (Series 2021-1), which diversifies its panel by accessing insurance-linked securities (ILS) investors on a multi-year basis.
This is Palomar’s second ever cat bond transaction after the $166 million Torrey Pines Re Ltd. (Series 2017-1) transaction.
For its most recent reinsurance renewal, the firm also added six new reinsurers to bring its reinsurance panel to approximately 82 reinsurers.
Another highlight of the renewal, according to Palomar, concerns prepaid reinstatements for all layers that include a reinstatement provision, which effectively limits the pre-tax net loss to $12.5 million without any offset for additional reinsurance premium.
Mac Armstrong, Palomar’s Chairman and Chief Executive Officer (CEO), commented: “We are very pleased to successfully complete our 6/1 placement. We were able to procure an incremental $280 million of limit to support our growth, adjust our retention modestly down when factoring in co-participations to $12.5 million and incorporate a well-received ILS issuance in the form of Torrey Pines Re into our comprehensive reinsurance program. We greatly appreciate the strong support from our reinsurance panel.
“The consummation of the 6/1 renewal along with the Aggregate Cover are further examples of Palomar’s commitment to providing consistent earnings and profitable, predictable growth. These reinsurance programs are central to our ability to produce an attractive earnings stream and return on equity.”
Palomar President, Heath Fisher, added: “We thoughtfully navigated a complicated renewal given the 2020 hurricane season as well as Winter Storm Uri in Texas. Over the past two quarters we took decisive action to improve underwriting results, and it is gratifying to see our panel endorse this strategy and offer increased support.
“We are fully invested in optimizing the portfolio for the betterment of Palomar, our reinsurers and our investors. The successful 6/1 placement is emblematic of the strength and collaborative nature of our reinsurance relationships and moreover positions us to take advantage of compelling market conditions. We remain grateful to reinsurers for their partnership and continued support of our business.”
