Palomar adds incremental reinsurance renewal limit. Cat bond cover hits $675m

Palomar Insurance Holdings, the speciality California-headquartered insurer that provides largely catastrophe exposed property products, significantly increased its reinsurance program limit at the mid-year renewals, expanding coverage by $630 million.

Palomar added $430 million of incremental reinsurance limit for earthquake coverage and $200 million of incremental windstorm related limit as well at the renewals this year.

It means the insurers reinsurance protection now exhausts at $2.08 billion for earthquake events and $900 million for hurricane events, which the company said provides, “adequate headroom to support the Company’s growth initiatives as well as coverage in excess of Palomar’s 1:250-year peak zone Probable Maximum Loss (PML).”

At the same time, Palomar maintained its catastrophe event retention at $12.5 million for all perils, with the excess of loss layers of its catastrophe reinsurance program all fully placed.

The $12.5 million per occurrence pre-tax retention is further supported by Palomar’s $25 million catastrophe aggregate excess of loss cover renewed on April 1, 2022.

“We are very pleased to successfully complete our 6/1 placement,” Mac Armstrong, Palomar’s Chief Executive Officer and Chairman explained. “In a challenging market, we were able to purchase $430 million of incremental limit to conservatively support our growth; maintain our per event retention at $12.5 million; and further incorporate ILS solutions into our comprehensive reinsurance program.”

Of course, Palomar also successfully secured its latest Torrey Pines Re Ltd. (Series 2022-1) catastrophe bond at a revised lower-end $275 million target size, but with coupons priced at elevated levels.

As a result, Palomar’s total outstanding catastrophe bond capacity has now reached $675 million, diversifying its reinsurance capital by accessing ILS investors on a multi-year basis, the company said.

Palomar also expanded its reinsurance panel to 84 companies, with 9 new reinsurers added this year.

It also secured the renewal with prepaid reinstatements across substantially all layers that include a reinstatement provision, which limits its pre-tax net loss to the $12.5 million retention with modest additional reinsurance premium due.

Armstrong added, “The consummation of the 6/1 XOL program along with the renewal of our Aggregate Cover in April are prime examples of Palomar’s commitment to providing consistent earnings and profitable, predictable growth. They are instrumental in our ability to produce attractive earnings and return on equity.”

Palomar’s Chief Risk Officer, Jon Knutzen also said, “We thoughtfully navigated a complicated renewal given the larger macro headwinds surrounding this June 1 renewal cycle. Palomar’s continued efforts to improve the risk profile of its subject business and its consistent emphasis on growth in differentiated lines of business such as earthquake and Hawaii wind has been well received and endorsed by our reinsurance partners. We are grateful to reinsurers for their partnership and continued support of our business.”