Palomar gets $420m of quake reinsurance with biggest Torrey Pines cat bond yet

Palomar Insurance Holdings has now finalised its largest catastrophe bond ever, with the Torrey Pines Re Ltd. (Series 2024-1) issuance priced to secure $420 million in California earthquake reinsurance from the capital markets for the company, Artemis has learned.

It’s up from the initial target size of $400 million and a slight further increase on the $415 million size we cited in an update yesterday.

Which makes this the largest catastrophe bond Palomar has ever sponsored, reflecting its strong appetite for diversifying its sources of reinsurance using the capital markets.

You can read about all of Palomar’s catastrophe bonds in our extensive Deal Directory.

As with other recent cat bonds sponsored by the insurer, this new Torrey Pines Re 2024-1 issuance will provide its reinsurance protection to both the Palomar Specialty Insurance Company and Palomar Excess and Surplus Insurance Company underwriting entities.

The now priced $420 million issuance of Series 2024-1 catastrophe bond notes will offer Palomar reinsurance protection against California earthquake losses, on an indemnity and per-occurrence basis, with two tranches of notes providing three years of reinsurance to the start of June 2027, and the third two years to the start of June 2026.

The first Class A tranche were initially a $200 million three-year layer, but have now been priced to provide Palomar $215 million in protection, Artemis understands.

The Class A notes have an initial expected loss of 1.58% and were first offered to investors with price guidance in a range from 5.5% to 6%. The price has now been finalised at the upper-end to pay investors a spread of 6%.

The second tranche was a $125 million three-year Class B layer, but grew to $130 million.

The Class B notes come with an initial expected loss of 2.34% and were first offered to investors with price guidance in a range from 6.75% to 7.25%. The price for these notes was also finalised at the top-end, for a spread of 7.25%.

The final two-year Class C tranche of notes remained at their initial target of $75 million in size.

The Class C notes have an initial expected loss of 3.32% and were first offered to investors with price guidance in a range from 8.5% to 9%. We’re told these notes were also finalised with a spread at the top-end of that range, to pay investors 9%.

This new $420 million catastrophe bond will more than replace a soon to mature $400 million issuance from 2021, helping Palomar to further grow the contribution the capital markets provides to its reinsurance tower.

You can read all about this Torrey Pines Re Ltd. (Series 2024-1) catastrophe bond and every deal issued since 1996 in the Artemis Deal Directory.