Palomar Holdings boosts reinsurance for earthquake line

Palomar Holdings has announced the successful completion of certain reinsurance programs effective June 1, 2024, and raised its full-year 2024 adjusted net income guidance.

The company secured approximately $400 million in additional coverage to support the growth of its earthquake insurance line. Palomar’s reinsurance coverage now totals $3.06 billion for earthquake events, $735 million for Hawaii hurricane events, and $117.5 million for all continental US hurricane events.

This reinsurance program provides sufficient capacity for growth in these business lines and exceeds Palomar’s 1:250-year peak zone probable maximum loss.

Palomar’s per occurrence event retention is set at $15.5 million for hurricane events, down from $17.5 million the previous year, and $20 million for earthquake events. These levels are within management’s guidance of less than one quarter’s adjusted net income and less than 5% of the company’s surplus on an after-tax basis – $420 million of the $3.06 billion earthquake limit was obtained through a new catastrophe bond, Torrey Pines Re Series 2024-1. This marks the fifth insurance linked securities (ILS) transaction Palomar has sponsored.

Mac Armstrong (pictured above), Palomar’s chairman and CEO, commented on the latest reinsurance renewal.

“We are very pleased with the successful June 1 placement and are very grateful for the continued support of our reinsurance and ILS partners,” he said. “We renewed our reinsurance program at terms and pricing better than our initial expectations and reduced our hurricane event retention. As a result, we are raising our full-year 2024 adjusted net income guidance to a range of $122 million to $128 million from the previously indicated range of $113 million to $118 million.”

Other highlights of the company’s reinsurance program include $895 million of multi-year ILS capacity providing diversifying collateralized reinsurance capital, a reinsurance panel of 90 reinsurers and ILS investors including multiple new reinsurers, all with an “A-” (Excellent) or better financial strength rating from A.M. Best and/or S&P or fully collateralized, and prepaid reinstatements for nearly all layers that include a reinstatement provision, limiting the pre-tax net loss to $15.5 million for hurricane events and $20 million for earthquake events, with modest additional reinsurance premium due.

Jon Knutzen, Palomar’s chief risk officer, added that the broad-based support from the reinsurance market reflects the company’s well-curated business mix and risk profile aimed at delivering more stable, predictable results.

“We appreciate all our incumbent and new reinsurance partners who have helped us successfully complete our June 1 placement,” Knutzen said.

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