Palomar gets upsized $200m reinsurance with Torrey Pines Re cat bond

Palomar Insurance Holdings has now successfully upsized its newest catastrophe bond by one-third, with the catastrophe-exposed property insurer now having priced $200 million of US earthquake reinsurance with this Torrey Pines Re Ltd. (Series 2023-1) issuance.

Palomar returned to the catastrophe bond market late in the month of April, seeking to source $150 million or more in collateralized and multi-year earthquake reinsurance protection from the capital markets.

This is the fourth Torrey Pines catastrophe bond from the California-headquartered insurer that underwrites largely catastrophe exposed property products.

With this Torrey Pines Re 2023-1 catastrophe bond, Palomar will benefit from a capital market source of both California-specific and also US-wide earthquake reinsurance protection, across a three-year term and on an indemnity and per-occurrence basis.

Initially, Palomar was seeking $150 million of reinsurance with its new cat bond, but as we reported that target jumped to $200 million, as Palomar looked to capitalise on strong investor appetite for cat bonds to secure more reinsurance protection.

We’re now told that the $200 million target was achieved, with the Torrey Pines Re 2023-1 cat bond notes having priced to provide the sponsor that much in reinsurance late yesterday.

The Class A tranche of California earthquake risk exposed cat bond notes have priced at their upsized target of $150 million in size, a 50% increase in size for this tranche and the only one to grow during their marketing.

The Class A California quake notes come with an initial expected loss of 0.90% and were first offered with price guidance in a range from 5.25% to 5.75%, which as we reported was later reduced to a range of 5% to 5.25% and we’re now told has been finalised with a spread of 5%, so below the initial guidance range and a roughly 9% drop from the mid-point.

The Class B tranche of notes that will provide US-wide earthquake protection remained at $50 million in size.

With their initial expected loss set at 2.38%, the Class B notes were first offered with price guidance in a range from 8.25% to 8.75%, but that was also reduced to a range of 7.5% to 8.25% and we’re now told that these notes were priced with a spread of 7.5%, so again below the initial guidance range and a roughly 12% drop from the mid-point.

All of which reflects strong execution for Palomar in the catastrophe bond market with its latest issuance, as the insurer benefits from the softening trend, in terms of pricing, that has been seen through recent weeks.

You can read all about this Torrey Pines Re Ltd. (Series 2023-1) catastrophe bond and every deal issued since 1996 in the Artemis Deal Directory.