Palomar lifts reinsurance to $3.06bn at renewal, with help of $895m cat bond limit

Palomar Insurance Holdings, the speciality California-headquartered insurer that offers largely catastrophe exposed property products, has completed its reinsurance renewal for 2024 and lifted the top of its tower to $3.06 billion, with its largest catastrophe bond yet contributing to the coverage growth.

A year ago, Palomar had renewed its reinsurance towers to provide $2.68 billion of coverage for earthquake events, with multi-year ILS capacity from its catastrophe bonds providing $875 million of that.

In recent weeks, we’ve documented Palomar’s issuance of its largest catastrophe bond to-date, as the company secured $420 million of California-focused earthquake reinsurance from the capital markets with the Torrey Pines Re Ltd. (Series 2024-1) issuance.

Now, the company has revealed full-details of its reinsurance renewal purchases, securing a reduction in attachment for the hurricane coverage and growing the reinsurance tower significantly.

The reinsurance programs incept at June 1st and saw Palomar purchasing $400 million of incremental limit to support the growth of its earthquake underwriting franchise.

Palomar’s total reinsurance coverage now extends to $3.06 billion for earthquake events, $735 million for Hawaii hurricane events, and $117.5 million for all continental United States hurricane events.

The insurer said this provides ample capacity for its growth in, as well as coverage to a level exceeding Palomar’s 1:250-year peak zone Probable Maximum Loss.

Palomar said that its per-occurrence event retention for 2024 is now $15.5 million for hurricane losses, down from $17.5 million the previous year, and $20 million for earthquake events, which is up from last year’s $17.5 million.

The insurer noted that these retention levels “continue to be meaningfully within management’s previously stated guideposts of less than one quarter’s adjusted net income and less than 5% of the Company’s surplus on an after-tax basis.”

Palomar highlighted the new $420 million of earthquake reinsurance secured through the fifth Torrey Pines Re catastrophe bond.

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

“We are very pleased with the successful June 1 placement and are very grateful for the continued support of our reinsurance and ILS partners,” Mac Armstrong, Palomar’s Chairman and Chief Executive Officer expained. “Importantly, we renewed our reinsurance program at terms and pricing that were 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.”

Now, with the larger $420 million catastrophe bond under Torrey Pines Re, that more than replaces a maturing $400 million deal from 2021, Palomar has increased its multi-year ILS capacity within its reinsurance tower from $875 million last year to $895 million in 2024.

Palomar noted that this represents “diversifying collateralized reinsurance capital”, while its overall reinsurance panel features 90 reinsurers and ILS investors, including multiple new reinsurers added in 2024.

Palomar’s reinsurance tower features prepaid reinstatements for substantially all layers, which it notes limit the pre-tax net loss to $15.5 million for hurricane events and $20 million for earthquake events, with some “modest” additional reinsurance premium due.

Palomar’s Chief Risk Officer, Jon Knutzen, commented, “We are grateful for the broad-based support we received from the reinsurance market. It is a testament to our business mix and risk profile, which has been curated with the goal of delivering more stable, predictable results. We appreciate all our incumbent and new reinsurance partners who have helped us successfully complete our June 1 placement.”

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.