Palomar set for $415m of quake reinsurance from largest Torrey Pines cat bond yet

Palomar Insurance Holdings now looks set to secure its largest catastrophe bond ever, as the Torrey Pines Re Ltd. (Series 2024-1) issuance is likely to secure the company $415 million in California earthquake reinsurance from the capital markets, Artemis has learned.

That’s an increase from the initial target to secure $400 million of reinsurance from this latest Torrey Pines Re cat bond deal, while we also understand Palomar is set to benefit from investor appetite, by securing its new cat bond priced within the initial guidance, albeit at the upper-ends of the spreads that were offered.

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

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

The now $415 million of Series 2024-1 catastrophe bond notes will provide Palomar with reinsurance protection for 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 just two years to the start of June 2026.

The first Class A tranche were initially a $200 million three-year layer, but are now sized at $210 million, 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%, but we’re now told that price is fixed at the upper-end of 6%.

The second tranche was a $125 million three-year Class B layer, but are now sized at $130 million, we are told.

The Class B notes have 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%, but the price here has also shifted to the top-end and been fixed at 7.25%.

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

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%, but again we are told the spread has now been fixed at the top-end of that, to pay investors 9%.

So, while a slight upsizing to $415 million will make this Palomar’s largest catastrophe bond it has ever sponsored, the pricing has moved higher in the case of each tranche.

But, perhaps notably given the timing, the prices have remained within the initial guidance, albeit at the top-ends, which given the widening and higher prices seen in catastrophe bond issues, suggests a strong level of appetite for this diversifying risk investment opportunity.

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.