Palomar extends limit at 1/6 renewals in ‘hardest reinsurance market in 30 years’
Californian carrier Palomar Holdings has completed its June 1 reinsurance renewal with approximately $550 million of earthquake limit and “ample capacity for growth” in what its chief executive Mac Armstrong described as the “hardest reinsurance market in 30 years”.
Palomar’s reinsurance coverage for earthquake events has been expanded to $2.68 billion, including an additional limit of $17.5 million starting from September 1, 2023. It also includes $900 million for Hawaii Hurricane events and $100 million for all continental United States hurricane events.
The reinsurance programme provides “ample capacity for growth in the subject business lines” as well as coverage to a level exceeding Palomar’s 1:250-year peak zone Probable Maximum Loss (PML), the company said.
Palomar has purchased around $550 million of reinsurance limit to bolster its earthquake franchise in 2023. Out of the new limit, the firm said $200 million was obtained through a new catastrophe bond called Torrey Pines Re Series 2023-1 notes. The new catastrophe bonds mark Palomar’s fourth sponsorship of Insurance Linked Securities (ILS) issuance.
Palomar’s per occurrence catastrophe event retention is now $17.5 million, a level that management claims “remains well within” its previously stated guideposts, on an after-tax basis, of less than one quarter’s earnings and less than 5% of the company’s surplus.
The carrier has now raised its full year 2023 adjusted net profit guidance in the range of $88 million to $92 million.
“In what most have deemed the hardest reinsurance market in thirty years, we successfully completed our 6/1 renewal,” said Mac Armstrong (pictured), Palomar’s chairman and chief executive officer. “Importantly, we maintained our retention within our previously stated expectations, bought incremental limit to support our growth, preserved important terms and conditions such as prepaid reinstatements, and successfully completed our fourth catastrophe bond.”
Armstrong added: “While risk-adjusted pricing increased, the total expense was within our previously stated expectations. The success of this placement along with our strong start to the year allow us to raise our full year 2023 adjusted net income guidance to a range of $88 million to $92 million.
“Looking forward, we have the reinsurance capacity to sustain our profitable growth trajectory, execute our Palomar 2X strategic objective and build a preeminent specialty insurance company.”
Palomar’s chief risk officer Jon Knutzen, said: “We successfully navigated the June 1 renewal in an orderly fashion having achieved results in-line with our expectations and are pleased with the support of our reinsurance partners. Our reinsurance placement is a testament to the proactive and deliberate underwriting changes that we have implemented over the last few years designed to reduce our risk profile and deliver more predictable results.”
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