“The first quarter was a demonstration of the quality of our book of business and our ability to navigate the choppy waters of this difficult reinsurance market,” said Palomar Holdings CEO Mac Armstrong.
Armstrong stated that Palomar successfully placed a $188 million incremental excess of loss reinsurance limit during Q1 to support growth in the company’s residential and commercial earthquake business.
“We are encouraged by the pricing, approximately 27% up on a risk-adjusted basis and the terms we have obtained, as it is consistent with the assumptions used to develop our revised net guidance of we,” he said.
Armstrong continued, “Furthermore, as previously mentioned, we have revised our primary portion of the casualty quota to the improved economy from the terminated terms of the agreement.
“On April 1, we chose not to renew our aggregate cover, after determining that its utility and protection had been materially reduced due to a significant reduction in our continental storm exposure and possible maximum loss (PML).
“To give more context to the impact of our material reduction in PML and the underwriting changes made over the past few years, if the 2020 wind season occurs in 2023, the $64 million in losses of net losses from multiple hurricanes in the 2020 harvest will total less than $10 million today and only one of the hurricanes will qualify for recovery under the finalized aggregate.
Armstrong explained that even if there was reinsurance capacity available to support the general cover, “it doesn’t make economic sense to change.”
He added that Palomar will explore alternative coverage to provide protection from higher frequency extreme events.
Armstrong continued, “We are currently in the midst of our 6/1 reinsurance placement with strong market order terms this week. As always, we would like to share comprehensive details when complete .
“Additionally, we are selling a multiyear, earthquake-only catastrophe bond, the fourth issuance from Torrey Pines Re, which will provide additional leverage to support our growth in our bellwether earthquake line.
“We continue to see the value of including multiyear ILS solutions in our comprehensive reinsurance program.
“We are encouraged by the progress to date in the core program and are confident that we will have the capacity to meet our strategic goals by 2023 and beyond.
“We are optimistic that we will exit our 6/1 reinsurance placement with risk transfer programs similar to previous years, and that reinsurance costs will be consistent with the assumptions used to provide our full-year 2023 guidance.”
Armstrong’s comments came on the heels of Palomar’s recent Q1 earnings call. In its results for the quarter, the company reported a net income of $17.3 million, a 46.3% increase in gross written premiums and a combined ratio of 77.9%.