Palomar Insurance Holdings is on track to achieve, and possibly exceed, its previously guided reinsurance pricing improvement of flat to down 5% for its 2025 renewal, thanks to favourable pricing on its latest catastrophe bond and a newly structured Hawaii excess-of-loss treaty, CEO Mac Armstrong told analysts during the company’s Q1 2025 earnings call.
Addressing this during the call, Armstrong said: “We were pleased to secure $525 million of earthquake limit through our sixth and largest Torrey Pines Re catastrophe bond issuance, exceeding our $425 million target and pricing at the lower-end of the indicated range.
“The cat bond pricing was approximately 15% down on a risk-adjusted basis.”
As a reminder, you can read all about this Torrey Pines Re Ltd. (Series 2025-1) catastrophe bond and every deal issued since 1996 in the Artemis Deal Directory.
The Torrey Pines Re deal forms a key part of Palomar’s core excess-of-loss program, which incepts on June 1st.
Armstrong described ILS securities and catastrophe bonds as “a key component” of that program.
The CEO noted that Palomar also completed the placement of a new Laulima excess-of-loss treaty, carved out specifically for its Hawaii hurricane book. The treaty covers Laulima Reciprocal Exchange, Palomar’s Hawaii-domiciled underwriting entity.
This risk was previously included in the company’s broader June 1 program, which is now “over 95% earthquake only, creating a more attractive structure for reinsurers,” Armstrong said. He added that the Hawaii treaty “also priced at a level favourable to our projections.”
Both the cat bond and Laulima placements provide strong momentum as Palomar heads into the remainder of its $2 billion-plus renewal.
“The successful placements of the cat bond and the Laulima treaty will position us to achieve, if not exceed, our original guidance level of flat to down 5%,” Armstrong said.
When asked whether the company’s broader reinsurance renewal was coming in better than forecast, Armstrong noted that “all placements to-date have come in better than our forecast of flat to -5%.”
“When we put the flat to -5%, we were still trying to assess the impact of the wildfires in Los Angeles on the global reinsurance market. What we’ve been able to execute has been superior to that flat to down 5%,” Armstrong said.
He continued: “And so, the guidance that we offered incorporates the cat bond being down 15%, Laulima being a little bit better than our projections. But then the rest of the core program being, call it, maybe 2.5% down at the midpoint or flat to down 5%. There’s conservatism there.
“I think we do feel very good about our ability to hit the low-end of down 5%, but it’s still a large quantum that needs to be placed.”
Adding: “It’s over $2 billion of earthquake limit and then another, call it, another $100 million of all-perils limit.”
“So, long-winded way of saying, a decent amount of conservatism in there. We do intend to put an update out following the closing of the placement around June 1, and we hope to outperform,” Armstrong concluded.
In their Q1 2025 results, Palomar Holdings reported a net income of $42.9 million, up considerably compared to the $26.4 million disclosed in Q1 2024, while gross written premiums were also up in the opening quarter, expanding 20.1% from the same period of 2024 to $442.2 million.
