Palomar Holdings, Inc. — Form 8-K Summary
Business context and reporting period
Palomar Holdings, Inc. filed a Form 8-K reporting an Item 8.01 event dated May 31, 2022. The company announced completion of reinsurance programs beginning June 1, 2022. The filing does not present quarterly or annual operating results.
Reinsurance and key financial metrics
- Incremental catastrophe limits: Approximately $430 million for earthquakes and $200 million for windstorms.
- Total coverage exhaustion: $2.08 billion for earthquake events and $900 million for hurricane events.
- Catastrophe retention: Maintained at $12.5 million per occurrence for all perils, on a pre-tax basis.
- Aggregate protection: A $25 million catastrophe aggregate excess-of-loss cover was renewed on April 1, 2022, backstopping the $12.5 million retention.
- Catastrophe bond capacity: Palomar issued $275 million of collateralized capacity through the Torrey Pines Re 144A catastrophe bond, increasing total outstanding catastrophe bond capacity to $675 million.
- Reinsurance panel: Nine reinsurers were added, bringing the panel to 84 reinsurers. Each was rated “A-” or better by A.M. Best and/or S&P, or provided collateral.
The filing does not provide revenue, profit, cash flow, margins, debt, liquidity, or other traditional operating-performance metrics for the reporting period.
Material changes versus the prior comparable period
- New catastrophe reinsurance capacity increased earthquake and windstorm limits by approximately $430 million and $200 million, respectively.
- Catastrophe bond capacity increased through the $275 million Torrey Pines Re issuance, bringing total outstanding catastrophe bond capacity to $675 million.
- The reinsurance panel expanded by nine reinsurers to 84.
Outlook, management commentary, risks, and unusual items
The expanded program is intended to provide headroom for growth initiatives and coverage exceeding Palomar’s 1-in-250-year peak-zone probable maximum loss. The company stated that it completely placed the excess-of-loss layers of its catastrophe program.
Prepaid reinstatements were obtained for substantially all layers containing reinstatement provisions. The company stated that this structure limits its pre-tax net loss to the $12.5 million retention, subject to modest additional reinsurance premium due.
The principal risks relate to catastrophe losses, reinsurance recoverability, reinstatement premiums, and the adequacy of available limits relative to actual losses. The filing does not quantify the impact of these arrangements on future earnings or cash flow.
Investor verification points
- Verify the final terms, exclusions, attachment points, and exhaustion points of the June 1, 2022 reinsurance programs.
- Assess whether the stated limits remain adequate relative to Palomar’s exposure growth and updated probable maximum loss estimates.
- Review the credit quality, collateral arrangements, and collectability of the 84-reinsurer panel.
- Confirm the financial statement effects of catastrophe bond issuance, prepaid reinstatements, and any additional reinsurance premiums.
- Review subsequent filings for catastrophe losses, reserve development, reinstatement costs, and changes in catastrophe program structure.