Palomar Holdings announced the completion of certain reinsurance programs beginning June 1, 2025, and raised its full-year 2025 adjusted net income guidance.
The company secured approximately US$455 million in incremental limit to support the expansion of its earthquake business. Palomar’s total reinsurance coverage now includes US$3.53 billion for earthquake events and US$100 million for hurricane events within the continental United States.
For the 2025 treaty year, Palomar reported a per-occurrence retention of US$11 million for hurricane events, a decrease from US$15.5 million the previous year. The retention for earthquake events is US$20 million.
Palomar noted that these retentions remain its management’s stated parameters of less than one quarter’s adjusted net income and below 5% of stockholders’ equity.
The reinsurance program continues to provide capacity for growth in targeted business lines and coverage levels that exceed Palomar’s 1:250-year peak zone probable maximum loss.
Included in the coverage is US$525 million sourced from Palomar’s sixth Torrey Pines Re catastrophe bond issuance, which surpassed the company’s US$425 million target and priced at the lower end of the indicated range.
Catastrophe bonds have taken on a larger role in Palomar’s reinsurance strategy, with approximately US$1.15 billion, or about 33%, of the company’s US$3.53 billion earthquake reinsurance limit now sourced from the catastrophe bond market.
Effective June 1, Palomar also executed a standalone excess of loss (XOL) treaty covering Hawaii hurricane policies issued by Laulima Exchange. Previously, this business was included in Palomar’s core reinsurance tower, which now covers over 95% earthquake risks following the change. Laulima’s new reinsurance structure provides per-occurrence coverage up to US$735 million with a retention of US$1.5 million.
The separation of Hawaii hurricane coverage into a standalone XOL treaty marks a shift in Palomar’s approach to structuring its risk portfolio. By isolating hurricane risk from its primary reinsurance tower, Palomar noted that its core coverage now concentrates predominantly on earthquake exposure, which may allow the company to optimize pricing and risk allocation.
Mac Armstrong (pictured above), Palomar’s chairman and chief executive officer, said the company was satisfied with the June 1 excess of loss placement and acknowledged the support of its reinsurance panel.
“Beyond the risk adjusted rate decrease of approximately 10%, this renewal saw Palomar procure incremental earthquake limit to support our growth, maintain our earthquake event retention despite significant year-over-year exposure growth, reduce our wind event retention to $11 million, upsize our Torrey Pines Re catastrophe bond and successfully execute our first standalone Laulima excess of loss treaty,” Armstrong said.
Armstrong noted that these developments led the company to increase its full-year 2025 adjusted net income guidance to a range of US$195 million to US$205 million, up from the previous range of US$186 million to US$200 million.
Palomar’s financial results for the first quarter of 2025 reported an 85% increase in adjusted net income, reaching US$51.3 million. Gross written premiums rose 20% year-over-year, reflecting continued growth across its specialty insurance lines. The expanded reinsurance coverage and incremental capacity are structured to support this trajectory and manage the associated risks.
Additional details of the reinsurance program include US$1.15 billion of multi-year insurance-linked securities (ILS) capacity that provides diversified collateralized reinsurance capital.
The reinsurance panel consists of over 100 reinsurers and ILS investors, including several new participants, all carrying an “A-” (Excellent) or higher financial strength rating from AM Best and/or S&P Global, or being fully collateralized.
Substantially all layers with reinstatement provisions have prepaid reinstatements, limiting Palomar’s pre-tax net loss to US$11 million for hurricane events and US$20 million for earthquake events, with modest additional reinsurance premium due.
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