Palomar Insurance Holdings, the speciality California-headquartered insurer that provides largely catastrophe exposed property products, sought to add to its reinsurance arrangements in Q1 2021 with a new $25 million aggregate layer of cover.The company had also secured its $400 million earthquake catastrophe bond during the period, but it seems frequency losses are also a concern for the carrier.That drove Palomar to add more aggregate reinsurance protection to its tower, in order to cap its exposure to the occurrence of multiple, smaller catastrophe loss events.Mac Armstrong, Chairman and Chief Executive Officer, explained, “We successfully placed $25 million of aggregate excess of loss reinsurance limit during the quarter.

The net effect of this new reinsurance facility is that it puts a floor on our operating results should we experience severe catastrophe activity levels like those in 2020.“While we aim to grow and capture an increasing share of our significant market opportunity, we must also prudently protect our balance sheet and earnings.” One motivator for this was losses from winter storm Uri during the first-quarter, which drove some erosions to its tower and resulted in reinstatements needing to be paid.Uri drove a net underwriting loss of $1 million for Palomar, and drove costs as the company had to pay additional reinsurance charges related to the reinstatement of its reinsurance program.

That resulted in $4 million of additional reinsurance expense in the first quarter of 2021, with more additional reinsurance expense in the second quarter of 2021.Hence, adding the new aggregate reinsurance might help to protect Palomar against some of these charges in future, with a specific cover now established to protect it against frequency loss experience.This new $25 million aggregate excess of loss reinsurance covers all perils for Palomar and was effective April 1st.

It sits alongside its $1.4 billion occurrence reinsurance program, that provides the full $1.4 billion of cover for earthquakes and $600 million of cover for wind events.Palomar also has quota share reinsurance in place to further mitigate the costs of catastrophes.———————————————————————.All of our Artemis Live insurance-linked securities (ILS), catastrophe bonds and reinsurance can be accessed online.

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