Reinsurance market dynamics are seemingly more favourable to buyers in 2025, with Palomar Holdings CEO Mac Armstrong reporting that all placements so far have exceeded the company’s initial forecast of flat to down 5%.
“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 stated during the company’s recent earnings call.
According to Armstrong, the first quarter was active across the organisation, with a particular emphasis on the core excess-of-loss program set to incept on June 1, 2025.
“ILS securities and cat bonds specifically are a key component of the core excess-of-loss program. 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,” he said.
Armstrong noted that catastrophe bond pricing was down approximately 15% on a risk-adjusted basis.
He added, “We placed a new Laulima excess-of-loss treaty effective June 1 for our Hawaii hurricane business. This coverage was previously part of our core June 1 program, which now is over 95% earthquake only, creating a more attractive structure for reinsurers.”
He continued, “The Hawaii treaty also priced at a level favourable to our projections. 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%.”
Beyond the core excess-of-loss program, Palomar renewed its May 1 builders’ risk quota share treaty with increased capacity and improved economics, demonstrating strong reinsurance support and confidence in the company’s underwriting strategy.
“The added capacity enhances our ability to expand the builders’ risk portfolio, pursue larger opportunities and strengthen broker relationships in a profitable segment,” Armstrong said.
Additionally, Palomar extended its April 1 casualty quota share to October 1, aiming to better align and increase optionality within its broader casualty reinsurance program.
Discussing whether reinsurance pricing is coming in better than anticipated, Armstrong said, “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.
“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.”
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