Palomar begins underwriting on new E&S platform
Palomar Specialty has already begun underwriting policies on its new E&S platform as it initially focuses on taking its existing property products into new geographies and targeting larger shared and layered risks, according to CEO Mac Armstrong.
Speaking on the La Jolla, California-based carrier’s earnings call this morning, the executive said the new platform had “written a policy or two” following its planned 1 August launch and will now look to a disciplined ramp up.
As previously reported, the company announced the formation of Palomar Excess and Surplus Insurance Company (PESIC) in June after it received the necessary regulatory approvals.
The subsidiary has been capitalized with over $100mn of surplus using a portion of proceeds from a June public offering and has been rated A- by AM Best.
Commenting on the platform, Armstrong said the Arizona-domiciled company is licensed to transact across all lines of insurance, including Palomar’s current specialty property lines, describing the move into E&S as a “natural and exciting progression” of its continued evolution.
“As PESIC was just recently launched, we will continue to make the necessary investments in areas like technology, analytics and revenue-generating underwriting talent throughout the remainder of the year,” he added.
Accessing new segments
Speaking to analysts, Armstrong explained that there are segments of Palomar’s core franchise in specialty property that it hasn’t been able to access effectively as an admitted insurer.
That has been most pronounced in commercial earthquake and commercial all risk, including in builders’ risk where the insurer has had more of an SME focus and hasn’t been able to participate in the shared and layered market.
“As PESIC was just recently launched, we will continue to make the necessary investments in areas like technology, analytics and revenue-generating underwriting talent throughout the remainder of the year”
Palomar CEO Mac Armstrong
Highlighting larger risks in excess of $100mn that typically go to the shared and layered market, with several carriers participating in a stack of limit, Armstrong said that without an E&S platform Palomar had not been able to access the business.
“Now with the E&S company, we should be able to do so. It won’t change the amount of limit we put up on a given risk, but where we attach and participate, [and] that is one area that we see considerable opportunity.
“That’s an area where there’s been considerable dislocation and pricing disruption over the last 12 months, and we think it’s going to be sustained through the rest of this year into 2021,” the executive added.
Geographical expansion
He also said the E&S company will allow Palomar to expand into geographies it hasn’t been able to access or be competitive with its 30-state licensed admitted platform.
Armstrong added that there is no reason why the E&S company can’t get to a similar size as Palomar’s admitted company in time. The admitted carrier wrote $252mn of gross premium last year.
The broadening of Palomar’s offerings comes some six years after the business was launched by CEO Armstrong with backing from private equity firm Genstar. The company began life with a focus on the earthquake insurance market. Genstar sold out the remaining shares it owned in the company in May having made a significant return on its investment.
Palomar grew from start-up funds of $75mn to be currently worth more than $2.51bn in market capitalisation after its share price soared from $15 at its IPO last year to $99.20 at the time of going to press.
Shares in the insurer were up 4 percent today after it reported Q2 earnings last night that exceeded analyst forecasts and an improving combined ratio.