Palomar unveils platform to broaden offering into booming E&S market

Specialty insurer Palomar Holdings is making a move into the rapidly expanding E&S market with the launch of Palomar Excess and Surplus Insurance Company (PESIC) to begin writing business during the second half of this year.

The company is undertaking another public offering of shares to raise funds which will go to capitalise the new E&S platform.

The offering of 1mn shares is being run by Barclays Capital, JP Morgan and Keefe, Bruyette & Woods and includes an option for the underwriters to purchase up to an additional 150,000 shares.

Domiciled in the state of Arizona, PESIC has been given the green light to transact across all of Palomar’s existing lines of specialty property business. It has also been licensed to write other classes of business such as casualty and surety, Palomar said.

“PESIC is currently in the process of becoming an eligible surplus lines insurer in all US jurisdictions and intends to commence writing E&S business, on a national basis beginning in the second half of 2020,” Palomar said in a statement.

The E&S market is currently booming, with private equity money pouring into the sector and supporting both new and existing carriers to take advantage of the flood of business entering the channel and the rapidly hardening pricing and tighter terms and conditions being imposed.

Palomar’s CEO Mac Armstrong said the creation of PESIC “represents a natural and exciting progression” in his firm’s evolution.

“We believe that the data-driven underwriting acumen and market expertise we have established and demonstrated across Palomar’s existing lines of specialty property business can also be logically applied to the E&S market,” he said.

In fact, Armstrong candidly admitted that some of La Jolla, California-based Palomar’s commercial products may in fact be better suited to the E&S market.

PESIC, Armstrong said, will allow the expansive Palomar to write and insure certain risks that its admitted products and geographic footprint are unable to currently satisfy.

“PESIC allows Palomar to extend both the breadth and reach of our specialty product offerings and continue to meet the demand for specialty property insurance protection,” Armstrong said.

“We are very excited to launch this new vehicle and bring a new solution to the market in the second half of 2020.”

Palomar was launched by Armstrong with backing from PE firm Genstar in 2014 initially with a focus on the earthquake insurance market.

It grew from start-up funds of $75mn to currently be worth more than $2bn in market capitalisation after its share price soared from $15 at its IPO last year to $83.61 in New York today.

Palomar’s gross written premium has grown from $16.6mn in its first year to $252.0mn last year, representing a compound annual growth rate of around 75 percent.

Genstar sold out the remaining shares it owned in the company last month and has made a lucrative return on its investment.