Palomar Insurance coverage Holdings is again within the disaster bond marketplace for what is going to grow to be the sixth time and the preliminary targets dimension suggests this may even be the insurers largest cat bond to-date, as it’s looking for $425 million or extra in California earthquake reinsurance from this Torrey Pines Re Ltd. (Series 2025-1) issuance.
Final yr, Palomar sponsored what was its largest disaster bond on the time, the $420 million Torrey Pines Re 2024-1.
Now, the insurer is again once more only one yr later with an preliminary goal of $425 million and trying to make this the most important Torrey Pines Re disaster bond up to now.
You can read about all of Palomar’s catastrophe bonds in our extensive Deal Directory.
As with all current cat bonds sponsored by Palomar, this new Torrey Pines Re Sequence 2025-1 issuance will present fully-collateralized reinsurance safety to each Palomar Specialty Insurance coverage Firm and Palomar Extra and Surplus Insurance coverage Firm, we’re instructed.
Bermuda primarily based particular objective insurer (SPI) Torrey Pines Re Ltd. is providing three tranches of Sequence 2025-1 disaster bond notes initially amounting to $425 million, that will probably be bought to traders and the proceeds used to collateralize reinsurance agreements to guard the Palomar underwriting entities on a multi-year foundation.
All three tranches of notes will give Palomar capital markets backed reinsurance safety towards California earthquake losses, on an indemnity and per-occurrence foundation, sources stated.
The coated space can, like different current Torrey Pines Re cat bonds, be expanded to incorporate any extra states of Palomar’s selecting after the primary reset, which means the insurer has optionality ought to it develop its underwriting scope.
All three tranches of notes will present Palomar with reinsurance throughout a 3 yr time period, to the beginning of June 2028, we perceive.
A Sequence 2025-1 Class A tranche of notes are focusing on $125 million in protection for Palomar, attaching at $1.3 billion and exhausting protection at $1.5 billion.
The Class A notes have an preliminary attachment likelihood of 1.33%, an preliminary anticipated lack of 1.22% and are being provided to traders with value steerage in a spread from 3.5% to 4%, we’re instructed.
A Sequence 2025-1 Class B tranche targets $175 million in protection for Palomar, attaching decrease down at $650 million and exhausting protection at $1.3 billion.
The Class B notes have an preliminary attachment likelihood of two.57%, an preliminary anticipated lack of 1.84% and are being provided to traders with value steerage in a spread from 4.5% to five%, sources stated.
A ultimate Sequence 2025-1 Class C tranche targets $125 million in protection for Palomar, attaching decrease down once more at $325 million and exhausting protection at $650 million.
The Class C notes have an preliminary attachment likelihood of 4.16%, an preliminary anticipated lack of 3.25% and are being provided to traders with value steerage in a spread from 6.5% to 7%, we perceive.
For comparability, on the worth steerage, Palomar’s 2024 cat bond had a Class A tranche with an preliminary anticipated lack of 1.58% that priced at 6%, a Class B tranche with an preliminary anticipated lack of 2.34% that priced at 7.25%, and a Class C tranche with an preliminary anticipated lack of 3.32% that priced at 9%.
So pricing is significantly decrease, on a a number of of EL foundation, reflecting softening within the cat bond market but additionally the very fact earthquake dangers are a worthwhile diversifier for traders at a time of hurricane-heavy disaster bond issuance.
It’s encouraging to see Palomar proceed to develop its urge for food for disaster bond protection in 2025, as the corporate continues to utilise cat bonds as a technique to safe multi-year, single shot reinsurance that inures to the advantage of its core disaster excess-of-loss reinsurance tower.
The insurer’s $275 million Torrey Pines Re 2022-1 matures this yr, so this new issuance will greater than exchange that, rising the capital markets position within the Palomar reinsurance tower.
You’ll be able to learn all about this Torrey Pines Re Ltd. (Series 2025-1) disaster bond and each deal issued since 1996 within the Artemis Deal Directory.
