OLDWICK, N.J.--(BUSINESS WIRE)--
AM Best has assigned a Long-Term Issuer Credit Rating (Long-Term ICR) of “bbb-” to Palomar Holdings, Inc. (PLMR) (Delaware), the ultimate parent and insurance holding company of Palomar Specialty Insurance Company (PSIC) (headquartered in La Jolla, CA) and Palomar Specialty Reinsurance Company Bermuda Ltd. (Palomar Re) (Bermuda). The outlook assigned to this Credit Rating (rating) is stable. Concurrently, AM Best has affirmed the Financial Strength Ratings (FSR) of A- (Excellent) and the Long-Term ICR of “a-” of PSIC and Palomar Re. The outlook of these ratings is stable. PSIC and Palomar Re are members of Palomar Holdings, Inc. These rating actions follow an initial public offering (IPO) for Palomar Holdings, Inc. on April 17, 2019.
Prior to the IPO, Palomar Holdings, Inc. (Palomar) was renamed from GC Palomar Holdings and re-domesticated to Delaware from Cayman Islands. Concurrently, Palomar became the ultimate parent, as the former ultimate parent, GC Palomar Investor LP (Cayman Islands), was eliminated.
The ratings reflect Palomar’s balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.
Palomar’s capital assessment reflects moderate underwriting leverage, a sound liquidity position and consistently favorable loss reserve development that is offset partially by significant reinsurance dependence.
Adequate operating performance reflects the geographic concentration in catastrophe prone areas, which results in potential for volatility. This was evident in 2017, when Palomar’s underwriting results were impacted adversely by net losses from Hurricane Harvey and Texas wind and hailstorms. However, despite these losses, Palomar managed to generate favorable operating earnings for the year.
Palomar’s limited business profile reflects a concentration of business, given its exposure to catastrophes, primarily a severe earthquake event. Gross catastrophe leverage for a 1-in-250 year earthquake is elevated, as depicted in a probable maximum loss analysis. Palomar also maintains significant dependence on reinsurance to reduce this gross earthquake exposure. However, given management’s extensive experience in the residential and commercial earthquake markets and comprehensive reinsurance program, Palomar has reduced its net catastrophe leverage to a manageable level with risk management capabilities in line with its profile.
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