Palomar’s new E&S subsidiary gets AM Best rating

Palomar Specialty’s new excess and surplus lines (E&S) subsidiary, which was announced in June, has received a rating from AM Best.

AM Best assigned an A- (Excellent) financial strength rating and an “a-” long-term issuer credit rating to Arizona-based Palomar Excess and Surplus Insurance Company (PESIC), both with stable outlooks. These are in line with the ratings of La Jolla, California-based parent Palomar.

“These rating assignments are reflective of PESIC receiving full rating enhancement as a member of Palomar, driven by their implementation of an intercompany pooling agreement, common management and integration into the operations of Palomar,” AM Best said.

PESIC’s ratings reflect the consolidated balance sheet strength of Palomar, which AM Best categorizes as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.

The new unit is licensed to transact across all of Palomar’s existing lines of specialty property business, as well as other classes of insurance including but not limited to casualty and surety lines. PESIC intends to write E&S business on a national basis beginning in the second half of 2020.

Palomar announced the formation of the new surplus lines insurance company subsidiary in June after it received all necessary regulatory approvals. At that time Mac Armstrong, Palomar’s chairman and CEO, commented PESIC’s creation “represents a natural and exciting progression in our company’s evolution”.

Later in June, Palomar used a portion of the net proceeds from a $94mn public offering to further capitalise its new subsidiary, in addition to the $50mn in initial surplus PESIC had already been capitalised with.

“We believe that the underwriting acumen and market expertise we have established through Palomar Specialty Insurance Company can be applied to the surplus lines market as well, and that PESIC will enable us to serve certain risks that our admitted products cannot currently satisfy,” Palomar said its prospectus filing.