AM Best has affirmed the financial strength rating of A- (Excellent) and the long-term issuer credit rating of “a-” (Excellent) of Palomar Specialty Reinsurance Company Bermuda Ltd.

It also affirmed those ratings for Palomar Specialty Insurance Company (PSIC), and Palomar Excess and Surplus Insurance Company (PESIC).

All three are members of Delaware-based Palomar Holdings Inc, the ultimate parent and insurance holding company of the three organisations.

Concurrently, AM Best affirmed the long-term issuer credit rating of “bbb-” (Good) of Palomar Holdings.

The outlook of these credit ratings is stable.

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

Palomar’s overall balance sheet strength is supported by the strongest level of risk-adjusted capitalisation, as measured by Best’s capital adequacy ratio, solid liquidity, positive operating cash flows and generally favourable loss reserve development.

Partially offsetting these positions is material reinsurance dependency, reflective of the group’s strategic use of excess of loss and quota share arrangements to mitigate volatility and catastrophe exposure.

Palomar writes a variety of risks through its admitted and non-admitted entities, primarily focused on earthquake coverage in California, Hawaii hurricane, inland marine and commercial all-risk products. The consolidated group consistently has reported net income, reflective of prudent underwriting strategies that Palomar continues to refine in an effort to curb volatility, particularly in the admitted markets.