Palomar Holdings, Inc.

Previous wording

Our business is concentrated in California and we are exposed more significantly to California loss activity and regulatory environments, including regulatory constraints on pricing, underwriting actions, and the timing or approval of rate changes;

Current wording

A significant portion of our business is generated in California, and as a result, we are more significantly exposed to California loss activity and regulatory environments, including regulatory constraints on pricing, underwriting actions, and the timing or approval of rate changes;

Previous wording

Our reinsurance coverage currently exhausts at $3.5 billion for earthquake events and $100 million for continental U.S. hurricane events, with coverage in excess of our estimated peak zone 1 in 250 year PML event and in excess of our A.M. Best threshold. Laulima maintains Hawaii hurricane reinsurance coverage through a standalone XOL treaty, which provides per-occurrence coverage up to $735 million with a retention of $1.5 million. Our catastrophe event retention is currently $20 million for earthquake events and $11 million for hurricane events and all other perils. In addition to our event retention, we may also incur additional reinsurance expenses upon a catastrophe event. While we only select reinsurers whom we believe to have acceptable credit, if our reinsurers are unable to pay the claims for which they are responsible, we retain primary liability. Our earthquake policies do not provide coverage for fire damage arising from an earthquake. Catastrophe events which cause our reinsurers to incur losses may increase the cost of reinsurance in future periods, increase retentions or reduce available limits, or make it more difficult to obtain reinsurance on commercially acceptable terms. While we believe our risk transfer program reduces exposure to catastrophe losses and earnings volatility, one or more severe catastrophe events could result in claims that exceed the limits of our reinsurance coverage.

Current wording

Our reinsurance coverage currently exhausts at $3.9 billion for earthquake events and $135 million for continental U.S. hurricane events, with coverage in excess of our estimated peak zone 1 in 250 year PML event and in excess of our A.M. Best threshold. Laulima maintains Hawaii hurricane reinsurance coverage through a standalone XOL treaty, which provides per-occurrence coverage up to $865 million with a retention of $1.5 million. Our catastrophe event retention is currently $20 million for earthquake events and $11 million for hurricane events and all other perils. In addition to our event retention, we may also incur additional reinsurance expenses upon a catastrophe event. While we only select reinsurers whom we believe to have acceptable credit, if our reinsurers are unable to pay the claims for which they are responsible, we retain primary liability. Our earthquake policies do not provide coverage for fire damage arising from an earthquake. Catastrophe events which cause our reinsurers to incur losses may increase the cost of reinsurance in future periods, increase retentions or reduce available limits, or make it more difficult to obtain reinsurance on commercially acceptable terms. While we believe our risk transfer program reduces exposure to catastrophe losses and earnings volatility, one or more severe catastrophe events could result in claims that exceed the limits of our reinsurance coverage.

Previous wording

Litigation, judicial and regulatory trends, such as increased litigation and higher jury awards;

Current wording

Litigation, judicial and regulatory trends, such as increased litigation, higher jury awards, class action lawsuits, multi-district litigation, and evolving legal theories that may increase claim duration, defense costs and settlement values;

Previous wording

In addition to reinsurance purchased from traditional reinsurers, we utilize collateralized protection from the insurance-linked securities market through catastrophe bonds issued via Torrey Pines Re Ltd., a Bermuda-domiciled special purpose insurer. We closed a $525 million catastrophe bond in the second quarter of 2025, effective June 1, 2025 through June 1, 2028; a $420 million catastrophe bond in the second quarter of 2024, effective June 1, 2024 through June 1, 2027; a $200 million catastrophe bond in the second quarter of 2023, effective June 1, 2023 through June 1, 2026; and a $275 million 144A catastrophe bond in the second quarter of 2022, effective June 1, 2022 through June 1, 2025. These catastrophe bonds provide indemnity-based reinsurance coverage for earthquake events.

Current wording

In addition to reinsurance purchased from traditional reinsurers, we utilize collateralized protection from the insurance-linked securities market through catastrophe bonds issued via Torrey Pines Re Ltd., a Bermuda-domiciled special purpose insurer. We closed a $360 million catastrophe bond in the second quarter of 2026, effective June 1, 2026 through June 1, 2029; a $525 million catastrophe bond in the second quarter of 2025, effective June 1, 2025 through June 1, 2028; a $420 million catastrophe bond in the second quarter of 2024, effective June 1, 2024 through June 1, 2027; and a $200 million catastrophe bond in the second quarter of 2023, effective June 1, 2023 through June 1, 2026. These catastrophe bonds provide indemnity-based reinsurance coverage for catastrophe events.

Previous wording

Our approach to risk management relies on subjective variables that entail significant uncertainties. We manage our exposure to catastrophe losses by analyzing the probability of the occurrence of catastrophe events and their severity and impact on our underwriting and investment portfolio. We monitor and mitigate our exposure through several of methods designed to minimize risk, including underwriting specialization, modeling and data systems, data quality control, strategic use of policy deductibles, regular review of aggregate exposure and probable maximum loss reports, which report the maximum amount of expected losses based on computer or actuarial modeling techniques. These methods rely on estimates, models, data, and scenarios that may not accurately predict actual outcomes. Consequently, we could incur losses both in the risks we underwrite and to the value of our investment portfolio due to the overall impact on financial markets from the occurrence of catastrophe events.

Current wording

Our approach to risk management relies on subjective variables that entail significant uncertainties. We manage our exposure to catastrophe losses by analyzing the probability of the occurrence of catastrophe events and their severity and impact on our underwriting and investment portfolio. We monitor and mitigate our exposure through several methods designed to minimize risk, including underwriting specialization, modeling and data systems, data quality control, strategic use of policy deductibles, regular review of aggregate exposure and probable maximum loss reports, which report the maximum amount of expected losses based on computer or actuarial modeling techniques. These methods rely on estimates, models, data, and scenarios that may not accurately predict actual outcomes. Consequently, we could incur losses both in the risks we underwrite and to the value of our investment portfolio due to the overall impact on financial markets from the occurrence of catastrophe events.

Previous wording

We run many model simulations to evaluate the impact of these assumptions on a catastrophe’s loss potential. Furthermore, there are risks associated with catastrophe events, which are either poorly represented or not represented at all by catastrophe models. Climate change, evolving catastrophe patterns, and the emergence of secondary perils such as severe inland flooding, wildfires, and convective storms may further increase both the frequency and severity of catastrophe events. Limited historical data for certain perils, along with changes in climate and loss patterns, may reduce the reliability of catastrophe models and stress the assumptions on which we rely to price risk, manage exposures, and purchase reinsurance. Each modeling assumption or un-modeled risk introduces uncertainty into probable maximum loss estimates that management must consider. These uncertainties can include, but are not limited to, the following:

Current wording

We run many model simulations to evaluate the impact of these assumptions on a catastrophe’s loss potential. Furthermore, there are risks associated with catastrophe events, which are either poorly represented or not represented at all by catastrophe models. Climate change, evolving catastrophe patterns, and the emergence of secondary perils such as severe inland flooding, wildfires, and convective storms may further increase both the frequency and severity of catastrophe events. Limited historical data for certain perils, along with changes in climate and loss patterns, may reduce the reliability of catastrophe models and stress the assumptions on which we rely to price risk, manage exposures, and purchase reinsurance. Changing catastrophe patterns may also reduce the predictive value of historical loss experience used to develop catastrophe models, which could impair our ability to price business, estimate probable maximum losses, and structure our reinsurance program. Each modeling assumption or un-modeled risk introduces uncertainty into probable maximum loss estimates that management must consider. These uncertainties can include, but are not limited to, the following:

Previous wording

Participants in the insurance industry use ratings from independent ratings agencies, such as A.M. Best, as an important means of assessing the financial strength and creditworthiness of insurers. In setting its ratings, A.M. Best performs quantitative and qualitative analysis of a company’s balance sheet strength, operating performance and business profile. A.M. Best financial strength ratings range from “A++” (Superior) to “F” for insurance companies that have been publicly placed in liquidation. As of March 31, 2026, A.M. Best has assigned a financial strength rating of “A” (Excellent) (Outlook Stable) to our insurance company subsidiaries,

Current wording

Participants in the insurance industry use ratings from independent ratings agencies, such as A.M. Best, as an important means of assessing the financial strength and creditworthiness of insurers. In setting its ratings, A.M. Best performs quantitative and qualitative analysis of a company’s balance sheet strength, operating performance and business profile. A.M. Best financial strength ratings range from “A++” (Superior) to “F” for insurance companies that have been publicly placed in liquidation. As of June 30, 2026, A.M. Best has assigned a financial strength rating of “A” (Excellent) (Outlook Stable) to our insurance company subsidiaries, Palomar Specialty Insurance Company (“PSIC”), Palomar Excess and Surplus Insurance Company (“PESIC”) and First Indemnity of America Insurance Co. (“FIA”), and “A-” (Excellent) (Outlook Positive) to Palomar Casualty and Surety Company (“PCSC”).

Previous wording

Our business is concentrated in California and we are exposed more significantly to California loss activity and regulatory environments, including regulatory constraints on pricing, underwriting actions, and the timing or approval of rate changes.

Current wording

A significant portion of our business is generated in California, and as a result, we are more significantly exposed to California loss activity and regulatory environments, including regulatory constraints on pricing, underwriting actions, and the timing or approval of rate changes.

Previous wording

Our policyholders and insurance risks are currently concentrated in California, which generated 30.9% of our gross written premiums for the year ended December 31, 2025 and 25.0% for the three months ended March 31, 2026. We are exposed to business, economic, political, judicial and regulatory risks due to this concentration that are greater than the risks faced by insurance companies with a lower concentration of their premiums in California. Any single, major catastrophe event, series of events or other condition causing significant losses in California could materially adversely affect our business, financial condition and results of operations. This may include catastrophes even where we do not insure against the loss, such as the 2025 California wildfires, as homes and businesses lost or damaged due to catastrophe events may cancel or not renew their policies with us following such events. Additionally, unfavorable business, economic or regulatory conditions in California may result in a significant reduction of our premiums or increase our loss exposure. Changes to insurance-related laws or regulations in California could also adversely affect our business.

Current wording

Our policyholders and insurance risks are currently concentrated in California, which generated 30.9% of our gross written premiums for the year ended December 31, 2025 and 25.6% for the six months ended June 30, 2026. We are exposed to business, economic, political, judicial and regulatory risks due to this concentration that are greater than the risks faced by insurance companies with a lower concentration of their premiums in California. Any single, major catastrophe event, series of events or other condition causing significant losses in California could materially adversely affect our business, financial condition and results of operations. This may include catastrophes even where we do not insure against the loss, such as the 2025 California wildfires, as homes and businesses lost or damaged due to catastrophe events may cancel or not renew their policies with us following such events. Additionally, unfavorable business, economic or regulatory conditions in California may result in a significant reduction of our premiums or increase our loss exposure. Changes to insurance-related laws or regulations in California could also adversely affect our business. In addition, the California Department of Insurance has continued to implement regulatory reforms, including changes to catastrophe modeling and rate regulation. We cannot predict how these or other regulatory changes may affect our California business. Delays in obtaining adequate rate approvals or restrictions on underwriting actions could reduce our ability to respond to changing loss trends and effectively manage catastrophe exposure.

Previous wording

For the three months ended March 31, 2026, our largest program administrator distributed $101.4 million, or 16.1% of our gross written premiums and our second largest program administrator distributed $87.8 million, or 13.9% of our gross written premiums. There were no other program administrators that distributed greater than 10% of our gross written premiums for the three months ended March 31, 2026.

Current wording

For the six months ended June 30, 2026, our largest program administrator distributed $207.6 million, or 16.5% of our gross written premiums and our second largest program administrator distributed $164.5 million, or 13.0% of our gross written premiums. There were no other program administrators that distributed greater than 10% of our gross written premiums for the six months ended June 30, 2026.

Previous wording

We face competition from other specialty insurance companies, standard insurance companies and underwriting agencies that are larger than we are and that have greater financial, marketing, technological, and other resources than we do. Some of these competitors also have longer operating histories and more market recognition than we do in certain lines of business. In addition, we compete against state or other publicly managed enterprises including the California Earthquake Authority (“CEA”), the National Flood Insurance Program, and the Texas Wind Insurance Association. If the CEA were to provide coverage to non-CEA member carriers or lessened the capital requirements for membership, we would face additional competition in our markets, and our operating results could be adversely affected. Furthermore, it may be difficult or prohibitively expensive for us to implement or maintain technology systems and processes that are competitive with those of larger insurers.

Current wording

We face competition from other specialty insurance companies, standard insurance companies and underwriting agencies that are larger than we are and that have greater financial, marketing, technological, and other resources than we do. Some of these competitors also have longer operating histories and more market recognition than we do in certain lines of business. In addition, we compete against state or other publicly managed enterprises including the California Earthquake Authority (“CEA”), the National Flood Insurance Program, and the Texas Wind Insurance Association. If the CEA were to provide coverage to non-CEA member carriers or lessen the capital requirements for membership, we would face additional competition in our markets, and our operating results could be adversely affected. Furthermore, it may be difficult or prohibitively expensive for us to implement or maintain technology systems and processes that are competitive with those of larger insurers.

Previous wording

In addition, the insurance and reinsurance industries have historically been cyclical, characterized by periods of intense price competition due to excess underwriting capacity (soft market cycle) as well as periods when shortages of capacity increase premium levels (hard market cycle). We expect our business and results of operations to continue to be impacted by these market cycles.

Current wording

In addition, the insurance and reinsurance industries have historically been cyclical, characterized by periods of intense price competition due to excess underwriting capacity (soft market cycle) which decrease premium levels as well as periods when shortages of capacity increase premium levels (hard market cycle). We expect our business and results of operations to continue to be impacted by these market cycles.

Previous wording

In addition, the Credit Agreement contains financial covenants, restrictions on indebtedness, liens, investments, mergers, dispositions, prepayment of other indebtedness and dividends and other distributions. The financial covenants in the Credit Agreement require that we do not exceed a maximum leverage ratio and maintain a minimum net worth at the end of each quarter. Our insurance subsidiaries are also required to maintain a minimum risk-based capital ratio at the end of each year and must always maintain a minimum AM Best Financial Strength rating. All of these covenants and restrictions impact how we operate our business and may limit our flexibility in planning for, or reacting to, changes in our business and industry. Our ability to comply with these covenants may be affected by events beyond our control. If we breach any of the covenants and do not obtain a waiver from the noteholders or lenders, then, subject to applicable cure periods, any outstanding debt may be declared immediately due and payable.

Current wording

In addition, the Credit Agreement contains financial covenants, restrictions on indebtedness, liens, investments, mergers, dispositions, prepayment of other indebtedness and dividends and other distributions. The financial covenants in the Credit Agreement require that we do not exceed a maximum leverage ratio and maintain a minimum net worth at the end of each quarter. Our insurance subsidiaries are also required to maintain a minimum risk-based capital ratio at the end of each year and must always maintain a minimum A.M. Best Financial Strength rating. All of these covenants and restrictions impact how we operate our business and may limit our flexibility in planning for, or reacting to, changes in our business and industry. Our ability to comply with these covenants may be affected by events beyond our control. If we breach any of the covenants and do not obtain a waiver from the noteholders or lenders, then, subject to applicable cure periods, any outstanding debt may be declared immediately due and payable.

Previous wording

Ongoing global economic uncertainty, including the effects of inflation, interest rate volatility, and changes in international trade policies such as the imposition of tariffs, could have wide-ranging impacts on the markets in which we operate. These conditions may lead to shifts in consumer behavior, changes in exposure levels across personal and commercial lines, and increased costs associated with claims, operations, and policy administration. In addition, market volatility may negatively impact the performance of our investment portfolio and influence policyholder behavior. Together, these developments could adversely affect our financial results, capital position, and ability to execute our long-term business strategy.

Current wording

Ongoing global economic uncertainty, including the effects of inflation, interest rate volatility, and changes in international trade policies such as the imposition of tariffs, could have wide-ranging impacts on the markets in which we operate. These conditions may lead to shifts in consumer behavior, changes in exposure levels across personal and commercial lines, and increased costs associated with claims, operations, and policy administration. In addition, market volatility may negatively impact the performance of our investment portfolio and influence policyholder behavior. These developments, including inflation, tariffs and supply-chain disruptions, may increase the cost of construction materials, auto parts, labor and other inputs used to settle claims, increasing claim severity, reserve requirements and pressure on underwriting margins, which could adversely affect our financial results, capital position and ability to execute our long-term business strategy.

Previous wording

We are incorporating AI and AI adjacent technology and tools in certain business processes and workflows and expect AI to have a more meaningful impact on our Company in the future. While we are attempting to implement AI deliberately to enhance automation, efficiency, and risk management, we believe it introduces several additional risks. The increased investment in and reliance on AI for business processes creates risks should AI not provide the anticipated benefits or operate as anticipated. There are numerous AI adjacent tools which may improve the efficiency or effectiveness of our processes, and there is a risk that we do not implement the correct tools or do not implement the tools effectively. While we issue guidelines to employees on the use of AI, employees may use it in unanticipated ways that introduce additional risk to us. Generative AI tools may provide inaccurate, incomplete or false information or introduce biases.

Current wording

We are incorporating AI and AI-adjacent technology and tools in certain business processes and workflows and expect AI to have a more meaningful impact on our Company in the future. While we are attempting to implement AI deliberately to enhance automation, efficiency, and risk management, we believe it introduces several additional risks. The increased investment in and reliance on AI for business processes creates risks should AI not provide the anticipated benefits or operate as anticipated. There are numerous AI-adjacent tools which may improve the efficiency or effectiveness of our processes, and there is a risk that we do not implement the correct tools or do not implement the tools effectively. While we issue guidelines to employees on the use of AI, employees may use it in unanticipated ways that introduce additional risk to us. Generative AI tools may provide inaccurate, incomplete or false information, introduce biases or otherwise adversely affect our operations, financial results or regulatory compliance. We also use AI to support risk selection, underwriting, pricing, and claims handling; if the analyses or recommendations these tools produce are, or are alleged to be, inaccurate, biased, or unfairly discriminatory, whether due to flawed algorithms, insufficient or biased data, or deficient training methodologies, our business, results of operations, reputation, and regulatory standing could be adversely affected.

Previous wording

There is also risk around third-party use of AI as our customers, software vendors and other service providers are increasingly incorporating AI into their processes, which may expose us to additional risks should they not be able to incorporate the technology effectively. Our competitors may incorporate AI more effectively than us causing us to lose market share. We also believe AI increases the information technology and cybersecurity risks described above and could enhance cyberattack capabilities. AI-related issues, deficiencies and/or failures could adversely impact our operations, damage our reputation, and give rise to legal or regulatory action.

Current wording

There is also risk around third-party use of AI as our customers, software vendors and other service providers are increasingly incorporating AI into their processes, which may expose us to additional risks should they not be able to incorporate the technology effectively. Our competitors may incorporate AI more effectively than we do, causing us to lose market share. We also believe AI increases the information technology and cybersecurity risks described above and could enhance cyberattack capabilities. AI-related issues, deficiencies and/or failures could adversely impact our operations, damage our reputation, and give rise to legal or regulatory action.

Previous wording

In addition, regulatory standards relating to the use of artificial intelligence are evolving in the states where certain states have issued regulatory guidance to insurance companies on the use AI. Certain states have adopted the NAIC Model Bulletin on the Use of Artificial Intelligence, while the New York Department of Financial Services issued its circular letter. Such state guidance on the use of AI sets forth expectations that companies have governance and risk management practices in place to ensure the use of AI complies with various state laws governing the business of insurance

Current wording

In addition, regulatory standards relating to the use of artificial intelligence are evolving in the states where certain states have issued regulatory guidance to insurance companies on the use of AI. Certain states have adopted the NAIC Model Bulletin on the Use of Artificial Intelligence, while the New York Department of Financial Services issued its circular letter. Such state guidance on the use of AI sets forth expectations that companies have governance and risk management practices in place to ensure the use of AI complies with various state laws governing the business of insurance

Previous wording

Future tax legislation or changes to tax laws such as changing the corporate or personal tax rate or changes to allowed tax deductions could have a negative impact on our results of operations and profitability by causing us to incur additional tax expense or by having a financial impact on our policyholders.

Current wording

Future tax legislation or changes to tax laws such as changing the corporate or personal tax rate or changes to allowed tax deductions could have a negative impact on our results of operations and profitability by causing us to incur additional tax expense or by having a financial impact on our policyholders. In particular, because PSRE is domiciled in Bermuda, changes in U.S. tax laws affecting reinsurance arrangements between U.S. insurers and their non-U.S. affiliates - including legislative proposals to limit or eliminate the deductibility of premiums ceded to affiliated offshore reinsurers - could increase our effective tax rate or otherwise adversely affect our results of operations, and any such changes could apply retroactively.

Previous wording

The continued operation and growth of our business will require substantial capital. We do not intend to declare and pay cash dividends on shares of our common stock in the foreseeable future. Because we are a holding company with no business operations of our own, our ability to pay dividends to stockholders largely depends on dividends and other distributions from our insurance subsidiaries, PSIC, PESIC, PSRE, FIA, and PCSC.

Current wording

The continued operation and growth of our business will require substantial capital. Although we did not pay cash dividends on our common stock prior to 2026, our Board of Directors has declared a cash dividend of $0.45 per share of our common stock, payable on September 2, 2026 to stockholders of record as of August 19, 2026, representing the first cash dividend declared on our common stock. Any future declaration and payment of dividends, including whether we continue to pay dividends at all, in the current amount, or on a quarterly schedule, will be at the discretion of our Board of Directors and will depend on, among other things, our results of operations, financial condition, capital requirements, regulatory restrictions, and other factors. Because we are a holding company with no business operations of our own, our ability to return capital to stockholders, including through dividends and other distributions from our insurance subsidiaries largely depends on dividends and other distributions from our insurance subsidiaries, PSIC, PESIC, PSRE, FIA, and PCSC.

Previous wording

The Sarbanes‑Oxley Act and the Dodd‑Frank Act, as well as new rules subsequently implemented by the SEC and Nasdaq, have increased regulation of, and imposed enhanced disclosure and corporate governance requirements on, public companies. We expect disclosure requirements to increase in the future and expand to areas such as climate change and greenhouse gas emissions. Our efforts to comply with these evolving laws, regulations and standards increases our operating costs and divert management’s time and attention from revenue‑generating activities.

Current wording

The Sarbanes‑Oxley Act and the Dodd‑Frank Act, as well as new rules subsequently implemented by the SEC and Nasdaq, have increased regulation of, and imposed enhanced disclosure and corporate governance requirements on, public companies. We expect disclosure requirements to increase in the future and expand to areas such as climate change and greenhouse gas emissions. Our efforts to comply with these evolving laws, regulations and standards increase our operating costs and divert management’s time and attention from revenue‑generating activities.

Previous wording

provide, through 2027, that our Board of Directors are classified into three classes with staggered, three year terms and that directors may only be removed for cause;

Current wording

provide, through 2027, that our Board of Directors is classified into three classes with staggered, three year terms and that directors may only be removed for cause;

Previous wording

Our purchases of our equity securities in the first quarter of fiscal year 2026 were:

Current wording

Our purchases of our equity securities in the second quarter of fiscal year 2026 were:

Previous wording

On July 31, 2025, our Board of Directors approved the adoption of a share repurchase plan that authorizes the repurchase of up to $150 million of outstanding shares of common stock through the period ending on July 31, 2027.

Current wording

On July 31, 2025, our Board of Directors approved the adoption of a share repurchase plan that authorizes the repurchase of up to $150 million of outstanding shares of common stock through the period ending on July 31, 2027. On April 30, 2026, our Board of Directors approved the adoption of a share repurchase plan, effective May 6, 2026, which replaces the previous program, and authorizes the repurchase of up to $200 million of outstanding shares of common stock through May 6, 2028.