Genstar Enters Earthquake Market with New Platform
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Genstar Enters Earthquake Market with New Platform

genstar nf1Genstar Capital Management has partnered with insurance industry veteran David “Mac” Armstrong to establish a new platform company, Palomar Insurance Holdings, to provide commercial and residential earthquake insurance. The company was funded with $75 million of equity capital from Genstar and the management team.

Concurrent with the investment from Genstar, Palomar acquired an admitted insurance company from a national insurer that is licensed to underwrite business in seven states and subsequently changed the name to Palomar Specialty Insurance Company (“Palomar”). Palomar has received a Financial Strength Rating of A- (Excellent) and an Issuer Credit Rating of “a-” from A.M. Best Company.

Palomar initially will focus on the residential and commercial earthquake markets in earthquake-exposed states such as California, Oregon, Washington and Missouri where consumers tend to have limited options to purchase earthquake insurance. Palomar will distribute its product through a network of program administrators as well as selected retail producers and wholesale brokers.

clark nf1“Genstar’s investment in Palomar follows a proven growth strategy in the insurance industry and one that we at Genstar have utilized to create strong and growing companies operating in niche sectors of this market,” said J. Ryan Clark, Managing Director at Genstar. “Palomar is well capitalized and we look forward to working with Mac and his extremely talented management team to pursue the growth and development initiatives we have identified in the approximately $4 billion earthquake insurance market.”

Genstar is partnering with Mr. Armstrong, former President of Arrowhead General Insurance Agency, the largest program administrator in the property and casualty insurance sector with over $800 million in written premium. Mr. Armstrong will lead Palomar as Chief Executive Officer.

Also joining the Palomar team are President Heath Fisher, Chief Underwriting Officer Andrew Robinson and Chief Operating Officer Jon Christianson. These individuals have over 50 years of experience in the earthquake insurance market and have relationships with the distribution sources and reinsurers required to effectively service the market.

Genstar Capital invests from $50 million to $400 million in middle-market companies that have enterprise values from $50 million to $1 billion and EBITDAs greater than $15 million. Sectors of interest include life sciences, healthcare services, software & software services, financial services, and industrial technology. The firm was founded in 1988 and is based in San Francisco (www.gencap.com).

Genstar’s other investments in the insurance industry include Acrisure, a Midwest retail insurance brokerage; Insurity, a provider of policy administration software for the property and casualty insurance industry; Granite Global Solutions, a Canadian provider of risk mitigation services to insurance and corporate clients; and Innovative Aftermarket Systems, a marketer, administrator and underwriter of vehicle protection products and related services sold through automobile dealers. In November 2012 Genstar sold Confie Seguros, a national insurance distribution company primarily focused on the insurance needs of the Hispanic consumer, to ABRY Partners. During its ownership, Genstar grew Confie Seguros from a single platform of 30 stores to more than 300 retail locations and more than $200 million in revenue.

Palomar’s Board of Directors includes Mr. Armstrong, two members of Genstar Capital, Mr. Clark and Geoff Miller, as well as independent director Tom Hutton, the former Chief Executive Officer of Risk Management Solutions and White Mountains Re. The company will also be advised by Dennis Chookaszian, the former CEO of CNA Insurance; Bob Dowdell, the former CEO of Marshall & Swift; and Richard Taketa, President of York Risk Services Group.

© 2014 PEPD • Private Equity’s Leading News Magazine • 3-13-14

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