Palomar Holdings, Inc. Commitments Disclosure
21. Commitments and Contingencies
Litigation
The Company is subject to legal proceedings arising from the normal conduct of its business. In the opinion of management, any ultimate liability that may arise from these proceedings will not have a material effect on the Company’s financial position.
Letters of Credit and Trusts
As of December 31, 2025, the Company has one irrevocable standby letter of credit for the benefit of ceding insurance companies to secure the unearned premium assumed by PSIC. The bank letters of credit amount to a total of $4.1 million and may renew if the Company continues to assume premium from these insurance companies. The letter of credit is collateralized by the Company’s Credit Agreement.
As of December 31, 2025, the Company has a letter of credit for the benefit of the State of California to secured unearned premium and loss reserves incurred in the worker’s compensation program. The letter of credit amounts to $142.3 million and are collateralized by the Company’s available-for-sale investments.
In addition, the Company has established seven Regulation 114 Trust accounts for the benefit of ceding insurance companies to secure the unearned premium assumed by PSIC. As of December 31, 2025 the trust had a market value of $22.6 million.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 24, 2026 | Showing above |
| 2024 | Feb 25, 2025 | |
| 2023 | Feb 23, 2024 | |
| 2022 | Mar 1, 2023 | |
| 2021 | Feb 25, 2022 | |
| 2020 | Mar 9, 2021 | |
| 2019 | Feb 28, 2020 | |
About Commitments Disclosures
Commitments and contingencies disclosures catalog a company's off-balance-sheet obligations and legal exposures — purchase commitments, guarantee arrangements, pending litigation, and regulatory proceedings. These items represent potential future cash outflows that may not appear as liabilities on the balance sheet until they become probable and estimable.
Key signals: litigation reserves and disclosed loss ranges quantify management's estimate of legal exposure, but unquantified "reasonably possible" losses often represent the larger risk. Watch for changes in language around pending cases — shifts from "remote" to "reasonably possible" or increases in estimated loss ranges signal deteriorating outcomes. Unconditional purchase obligations and take-or-pay contracts create fixed cost structures that reduce operational flexibility. Guarantee arrangements for subsidiaries or joint ventures can create cascading obligations. Compare the total commitment schedule against projected free cash flow to assess whether the company can meet its obligations without additional financing.