GC Securities, a division of US-registered broker-dealer MMC Securities, has announced the placement of the Series 2015-1 Notes, with notional principal of $275 million through the newly formed catastrophe bond shelf programme PennUnion Re.
The 2015-1 notes will benefit Passenger Railroad Insurance (PRIL), a Bermuda licensed captive and domiciled insurance company and wholly-owned subsidiary of the National Railroad Passenger Corporation, Amtrak.
The Series 2015-1 Notes provide protection from storm surge and wind resulting from named storms as well as earthquakes affecting the Northeast region of the US for a period of approximately 3.17 years. The transaction is triggered based on key intensity measurements of the physical parameters for each respective peril captured at specified measurement locations. Depending upon the peril, the measurements are taken from both inland and offshore locations ranging from the Washington, DC to Providence, Rhode Island (RI) regions.
Storm surge water height measurements are captured at seven tidal gauge stations in the Long Island Sound, East River, Lower New York Bay and Delaware River. Wind measurements are captured and interpolated for 60 ZIP codes along Amtrak’s Northeast Corridor (NEC) railways from Washington, DC. to near Providence, RI. Earthquake intensity is interpolated to 21 ZIP codes within the states of Delaware, New Jersey, New York, Pennsylvania and Rhode Island.
PennUnion Re enables Amtrak to cover the cost of disasters by tapping new risk financing outside the traditional reinsurance markets.
“This is the first time Amtrak has used the capital markets to broaden our base of insurance coverage,” said Gerald Sokol, Jr, Amtrak executive vice president and chief financial officer.
“The catastrophe bond market provides us with a means to diversify our sources of insurance in a cost effective manner.”
“PennUnion is another ground-breaking catastrophe bond transaction predicated on mature, metric-based understanding of current and future risk that RMS has helped develop for a transport agency,” said Brookes.
GC Securities served as joint structuring agent and joint bookrunner for the Series 2015-1 Notes. Risk Management Solutions served as expertising modeling firm and calculation agent for the Series 2015-1 Notes.
Catastrophe risk management firm RMS provided the risk analysis for the 2015-1 Notes. The firm also provided consulting support to help Amtrak strengthen its risk transfer strategy.
Combined, the bond and preparatory consulting work by RMS equips Amtrak to define the probability and severity of potential catastrophic scenarios, assess the risk that it currently holds, and evaluate the cost benefit of disaster risk mitigation policies.
“RMS is delighted to have helped develop PennUnion Re, protecting Amtrak-owned infrastructure along one of the most important railroads in the northeast region,” said Ben Brookes, vice president of capital markets at RMS.
“The bond’s robust trigger, based on measured hazard values, will help Amtrak receive a quick settlement, enabling the agency to recover quickly following a hurricane or earthquake.”
Amtrak, GC Securities, MMC Securities, PennUnion Re, North America