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New York transit system gets three years of storm surge protection with $200-million in cat bonds


August 1, 2013   by Canadian Underwriter


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Guy Carpenter & Company LLC announced Wednesday that GC Securities has placed US$200 million in cat bonds which are essentially intended to cover public transit systems in and near New York City for storm surge risk.

NYC transit system gets cat bond protection from storm surge

New York-based GC Securities stated the Series 2013-1 Notes were placed through a catastrophe bond shelf program, MetroCat Ltd., to benefit the First Mutual Transportation Assurance Company (FMTAC).

New York state records indicate FMTAC was established to insure and reinsure the risks of the Metropolitan Transit Authority (MTA), which runs the subway and bus system in New York City as well at the Long Island Railroad and Metro North, the commuter train services serving areas east to Montauk, N.Y. and northeast to Waterbury, Conn.

Parts of the New York subway system were flooded after Hurricane Sandy, which was downgraded to post-tropical storm status when it made landfall in New Jersey, about 200 kilometres south of New York City, on Oct. 29, 2012.

“In the aftermath of Superstorm Sandy, the traditional avenues we use for insurance and reinsurance contracted dramatically, making it exceedingly difficult for the MTA to obtain insurance,” MTA chairman and CEO Thomas Prendergast stated in a press release.

The expected maturity date for the cat bonds is Aug. 5, 2016.

“The bond provides three years of per occurrence determined storm surge height protection as measured by up to five calculation locations in the New York City metropolitan region during the event period of a named storm,” GC Securities stated.

The notes are rated BB- sf by Standard & Poor’s Financial Services LLC.

Public transit systems in the northeastern U.S. got billions in federal aid in order to repair damage from Hurricane Sandy. Last May, the U.S. Department of Transportation announced that MTA, the New York City department of Transportation and two area transit agencies are getting US$3.7 billion in new funding, on top of funding announced in March.

The other agencies were New Jersey Transit and the Port Authority of New York and New Jersey, which operates the Port Authority Trans Hudson (PATH), a passenger rail service connecting lower Manhattan with the New Jersey suburbs to the west. Parts of the PATH system was also flooded after Storm Sandy.


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