15 October 2015 Alternative Risk Transfer

Amtrak completes $275m cat bond

Amtrak subsidiary Passenger Railroad Insurance has closed a $275 million catastrophe bond hedging its exposure to storm surge and wind from named storms and earthquake protection.

This is the first time Amtrak, also known as the National Railroad Passenger Corporation, has used the capital market to broaden its insurance coverage.

The notes, which were placed through newly formed catastrophe bond shelf program PennUnion Re, 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 trigger 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.

“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.”

GC Securities served as joint structuring agent and joint book runner and RMS provided the risk analysis.

Ben Brookes, vice president of capital markets at RMS, said: “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.

Cory Anger, global head of ILS structuring, GC Securities, added: “Amtrak’s use of catastrophe bond-based protection for its Northeast Corridor exposure represents further strides in the ILS market by being the first catastrophe bond ultimately benefiting a corporate that provides multi-peril coverage.”

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