MTA issues first storm surge cat bond

First Mutual Transportation Assurance Company, a New York State licensed and domiciled captive insurance company and subsidiary of the Metropolitan Transportation Authority (MTA), has become the first company to issue a cat bond to protect solely against storm surge risk.

MetroCat Re is a newly formed catastrophe bond shelf programme. GC Securities announced the placement of the Series 2013-1 Notes with notional principal of $200 million.

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 served as sole bookrunner, joint structuring agent and lead manager. The notes are rates BB- by Standard & Poor’s and have an expected maturity of August 5, 2016.

“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,” said Thomas Prendergast, MTA chairman and CEO.

“We appreciate the contributions of all of our business partners. This strengthens our position with regard to future interactions with the traditional reinsurance market. We anticipate that this deal represents the start of a long-term alternative reinsurance option that diversifies MTA’s risk management strategy.”

David Priebe, vice chairman of Guy Carpenter and Head of GC Securities, added: “The remarkable convergence of capital markets capacity with the reinsurance market that has been witnessed in 2013 to-date is also applicable to the insurance markets as is evidenced by the successful MetroCat Re cat bond issuance benefiting FMTAC. Capital markets investors embraced this new peril and sponsor. Marsh and McLennan Companies is committed to leveraging the GC Securities platform for the benefit of all its operating companies’ clients.”