The Metropolitan Transportation Authority (MTA) has secured $200 million of insurance protection that will help pay for future repairs for damage to its infrastructure in the event of a storm featuring destructive storm surges similar to those experienced during Superstorm Sandy. The insurance protection has been funded through the offering of “catastrophe bonds” by MetroCat Re Ltd., a special purpose insurer.
This is the first time that the MTA has accessed the capital markets to manage its property damage risks, and it is the first catastrophe bond ever issued to protect solely against storm surge. The MTA’s premium cost is well below quotes that MTA received this spring for traditional property coverage.
“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 MTA Chairman/CEO Thomas F. Prendergast. “But as a result of this savvy and novel reinsurance arrangement, we are now in a stronger position should our area, God forbid, face another large-scale storm-surge event within the next three years.”
The transaction provides protection in the unlikely event that the water level reaches designated heights in the New York City Metropolitan Region during any hurricane, tropical cyclone or tropical storm through August 5, 2016.