N.Y. MTA Secures $200M of Storm Insurance Protection

BOSTON — New York's Metropolitan Transportation Authority has secured $200 million of insurance protection that will help pay for future repairs for storm damage to its infrastructure, the agency announced Wednesday.

MetroCat Re Ltd., a special-purpose insurer, will offer the protection through so-called catastrophe bonds.

This is the first time the MTA, which operates New York City's subway system, regional commuter trains, and bridges and tunnels, 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, according to an agency spokesman.

The MTA's premium cost is well below quotes that MTA received this spring for traditional property coverage, the spokesman said.

"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," chairman and chief executive Thomas Prendergast said in a statement. "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."

Standard & Poor's two weeks ago assigned a preliminary BB-(sf) rating to the Series 2013-1 Class A notes.

 The transaction provides protection should the water level reach designated heights in the region during any hurricane, tropical cyclone or tropical storm through Aug. 5, 2016.

First Mutual Transportation Assurance Co., the MTA's in-house insurer, entered into a reinsurance contract with MetroCat Re.

Risk Management Solutions Inc. is calculation agent. It uses a storm-surge model rather than a wind model. Water surge caused most of the MTA's estimated $4.8 billion of damage when Sandy struck Oct. 29.

Raymond James and Associates Inc. was First Mutual's financial advisor.

GC Securities, a division of MMC Securities Corp. and a member of Marsh and McLennan Cos., and Goldman, Sachs and Co., also advised on the deal.

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Transportation industry New York
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