PennUnion Re (Amtrak, 2015)
A 275-million-dollar cat bond issued in 2015 for Amtrak after Sandy, covering storm surge in New York and Delaware through a parametric trigger based on tide gauges.
Sandy flooded the rail tunnels under the Hudson and East rivers in 2012, and saltwater leaves damage that surfaces over years, which makes an indemnity loss slow and contentious to establish. An infrastructure operator also has no diversified portfolio to cede: it carries a few critical assets whose replacement value exceeds what the traditional market readily offers. A parametric trigger addresses both problems: it pays on water height measured at public tide gauges, published within days and beyond dispute. The tradeoff is basis risk: a surge just below the threshold, or damage caused by something other than water height, stays with the operator. The deal runs through the operator's captive, which reinsures with the issuing vehicle.
In October 2015, through its Bermuda captive and the PennUnion Re vehicle (Series 2015-1), Amtrak secured 275 million dollars of cover, 75 million above target, against storm surge in New York and Delaware, named storm wind and earthquake; the notes, given a preliminary 'BB-' rating by S&P, matured on December 7, 2018.
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