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Amtrak’s PennUnion Re cat bond launch delayed by Joaquin


The completion and settlement of passenger rail company Amtrak’s first catastrophe bond, PennUnion Re Ltd. (Series 2015-1), has been delayed due to the uncertainty surrounding the forecast for recent hurricane Joaquin.

The PennUnion Re cat bond is a largely storm surge exposed catastrophe bond featuring a parametric trigger based on hurricane or named storm landfall location, wind speeds and/or storm surge heights.

The cat bond is designed to protect Amtrak against exactly the kind of coastal impact and flooding that last week’s hurricane Joaquin threatened when the forecast models all suggested a U.S. east coast landfall was likely.

PennUnion Re Ltd. is a Bermudian SPI established for the purpose of issuing catastrophe bond notes for Amtrak. PennUnion Re will seek to issue a single tranche of at least $200m of Series 2015-1 Class A notes which will be sold to ILS investors. The sale of the notes will fully-collateralize a reinsurance agreement between the SPI and Passenger Railroad Insurance, which will in turn provide insurance protection to Amtrak.

On Thursday, just before the cat bond’s scheduled completion, the forecast models all showed hurricane Joaquin as likely to make a landfall somewhere north of the Carolina’s, with the consensus at one stage pointing directly at Chesapeake Bay and later in the day at New York and New Jersey.

Both of those scenarios could have put the PennUnion Re cat bond at risk as Joaquin approached and with the bond scheduled to be settled and come on-risk after Friday the 2nd October, the deal’s launch has, according to sources, been delayed.

Obviously Amtrak would have liked to have had the protection from this cat bond in place had Joaquin made landfall, however ILS investors and managers would probably have cancelled orders had the book continued to target closing last Friday.

Buying a cat bond at par, as all new deals launch, which was immediately threatened by an approaching storm would not even appeal to the most risky ILS investment strategy, so it’s no surprise that the deal has been delayed by a week.

The $200m of PennUnion Re cat bond notes are now scheduled to be priced either today or tomorrow, we understand, with an expected settlement of the transaction by the end of the week. We don’t at this time know if the deal is likely to upsize at all.

We’ll update you as the PennUnion Re Ltd. (Series 2015-1) catastrophe bond completes and we have final details on size and pricing.

You can read all about this and every other cat bond in the Artemis Deal Directory.

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