Standard & Poor’s on rating the MetroCat Re storm surge catastrophe bond


The MetroCat Re Ltd. catastrophe bond, which launched recently, has been receiving attention from the broader financial press and local New York media outlets. That’s no surprise given the unusual nature of the cat bond, as the first storm surge only cat bond and the first time a U.S. transit agency has sponsored a cat bond transaction.

The New York Metropolitan Transportation Authority (MTA) is seeking protection via a catastrophe bond issuance for storm surge risks held by its New York State-licensed captive insurer, First Mutual Transportation Assurance Co. (FMTAC).

MetroCat Re Ltd. is issuing a single tranche of Series 2013-1 catastrophe bond notes, which are being sold to collateralize a reinsurance agreement between itself and First Mutual Transportation Assurance Co. (FMTAC). Through the sale of the cat bond the MTA will receive a three-year source of reinsurance protection against storm surge measured during named storm events on a per-occurrence basis using a parametric trigger.

The unusual nature of cat bond which is solely exposed to storm surge risks, so soon on the heels of a high-profile catastrophe event like hurricane Sandy has piqued the media’s interest in the New York area. Given its unusual nature the cat bond has also required new insight and analysis from the rating agency Standard & Poor’s, being the first time it has ever rated a storm surge catastrophe bond.

Standard & Poor’s has published a useful short video which discusses the key decisions it faced in making its preliminary rating of the MetroCat Re Ltd. cat bond. The video features the thoughts of Gary Martucci, Director of Insurance Ratings at Standard & Poor’s.

You can read all about the MetroCat Re storm surge cat bond in our article announcing the launch of the deal and our catastrophe bond Deal Directory.

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