NEW YORK CITY-The Metropolitan Transportation Authority has sold its first catastrophe bond totaling $200 million to help protect its assets against future storm surges like those of Superstorm Sandy that caused extensive damage to its infrastructure in the New York metro region last year.
Due to difficulties in obtaining insurance coverage for storm-related damage, the MTA turned to the public markets for financing and other transportation agencies here and elsewhere are studying such a funding option, according to the Wall Street Journal.
“The MTA's traditional avenues for insurance coverage dried up after Sandy, with damage from the storm making it "exceedingly difficult for (it) to obtain insurance," MTA Chairman Thomas Prendergast states.
For example, the Port Authority of New York & New Jersey's spokesman Steve Coleman says that catastrophe bonds are something the PA has considered and will continue to evaluate as a source of risk financing. A spokesman for the Massachusetts Bay Transportation Authority also says that agency is considering the issuance of catastrophe bonds as well.
"If one authority came in like that, you may see more," says Gary Martucci, director at Standard & Poor's, which rated the MTA bonds. "Catastrophe bond pricing has come in a lot more than traditional reinsurance pricing because of the competition from new sources of capital.” See story in the Wall Street Journal.
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