Amtrak’s captive insurance company, Passenger Railroad Insurance, has launched a catastrophe bond for US storm surge coverage.
Passenger Railroad Insurance insures Amtrak, a passenger railroad company, and also provides some reinsurance coverage.
In this deal, PennUnion Re will look to issue a single Series 2015-1 Class A notes which will be sold to insurance-linked securities investors. The cat bond deal is for approximately $200 million.
PennUnion Re will be able to fully-collateralise the reinsurance agreement between itself and Passenger Railroad Insurance, which will in turn provide insurance protection to Amtrak.
The coverage from the cat bond will be on a per-occurrence basis, across a three-year period, providing protection against the perils of US storm surge, from named storms and earthquakes.
Standard and Poor’s has assigned a “BB-(sf)” preliminary rating to the Series 2015-1 notes.
The rating is based on the lowest of the natural catastrophe risk (“bb-“) and the rating on the assets in the reinsurance trust account.
According to S&P, this is the first issuance sponsored by Amtrak and the second issuance that its rated that includes storm surge as the primary driver of the risk being transferred to the capital markets.
