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Amtrak taps into capital market with $275 million cat bond

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The National Railroad Passenger Corp., better known as Amtrak, has used a catastrophe bond to secure $275 million in storm surge protection for just over three years, according to GC Securities, which served as joint structuring agent and joint bookrunner for the notes, GC Securities said in a statement Wednesday.

This is the first time Amtrak has tapped the capital markets for coverage, said the statement.

The PennUnion Re Ltd., 2015-1 Notes will benefit Passenger Railroad Insurance Ltd., a Bermuda licensed and domiciled insurance company and wholly-owned subsidiary of the National Railroad Passenger Corp., said the statement.

The notes mature on Dec. 7, 2018, affording just over three years of per-occurrence cover using a parametric trigger, according to the statement.

Measured storm effects involved in the trigger will include water height measurements from seven tidal gauge stations in the Long Island Sound, East River, Lower New York Bay and Delaware River; wind measurements taken and interpolated for 60 ZIP codes along Amtrak's Northeast Corridor railways from Washingtonto near Providence, Rhode Island; and earthquake intensity which is interpolated to 21 ZIP codes in Delaware, New Jersey, New York, Pennsylvania and Rhode Island, said the statement.

“This is the first time Amtrak has used the capital markets to broaden our base of insurance coverage. The catastrophe bond market provides us with a means to diversify our sources of insurance in a cost effective manner,” Gerald Sokol, Amtrak chief financial officer, said in the statement.

“The novel and dynamic trigger mechanisms based on physical observations for each of the perils covered, for example, storm surge heights for named storms, wind speeds from named storms, and earthquake intensities, were tailored to specific losses to Amtrak's infrastructure and are fairly unique in the current ILS landscape,” Cory Anger, Global Head of ILS Structuring, GC Securities, said in the statement.