Amtrak goes to Bermuda (for insurance)

Amtrak has obtained $275 million of insurance protection from PennUnion Re Ltd., an independent special-purpose insurer based in Bermuda.

PennUnion has issued so-called “catastrophe” bonds to fund and collateralize the insurance, which covers damage to Amtrak-owned infrastructure in the Northeast Corridor (NEC) in the event of a natural disaster due to storm surge, wind damage or earthquake. Passenger Rail Insurance Liability, a Bermuda-based insurance company wholly-owned by Amtrak, entered into a reinsurance contract with PennUnion Re Ltd., to provide this catastrophe protection. GC Securities, a division of MMC Securities Corp and an affiliate of Marsh and McLennan Companies, and Goldman, Sachs & Co. were joint structuring agents, joint bookrunners and initial purchasers of the Series 2015-1 catastrophe bonds. Advisors also working on the transaction include RMS, Inc., a catastrophe risk modeling firm experienced in developing pioneering trigger mechanisms for catastrophe bonds, and Mayer Brown, LLP, transaction counsel.

“The catastrophe bonds provide a capital-markets source of insurance risk capital that will provide protection in the unlikely event that a natural disaster would cause damage to Amtrak-owned infrastructure in the NEC, such as damage suffered by Amtrak from Superstorm Sandy in 2012,” said Amtrak Executive Vice President and Chief Financial Officer Gerald Sokol, Jr. “Superstorm Sandy created a storm surge that resulted in sea water inundating both tubes of the Hudson River tunnel and two of the four tubes of the East River tunnel, causing more than $1 billion in damage. 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.”

Bermuda is a British Overseas Territory in the North Atlantic Ocean, located off the east coast of North America. Its nearest landmass is Cape Hatteras, N.C.