Reinsurance intermediary Guy Carpenter and catastrophe modelingfirm Risk Management Solutions say they helped the MetropolitanTransportation Authority sell the first-ever bond to protectagainst storm surge.

With the bond, the MTA secured $200 million in insuranceprotection to help pay for damages like those it sufferedduring Superstorm Sandy last year. Repair costs totaled $4.8billion from the late October storm.

“In the aftermath of Superstorm Sandy, the traditional avenueswe use for insurance and reinsurance contracted dramatically,making it exceedingly difficult for the MTA to obtain insurance,”says Thomas F. Prendergast, MTA chairman and CEO. “We anticipatethat this deal represents the start of a long-term alternativereinsurance option that diversifies MTA's risk managementstrategy.”

MTA's captive insurer, First Mutual Transportation AssuranceCo., entered into the contract with special-purpose insurerMetroCat Re Ltd. in a deal brokered by GC Securities, a division ofMMC Securities and a member of Marsh and McLennan Cos.

The coverage, with what is being described as afirst-of-its-kind trigger structure, protects the MTA against stormsurge through August 5, 2016.

Chi Hum, global head of ILS distribution for GC Securities saysthe MTA “should consider this an invitation from the capitalmarkets to make regular use of this diversifying and deep source ofreinsurance capacity.”

RMS says its Version 13.0 North Atlantic hurricane model wasused for the risk analysis related to the bond. The model is theonly one in the industry to quantify storm surge through the entirelifecycle of a storm, the firm says.

“Our model indicates that there is a 20 percent chance that aU.S. hurricane will cause more damage from surge than from wind,which rises to 40 percent along the northeast coast,” says PeterNakada, managing director of capital markets at RMS, in astatement.