Environmental Market Opportunities
Climate and Weather Risk Solutions
Effective management of catastrophic risk relating to weather extremes has become increasingly important for our clients.
We have been a leader in structuring and underwriting catastrophe bonds, which help diversify and transfer catastrophic risks—including weather-related events such as hurricanes—through the capital markets. We have structured over $15 billion of weather-related catastrophe bonds since 2006. Our breadth of financial and market making capacity enables us to be innovative in helping our clients more effectively manage their risk.
Given the increasing focus on resiliency measures and the need for greater investment in this field, we are also establishing partnerships to develop new models for catastrophe bonds that can better evaluate the benefits of increased investments. For example, enhanced physical resiliency, including flood barriers and stormwater detention structures, can improve the ability to withstand extreme weather events, which could then potentially be factored into the pricing and financial return models for catastrophe bonds.
Case Study: AMTRAK
In October 2015, we acted as joint bookrunner for PennUnion Re Ltd., the vehicle sponsored by passenger rail company Amtrak, in connection with the issuance of catastrophe bonds that provide Amtrak coverage beyond its traditional reinsurance against storm surge, wind and earthquake triggers in the Northeastern United States. The $275 million bond was the second cat bond ever to cover storm surge as a primary peril.
Case Study: Metropolitan Transportation Authority
In May 2017, we acted as joint bookrunner on the second catastrophe bond sponsored by the New York Metropolitan Transportation Authority (the owner of the New York City subway, bus and rail transportation system). This built on our prior transaction experience in August 2013, when we acted as joint bookrunner for MetroCat Re Ltd., a vehicle sponsored by the MTA in connection with the issuance of the first catastrophe bonds focused solely on the peril of storm surge.
Case Study: RE.bound Initiative
In 2015, given the increasing focus on resiliency measures by policymakers and the need for greater investment in this field, we joined a partnership with other private-sector leaders called RE:bound. The initiative seeks to design a new catastrophe bond-like product that would realize the potential benefits from infrastructure improvements that have greater resiliency measures and monetize the associated physical and financial risk reductions. In addition to traditional grey infrastructure solutions, improved resiliency measures can include seawalls and green stormwater infrastructure. By identifying the financial value from enhanced resiliency, the partnership seeks to promote greater investment.