A Bermuda special purpose insurer is behind the first storm-surge catastrophe bond.MetroCat Re Ltd, a Bermuda domiciled special purpose insurer established for issuing series of catastrophe bond notes, has been set up to support the risk transfer needs of First Mutual Transportation Assurance Co (FMTAC), the New York State-licensed captive insurer and subsidiary of the New York Metropolitan Transportation Authority (MTA).As industry blog Artemis noted: “For the first time in the history of the cat bond market, this transaction provides cover just for storm surge, resulting from named storms. Hurricane and tropical storm induced storm surge is included in many US wind cat bonds, so it is not particularly diversifying, but it has never been structured into a cat bond as the sole peril in this way and is an interesting addition to the market that could spur more issuance of storm surge cat bonds. It’s another sign of the increasing maturity and flexibility in the cat bond market, as well as the increasing appetite investors are showing for catastrophe risk.”The blog said the sponsor, the captive insurer of the New York Mass Transit Authority (MTA), has significant exposure to storm surge, as evidenced by the losses it faced from last year’s hurricane Sandy.“The MTA suffered a loss in the region of $5 billion from the storm, predominantly from surge due to flooded transit tunnels and subways, so it is encouraging to see it turn to the catastrophe bond market for a new source of reinsurance protection,” Artemis said.“In this cat bond, MetroCat Re Ltd will issue a single tranche of Series 2013-1 notes, which will be sold to collateralised a reinsurance agreement between itself and First Mutual Transportation Assurance Co (FMTAC). FMTAC will receive from the cat bond a three-year source of per-occurrence reinsurance protection against storm surge measured during named storm events on a parametric trigger basis.”Artemis said the notes offer protection against named storms that generate a storm surge event index that equals or exceeds 8.5 feet for Area A or 15.5 feet for Area B. Area A includes tidal gauges located in The Battery, Sandy Hook and Rockaway Inlet, while Area B includes tidal gauges in East Creak and Kings Point.A trigger event occurs when either Area’s event index calculated by RMS equals or exceeds the respective trigger levels. If a trigger event occurs, the loss payment from MetroCat to FMTAC will be 100 percent of the outstanding principal amount, so there is no sliding scale of loss here.