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based measurements to frame the risk.
For a flood barrier project, for
instance, the same CAT events are
modeled both with and without the
barrier in place, illustrating how the
project will reduce the cost of the risk.
“The key to the resilience bond
concept is the ability to … determine
in a robust, probabilistic manner, the
reduction in risk that results from
actions taken to improve resilience,” said
Ben Brookes, VP, capital markets, RMS.
Brookes noted that modeling for
resilience brought a new dimension to
Resilience, he said, “might mean
reducing loss of life in the wake of
disaster. It might mean protecting
complex interconnected lifelines such
as health care services, transportation,
The catastrophe exposures
being addressed by any given public
sector resilience project typically
impact numerous public and private
stakeholders in a region, such as
utilities, hospitals, universities and
mass transportation systems as well as
As such, resilience bonds present
partnership opportunities to share the
cost of infrastructure improvements
as well as the benefits of resilience
rebates, while improving the risk
profile for all.
Shared risk in the Embarcadero
Historic District in San Francisco is a
“There is $75 billion in assets behind
the seawall and all of the major utility
lines actually run physically through the
concrete wall,” said Vajjhala.
“The wall is not seismically sound
A retrofit would generate insurance
benefits for the Port, which is the
seawall’s managing entity, as well as all
of the private properties that could be
impacted if that seawall fails, she said.
“Almost every major port city has
some variation on that problem.”
The Re:Bound project is exploring
infrastructure interventions that
work across different perils, including
“It’s all about what’s modellable,
what creates a meaningful risk
reduction, and then how do you
translate those risk reductions into
a resilience bond structure so that
they can be redirected to support the
project,” said Vajjhala.
She and Re:Bound program co-lead Jamie Rhodes are working with
potential sponsors and co-sponsors
from around the country to explain the
new bond framework and help them
determine whether a resilience bond
might be an effective complement to a
resilience project under consideration.
Vajjhala and Rhodes expect that the
first issuance of this type of resilience
bond will happen within the next year
and a half. They’re excited to be able to
bring the concept to reality.
“A large part of what makes our
little firm tick is solving problems
that are at the intersection of public
and private interest — those things
that have a lot of people’s attention
but there’s no single individual or
organization that has the get-up-and-go to tackle on its own,” said Vajjhala.
“We take a great deal of satisfaction
in being able to solve these kinds of
problems and incubate lines of business
that create public value.” &
MICHELLE KERR is an associate editor with
Risk & Insurance®. She can be reached at
energy and water supplies. It might mean
improving the ability to recover quickly.
It might mean reducing the economic
impact in terms of city revenues or
“Or it might mean all of these things
“The interplays between these
elements can also be critical,” Brookes