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EBC Climate Change Program:

Financing Resilience The Big Challenge


Grants, Loans, Bonds, Insurance-Linked Securities
and More

Welcome
Ruth Silman
Chair, EBC Climate Change &
Air Committee
Boston Office Managing Partner
Nixon Peabody LLP

Environmental Business Council of New England


Energy Environment Economy

Introduction
Daniel Stapleton
Program Chair & Moderator
Senior Vice-President/Sr. Principal
GZA

Environmental Business Council of New England


Energy Environment Economy

Financing Climate Change Resiliency,


Overview - Issues and Opportunities

Wayne Cobleigh
Vice President Client Services
GZA

Environmental Business Council of New England


Energy Environment Economy

Financing Resilience - Overview


Issues and Opportunities
Rebecca French, Ph.D.
Wayne Cobleigh, CPSM
Jessica LeClair, M.S.
Yi Shi, M.E.M. candidate

Ask 3 Questions and Innovate


Why? Lets confront a problem and a present
reality.
What if? Envision what might be. What if we borrow an
idea or try some combination of X and Y?

How? Turn speculation into reality. How can


we get this done? What are the first steps?
If my idea isnt working, how can I figure out
whats wrong and fix it?

What We Need to Fund

Credit: USACE North Atlantic Coast Comprehensive Study

Resilience Outcomes

Return on Investment

Elevation
Green Infrastructure
Hazard Mitigation
Retreat to Safety
Shoreline Protection
Jobs
Market Investments

Benefit Cost
Analysis
Return on
Resiliency
Lower Risk and
Insurance Costs

Increased property value


Lower insurance costs
Reduced losses
Reduced risk
Property tax stability
Safer community
Bond Rating Stability

Standards to
mitigate flood and
wind risk
to reduce disaster
recovery costs

Increase property
value

Increase public
safety and resiliency

business continuity
& community
socioeconomic
stability

Resilience Financing in Connecticut

Microgrids Grants and Green Bank Financing


Clean Water Revolving Loan Funds
Tax Increment Financing Districts
Shore Up Connecticut Loans
Rebuild by Design
National Disaster Resilience Competition

Emerging Finance Programs

Social Impact, Green and Resilience Bonds


Energy Savings Performance Contracts
New Jersey Energy Resilience Bank
Connecticut Green Bank C-PACE and R-PACE
Property Assessed Resilience
Institutional Investors (enviro-social-governance)
Public-Private Partnerships (P3s)

Resilience Financing in Connecticut

CURRENT PROGRAMS

Microgrids Grants and


Green Bank Financing
CT DEEP made $23 million in
grants, $30 million just added
Partner with CT Green Bank
Generators, fuel cells, or any
other type of electrical
energy production source
Fuel tanks, piping, or fuel
regulation equipment
Foundations
Excavation, trenching, paving
Mechanical equipment or
piping
Thermal insulation

Clean Water Revolving Loan Funds


Grants range from 20% to 50%
of costs
Loans are repaid 2% over 20
years
Reserve for construction of
resiliency projects for sea level
rise $4M (20% grant/80% loan)
Reserve for green
infrastructure (20% grant/80%
loan or 50% grant/50% loan)
Climate change assessment
and evaluation of remedial
actions

Shore Up Connecticut

Shore Up Connecticut Results


13 Loans $82-300K,
$170K average per
house,
$2.06M total
3 Elevation Contractors
Multiple architects,
engineers

5 in Milford
4 in Fairfield
2 in East Haven
1 in Branford and
Norwalk

Potential Resilience Financing in Connecticut

MODEL PROGRAMS

Resilience Bonds
Modify the catastrophe bond structure to
capture the future savings from a resilience
project and lowered risk to investors of
insurance payouts, then apply that
performance value as a rebate for resilient
infrastructure projects

Energy Savings Performance Contracts


Energy savings pays down the financing

U.S. DOE

New Jersey Energy Resilience Bank


Funding for distributed
energy resource
technologies
Grants and low-interest
loans capitalized with
federal disaster recovery
dollars
Can become self-sustaining
after disaster dollars spent
Waiver from small business
rule due to broad public
benefit of privately-owned
utilities
Source: NJ.com

Connecticut Green Bank C-PACE*


Property Assessed Resiliency
Access to PRIVATE financing of
mitigation measures with senior lien for
qualified upgrades and repaid via a
benefit assessment on the owners
property tax

Requires legislative consent of municipality


and existing mortgage lender

* Commercial Property Assessed


Clean Energy

Savings from upgrades payback over loan


period enforced by legal, financial and
technical underwriting

Breaking Barriers Proposed R-PACE


Proposed HB5563
Subordinates the lien for
residential
Allows lenders to
transfer payment
obligation
Sidesteps FHFAs
prohibition of
purchasing first-lien

First PAR in the country?


Allowable activities:
Flood and hurricane
resistant construction
retrofits

Federal Policy Motivating


Proactive Resilience
FEMAs Disaster
Deductible concept
States responsible for
up front commitment of
funds
Resilience projects
could be credit towards
deductible
Opportunity for
resilience financing?
FEMA Administrator Craig Fugate AP

Contact Information
Rebecca.french@uconn.edu
wayne.cobleigh@gza.com

References
1. Berger, Warren, A More Beautiful Question: The Power of Inquiry to
Spark Breakthrough Ideas (Bloomsbury, March, 2014).
2. Berger, Warren, Chasing Beautiful Questions, Spirit Magazine, p. 6974, April, 2014.
3. Kunreuther, Howard; Kousky, Carolyn; Addressing Affordability in the
National Flood Insurance Program, Journal of Extreme Events, Vol. 1,
No. 1, April, 2014.
4. Bailey, Jessica, C-PACE: Commercial & Industrial Property Assessed
Clean Energy Presentation to ICSC May 2013 and www.c-pace.com .
5. American Society of Civil Engineers, Flood Resistant Design and
Construction Guidance Standard, ASCE 24-14.
6. Insurance Institute for Business and Home Safety, Fortified Overview
at www.disastersafety.org/fortified-main/
7. Petrenko, Fedor, Finance for Resilience Chooses Winning Innovations.
Yale Center for Business and the Environment.
http://www.cleanenergyfinanceforum.com/2015/04/24/finance-forresilience-chooses-winning-innovations
8. Sims, Douglass,et al. NRDC Issue Paper, Taking the High Road to More
and Better Infrastructure in the United States
https://www.nrdc.org/resources/taking-high-road-more-and-betterinfrastructure-united-states

MA Coastal Resilience Grant Program:


Grants Supporting Local Adaptation Efforts

Patricia Bowie
Coastal Resiliency Specialist
Office of Coastal Zone Management

Environmental Business Council of New England


Energy Environment Economy

Coastal Resilience
Grant Program
Patricia Bowie
Coastal Resilience Specialist
MA Office of Coastal Zone Management

State financial (& technical) support


for local adaptation
State Capital Funding Awarded:
FY14 (2014)

$2.0 M

FY15 (2014)

$2.7 M

FY16 (2015)

$2.2 M

FY17 (2016)

$1.8 M

Demonstrated need for additional


financing mechanisms
140
120

100
80

FY17

60

FY16
FY15

40

FY14

20

Proposed
117

Awarded
71

Total Requested: $18.1 M

Total awarded: $8.8 M

Resilience projects in 40
coastal communities
since Sep. 2014

Utilize dynamic models to map &


evaluate flooding vulnerabilities

Increase public awareness

Adaptive management of
current & future vulnerabilities

Restore coastal floodplains

Strengthen hazard mitigation approaches


to protect public health & safety

Prevent catastrophic
flooding impacts

Relocate and elevate critical


infrastructure

Advance green infrastructure


approaches to shoreline
stabilization

Planning & implementation


challenges

- Design life, cost & maintenance


- Permitting
- Stakeholder input varies

Coastal resilience investment


(FY14-17)

Green
Infrastructure
$3,160,372

Vulnerability &
Risk
Assessment
$1,935,459

Redesign &
Retrofit
$2,682,529

Public
Education &
Communication
$308,417

Local Bylaws/
Management
Measures
$738,810

Communities taking action

Green
Infrastructure
$3,160,372

Vulnerability &
Risk
Assessment
$1,935,459

Redesign &
Retrofit
$2,682,529

On-the-ground
adaptation
$5,842,901

Public
Education &
Communication
$308,417

Local Bylaws/
Management
Measures
$738,810

Investing local staff time & other


resources

Competitive Evaluation Criteria


Problem and need for
assistance
Current management
approach
Project description and
public benefit
Climate adaptation
Transferability
Timeline
Budget
Project Management
Partners

Achieving Resilience through


Property-Assessed Resilience,
Microgrid and Clean Energy Loans

Matt Macunas
Legislative Liaison/Marketing Manager
Connecticut Green Bank

Environmental Business Council of New England


Energy Environment Economy

Sparking a Movement to Accelerate


the Growth of Green Energy

November 2016

AGENDA
Green Bank Introduction
PACE Financing
Green Bonds
National Infrastructure Bank

4747

Green Bank
Introduction

Connecticut Green Bank


About Us
Quasi-public organization 2012 / successor to the CT Clean Energy Fund
Focus finance clean energy (i.e. renewable energy, energy efficiency, and
alternative fuel vehicles and infrastructure) by leveraging public capital
with private investment
Balance Sheet ~$130 Mil in assets (~$95 Mil in Loans/Investments)
Recurrent Funding
$0.01/kWh surcharge on electric bills (~$10 / yr per household) [$27Mil]
RGGI [~$5 Mil] a year for renewable energy
Miscellaneous
federal competitive solicitations (i.e. SunShot Initiative)
non-competitive resources (i.e. ARRA-SEP)
private capital and private foundations

4949

Solution Blueprint
Getting Results Inception to Date
FY 2000FY 2011
(CCEF)

FY 2012FY 2016
(CGB) 1

FY 2017
Targets
(CGB) 2

Model

Subsidy

Financing

Financing

Years

11.00

5.00

1.00

Energy (MW)

43.1

193.8

86.4

$349.2

$936.9

$393.7

Leverage Ratio

1:1

6:1

10:1

% of Funds as Loans

10

56

80

Investment ($MM)

Deploying more green energy at a faster pace while using ratepayertaxpayer resources responsibly
REFERENCES
1. Comprehensive Annual Financial Report for FY 2015 for approved, closed, and completed transactions
2. Board approved targets for FY 2017

50

What are Green Bank


Products and Programs?
Co-Investment

Credit Support

Green Bank
Capital
(sub debt)

Senior Private
Capital

Project

Green Bank
Credit
Enhancement

Green Bank
Origination

Project

Private
Purchase of
Portfolio

Private Capital

Warehousing
Project

Working Capital
Guarantee
Green Bank
Balance Sheet

Local
Lenders

Contractor

51

Microgrids
Microgrid Grant and Loan Program (DEEP)

Use primarily for design, interconnection,


engineering

Program can provide matching funds for


renewables, storage

52

REFERENCE
Center for Sustainable Energy

1st two rounds of program were competitive,


now works on rolling application basis

DEEP can grant up to $7,000/kW of


islanded peak load, up to $3 million per
project.

6 projects in operation by end of 2016

Average project is proposed by municipality


or university, in the 100s of kWs

PACE Financing
Property Assessed Clean Energy

Commercial PACE
Closed Projects and Private Investment

REFERENCES
Pace SETTERS News for Q2 of 2016

5454

C-PACE
Project Sizes and Shapes

REFERENCES
Pace SETTERS News for Q2 of 2016

5555

Commercial PACE (C-PACE)


Solar PV (Industrial Manufacturer)
City Hartford
Building Type Manufacturing
Terms 20 years @ 5.5%

Project Cost $170,000


Utility Incentive ZREC

Financing $145,000
Assessment $12,044/yr.
Cost Savings $20,934/yr.
Savings $418,690 lifetime
5656

What is Residential PACE?


(Policy proposal, not active in CT)
Financing certain home improvements using the property tax mechanism

Clean energy (renewable, efficiency), water conservation, resilience


Payment obligation is tied to the property, not to the person
Underwrites to collateral, less to credit history
Opens possibilities for much longer term financing at below market rates,
allowing customers to pursue deeper energy improvements

Helps more homeowners


improve their property
and enjoy energy savings

57

Green Bonds

Sunshine Backed Bonds


or Green Bonds
C-PACE bonds backed by a pool of C-PACE
assessments
2014/15 purchased by Clean Fund via PFA as
conduit issuer
Offering of B bonds (mezzanine) 2nd half 2016

$100 million facility w/Hannon Armstrong


(potential securitization)
CarbonCount certification Green Bond Ready

QECBs bonds backed by a pool of PPAs to


State Housing Projects (SHPs)
State Housing Finance Authority & QECB Buyer
(major bank)
Back-levered the sponsor equity

Carved out revenue streams from SHPs from


Lenders collateral

2015 Green Bond Issuers


40% Governments:
supranational, sovereign,
agency
35% Corporate
~10% U.S. municipal
10% Project revenue
bonds
5% Asset backed
securities
On pace for $60 billion in
issuances in 2016, up from
$12 billion in 2013

59

59

New England Hydropower


Run of the River Hydro
Overview Meriden, CT
1. Unlock potential for small hydro in CT
2. Using established technology widely
deployed in Europe (Archimedes
Screw Generator)
3. Discounted electricity for the City while
using VNM credits and ZREC

Details
From Operational Demonstration (2011)
to project finance with CREBs
working capital (Webster Bank),
construction financing (KeyBank), and
term financing (Bank of America)
193 kW hydro-electric facility, producing
about 1,000 MWh (equal to 115 homes)

30-year PPA with option to extend 10


additional years

Sparking a Movement
National/Global Observations
UN Report1 says the world will need $90 trillion in
public and private capital over the next 15 years
to confront the worst effects of climate change.
Center for American Progress estimates $200
billion annually in the U.S.
Based on Connecticut and its market size, growth
rate, and public-private leverage ratio, we estimate
that a Green Bank in every state in America would
yield $200 billion in national annual investment
within 5 years, with 90% of the funds coming from
private sources and all taxpayer contributions
returned over 10 to 20 years.

61

REFERENCES
Financing Sustainable Development: Moving from Momentum to Transformation in a Time of Turmoil by the UNEP (September 2016)

Barriers to Green Infrastructure


Finance
Market failures:
Environmental
Knowledge
Imperfect competition
Financial market failures

Meeting investor preferences:


Uniform project characteristics
Availability of information
Commercial viability

REFERENCE
Long-Term Infrastructure Investors Association, Nov. 2016
Sources: OECD; E&Y; Preqin; McKinsey Global Institute

62

National Infrastructure Policy

National Policy
Room for the Green Bank Movement?
Trump Plan: $1 trillion proposal
- $137 billion in tax credits to spur private construction
- Private companies would invest $167 billion in initial equity, then borrow
far more from private markets
- Cost to taxpayers offset by increased tax revenue from new jobs, corporate
profits. Possible consumer costs through privatization leading to tolls & usage fees
- Might include energy transmission (e.g., electricity, NG pipeline, storage)

Contact your congressional delegation


Advocate for an infrastructure bank patterned after Green Bank-style financing

Clinton Plan: $500 billion proposal


$250 billion direct investment
Infrastructure Bank: $25 billion $225 billion
- Likely favorable to clean energy/climate financing
21

64

U.S. Green Bank proposals


2016 Legislation
Introducer: Rep. Van Hollen
Local co-sponsors: Esty, Himes, Tonko

$10 billion initial


capitalization, up to an
additional $50 billion.
Used to capitalize state,
regional, or local green
banks.

HR 5802 Fact sheet

Roundtable on US Green
Bank proposal at Yale
School of Management:
Online recording
65

Introducer: Sen. Murphy


Local co-sponsors: Blumenthal, Whitehouse

Solar.
Wind.
Geothermal.
Biomass.
Hydropower.
Ocean and hydrokinetic.
Fuel cell.
Advanced battery.
Carbon capture and
sequestration.
Next gen biofuels
from nonfood feedstocks.
Alternative vehicle fuel
infrastructure.
Alternative fuel vehicles.

Federal Tax Credits


December 2015 tax extenders
Solar Investment Tax Credit

*In 2022, residential credit expires and commercial credit stays at 10%

Production Tax Credit


$0.023/kWh for wind, closed-loop biomass, and geothermal
$0.012/kWh for open-loop biomass, landfill gas, municipal solid waste, qualified hydro
Adjustment factor based on year construction commenced:

REFERENCES
American Council On Renewable Energy
US Department of Energy

66

The Big Picture


US clean energy goes mainstream

41% to 98% technology cost reductions


Over 66% of new U.S. generation capacity in 2015 came from
wind, utility-scale solar PV and distributed solar PV
REFERENCE
RevolutionNow: The Future Arrives for Five Clean
Energy Technologies 2016 Update.
U.S. Department of Energy (September 2016)

67

Mapping Risk in Infrastructure

68

REFERENCE
OECD, Infrastructure Financing Instruments and
Investments Taxomony

More Info:
www.ctgreenbank.com

Contact us:
Matt Macunas
Legislative Liaison & Marketing Manager
Matt.Macunas@CTGreenBank.com
(860) 257-2889

Catastrophe and Resilience Bonds


The Private Investors Perspective,
Tools for States and Municipalities

Rhodri J. Lane
Vice President
GC Securities Insurance-Linked Securities
(ILS) Origination & Structuring

Environmental Business Council of New England


Energy Environment Economy

Introduction to Catastrophe Bonds and


Resilience Bond Initiatives
Rhodri J. Lane
November 22, 2016

Presentation Road Map

Introduce
Resilience
Bond Concept

Case Studies

Considerations
for applying to
Resilience
Bond/Project

Review
Reinsurance /
Catastrophe
Bond Purpose

Catastrophe
Bond Critical
Features

72

What is a Resilience Bond?


A Resilience Bond is a financial instrument which aims to leverage the framework from an
established financial product, Catastrophe Bonds, in conjunction with advanced
Catastrophe Models to allow communities to monetize the benefits of investments in
resilience infrastructure
Resilience Projects mitigate the physical and financial impacts of natural, catastrophic
events
Examples include sea walls, river embankments, developing coastal wetlands, and
other similar projects
Catastrophe Bonds are insurance products designed to provide coverage or
compensation to a Sponsor or cedent to help react and rebuild following an natural
catastrophic events
Resilience Bonds work as a hybrid of these concepts which can encourage Resilience
Projects by offering a mechanism to protect against major events occurring but also
reducing cost of that coverage over time as projects are completed

73

GC Securities Credentials
Bringing The Most Diversified Participants and Innovations to ILS
GC Securities continues to focus on insurers and reinsurers

and receive
recognition for our
innovations

Allianz Risk Transfer

and leads the market for first-time corporate issuers


GC Securities
ILS Advisor of the Year
2014, 2015
ILS Deal of the Year
2016

...and is #1 overall for sovereign/public entity/residual market insurers

and achieve firsts in emerging markets

GC Securities deals
Non-Life Transaction
of the Year
2014, 2015, 2016
GC Securities
Manager of the Year
2016
74

Introduction to Insurance-Linked Securities (ILS)


(Re)insurance vs Capital Markets-Based Risk Transfer Protection
Reinsurance: transaction whereby a reinsurer, for consideration, agrees to indemnify the
reinsured company (insurance company) against all or part of the loss that the company
may sustain under the policy or policies that it has issued

Insurance and Reinsurance Transactions


Premium

Capital Markets

Premium

Insurance
Company
Policy backed
by financial
strength

Premium

Reinsurance
Company
Contract backed
by financial
strength

Premium

Insurance
Company
Policy backed
by financial
strength

Contract
fully
backed by
collateral

Dedicated
Reinsurer
or
Fronting
Reinsurer

Interest
Payment*
or ROL

Cash

Capital
Markets
Investors

* Based on Premium payment (plus investment earnings on collateral)

75

Introduction to Insurance-Linked Securities (ILS)


Overview of Catastrophe Bonds
What are Insurance-Linked Securities (ILS)?
- Financial instruments whose value is affected by an insured loss event (i.e. insurance derivatives)
Types of ILS:
- Catastrophe Bonds (Cat Bonds)
- Collateralized Reinsurance
- Industry Loss Warranties (ILW)
- Sidecars
Securitization of catastrophe risk became prominent in the aftermath of Hurricane Andrew in 1992
- First Cat Bond transactions were completed in mid-1900s by AIG, Hannover Re, St. Paul Re, and USAA

Issuer
Sponsor
Perils
Size
Trigger
Rating
Date of Issue

George Town Re Ltd.


St Paul Re
Worldwide all risks
$68.5m
Indemnity
Unknown
December 1996

- Number of 144A and Rule 4(2), Reg D, Reg S Cat Bonds issued steadily increased over the past 20 years
- Major catastrophe events like Hurricanes Andrew, Katrina, Rita, and Wilma (KRW) were major drivers of this
increase
- Hurricane Andrew caused $15.5 billion in insured losses
- Formation of a number of well-capitalized Bermudian reinsurers focused on property catastrophe coverage
76

Introduction to Insurance-Linked Securities (ILS)


How are ILS positioned?
Insuranc
e Market
Individual
Business

Corporation

Insurance

Primary Insurer

ILS

Reinsurance

ILS

Reinsurer

ILS

Pool of

Insurance
Risk

Convergence of
(Re)insurance and
Capital Markets
Private
Equity

Hedge
Funds

Non-Traditional
Asset Risk

Interest
Rate

Capital Markets
Investors

Real
Estate

Equity

Traditional Asset
Risk
Credit

Commodities

Forex

Financia
l
Markets
77

Introduction to Insurance-Linked Securities (ILS)


General Motivations/Concerns of Sponsors and Investors
Sponsors
Motivations

Full Collateralization
Multi-year fixed pricing
Diversification of risk capital source
Limit risks of capacity constraints and
price volatility in the traditional
reinsurance market

Investors
Source of diversification in an investment
portfolio
Potentially attractive investment returns
Ability to further diversify within sector
Independent Third Party modeling reduces
requirement of in-house underwriters, etc.

Leverage reinsurance market by demonstrating


access to alternative capacity source

Concerns

Basis risk (if Indemnity trigger not used)

Liquidity in secondary market

Transaction costs

Risk assessment requirements

Complexity (e.g., increased documentation)

Transparency

Dependence on investor preferences


Disclosure requirement of 144A (particularly for
indemnity deals)

78

Introduction to Insurance-Linked Securities (ILS)


Insurance Linked Securities and the Capital Markets Convergence
Convergence Capital has grown at a significant pace since
2005 (21% from 2005, and 8% YoY) with collateralized re
segment growing fastest in the last several years

Growth of Third Party Capital

It is estimated that there is approximately $65 to $70 billion


of convergence capital in the (Re)insurance market
Capital is deployed across a broad range of products
from Catastrophe Bonds, Sidecars, Collateralized
Industry Loss Warranties and Collateralized
Reinsurance
However, the end investors in the market (pensions,
sovereign wealth funds etc.) have approximately $30
trillion of investable assets, globally
It is estimated that there is up to $900 billion of potential
capital to be deployed into Insurance Linked Investments
Global Pension Assets

Source: Guy Carpenter and Oliver Wyman.

Traditional vs Convergence Capital (12/31/2014 to 6/30/2016)

79

Introduction to Insurance-Linked Securities (ILS)


2005 - 2016 Historical Total Returns Data
The ILS market offers investors an opportunity to invest in an asset class that has historically
outperformed many other investments and with extremely low correlation
Cat Bond

S&P 500

Commodity

BB High Yield

Global ROL

Financial Crisis

300.0%

250.0%

200.0%

150.0%

136.6%
124.5%

120.8%

115.0%
114.4%

113.5%
111.8%

100.0%

101.8%

105.0%

90.4%

100.0%

82.5%

50.0%

Source: Bloomberg, SNL Financial, Guy Carpenter ROL Index, as of 5/31/2016


Bloomberg Tickers: Cat Bond, SRCATTRR; S&P 500, SPXT; CCITR, Commodity; H0A1, BB High Yield

6/1/2016

3/1/2016

9/1/2015

12/1/2015

6/1/2015

3/1/2015

9/1/2014

12/1/2014

6/1/2014

3/1/2014

12/1/2013

9/1/2013

6/1/2013

3/1/2013

9/1/2012

12/1/2012

6/1/2012

3/1/2012

12/1/2011

9/1/2011

6/1/2011

3/1/2011

9/1/2010

12/1/2010

6/1/2010

3/1/2010

9/1/2009

12/1/2009

6/1/2009

3/1/2009

9/1/2008

12/1/2008

6/1/2008

3/1/2008

9/1/2007

12/1/2007

6/1/2007

3/1/2007

12/1/2006

9/1/2006

6/1/2006

3/1/2006

9/1/2005

12/1/2005

6/1/2005

3/1/2005

12/1/2004

0.0%

80

Introduction to Insurance-Linked Securities (ILS)


State of the 144A P&C Catastrophe Bond Market
144A P&C Cat Bond Risk Capital Issued and Outstanding

Source: GC Securities Proprietary Database (P&C catastrophe bonds issued as of November 15, 2016 excluding private transactions).

81

Cat Bond Structuring Considerations


General Structure Schematic
Sponsor /
Cedant
Derivative
or
Reinsurance
Contract

Premium

3
Collateral
Solution
(e.g. Treasury MMFs)

Yield on
Collateral Solution &
Return of Original
Investment Principal

Dedicated
Reinsurer
Collateral
Account

Proceeds

Interest Payments =
Yield on Collateral + Spread

Proceeds

1) Dedicated Reinsurer is usually formed in


a favorable jurisdiction (e.g. Bermuda,
Cayman Islands, or Ireland)
Provides reinsurance or derivative
protection solely to Sponsor
Cat Bond is not a debt obligation of
Sponsor
Dedicated Reinsurer does not
consolidate onto Sponsors balance
sheet under FIN46R

Outstanding Principal
Amount at Maturity

2) Dedicated Reinsurer offers Principal


At-Risk Notes
Purchased by only Qualified
Institutional Buyers
Collateralizes Dedicated
Reinsurers claims paying capacity
obligations to sponsor in the event
the catastrophe occurs

2
Institutional
Investors

3) Proceeds from the Notes offering are


reinvested into highly quality assets,
most commonly US Treasury Money
Market Funds

82

Cat Bond Structuring Considerations


Trigger Options: Transparency/Speed of Payment vs. Basis Risk
Trigger Options
Indemnity

Modeled Loss

Index

Parametric

Triggered by actual
loss of sponsor

Triggered by modeled
results to sponsor portfolio

Triggered by
industry insured losses

Triggered by
event parameters

Basis Risk

Transparency / Speed of Payment


Investors understanding of how the reinsurance
contract will be settled
Parametric trigger parameters typically based
on publicly disclosed information
Indemnity based on sponsor disclosed losses
The speed in which a transaction will provide
coverage
Parametrically triggered Cat Bonds typically
settle faster
Indemnity triggered bonds are slower due to
claims reporting

More /
Fast

Transparency / Speed of
Payment

The risk that the reinsurance contract (traditional,


Cat Bond, ILW, etc.) does not perform as
desired/expected
Sponsor not paid when actual losses are
large enough, needing reinsurance capacity
Sponsor paid when actual losses are below
the amount needed for reinsurance capacity

Parametric
Modeled
Loss

Index
Indemnity

Less /
Slow
Low

Basis Risk

High

83

Cat Bond Structuring Considerations


Summary of Collateral Solutions Supporting Cat Bond Limit
Investors prefer a wider selection of collateral solutions / providers to avoid concentrations;
Use of U.S. Treasury Money Market Funds has been most prevalent since 2012
144A Market Collateral Concentration (20122016YTD)

GC Securities Cat Bonds Collateral Holdings (Outstanding)


IBRD

2016YTD

56%

2015

18%

44%

86%

2014

97%

2013

86%

EBRD

14%

7%

24.8%

3%

75.2%
14%
TMM

2012

80%

Putable Note

20%
34%

0%

20%
TMM

40%

60%

Putable Note

80%
Tri-Party Repo

100%

18%

13%

5% 2%2%
1%

Goldman Sachs Financial Square Treasury

Morgan Stanley Treasury

Blackrock Treasury Trust

MEAG TMM

JP Morgan US Treasury

Federated UST

JP Morgan JPY Cash Liquidity Fund

Source: GC Securities Proprietary Database (P&C catastrophe bonds issued as of November 15, 2016 excluding private transactions).
Notes: Putable Note issuers has expanded to EBRD, KfW and IBRD.
Figures include collateral election of Manatee Re Ltd. 2016-1 Cl A and C

84

Cat Bond Structuring Considerations


Review of Catastrophe Models

Catastrophe models evaluate risk profiles of portfolios of exposed risk


The Exceedance Probability curve, or a measure of an Expected Loss for a given
portfolio and a structure, are the currency by which risk is translated into a price for a
risk transfer
Successful Cat Bond issuances rely heavily on trusted risk modeling and Resilience
Bonds would as well

85

Cat Bond Structuring Considerations


Reset Mechanics Adjusting For An Updated Risk Profile
Annual Resets are standard features of Catastrophe Bonds which are critical to the concept of
Resilience Bonds as it is a recalculation of risk, post project completion
Allow for adjustments to the structure annually based on changes in a risk profile
Recent developments in accepted Reset mechanics have allowed for the flexibility to shift the cat
bond coupon payments to investors in subsequent years of the transaction, subject to a formulaic
premium adjustment
10

Project Based Risk


Reduction

Coupon (%)

Inception of the
Bond
6

Reduced Coupon
Spread Payment
4

Post completion
of the project
2

0
0

2
3
Modeled Expected Loss (%)

86

Case Study
Hypothetical Case / Fact Pattern for a Boston Based Resilience
Project
The State of Massachusetts is concerned with certain high value assets in the City of Boston (e.g.
Boston Logan Airport) in addition to select communities of Winthrop and Revere

Storm surge and riverine flooding are the key concerns

A study has been commissioned regarding the development of a defense system focused on
defense

An independent catastrophe modeling firm has been able to demonstrate the value of the resilience
project as part of the study
Based on the studys findings, a grant is issued for implementation of seawall protection around the
exposed areas

The project will take two years to complete and is green-lit for execution

Rebate plan
established
for distribution
of savings
on insurance
over time
Sponsor:
Cities
of Boston,
Winthrop, Revere
collectively
responsible
for the premium payments to
the
Issuer: An established special purpose reinsurer which issues the Notes and pays premium to
investors
Modeling Firm: Has established that the expected loss before and after the
Updated Risk
Initial
Risk
Initial
Term: 5 years with a Reset after completion of the seawall
development
(anticipated
2-years)Updated
Profile
Coupon
Profile

Coupon

Pr (attachment) loss of $100m

5.0%

--

3.0%

--

Expected Loss

4.0%

7.0%

1.5%

3.0%

Pr (exhaustion) loss of $200m

3.0%

--

0.5%

--

$200m

(post project) (post project)

$100m

Losses

Resilience Bond

87

Appendix A:
Sample Case Studies of Northeast Cat Bonds

Appendix A: Case Studies


Cranberry Re Ltd. Series 2015-1 Class A Notes
April 2015

$300,000,000

Cranberry Re Ltd.
Series 2015-1 Principal At-Risk
Variable Rate Notes
Due July 6, 2018

Sole Structuring Agent and


Sole Bookrunner

Cranberry Re Ltd. is the second catastrophe bond issued by Massachusetts Property


Insurance Underwriting Association (MPIUA); the residual markets insurer previously issued
$96,000,000 of Notes via Shore Re Ltd. in 2010
The Notes of Cranberry Re Ltd. have been structured with an indemnity, annual aggregate
trigger to align with MPIUAs traditional reinsurance program. Furthermore, the bond
participates with traditional reinsurance in a $1.1 billion layer, highlighting the flexibility of
insurance linked securities in addition to complementing traditional market coverage
- Use of the catastrophe bond is instrumental in transforming MPIUAs entire
reinsurance program into an annual aggregate reinsurance program
The structure of the transaction utilizes Hannover Ruck SE as a transformer reinsurer
(Ceding Reinsurer) to avoid having MPIUA face the issuance vehicle directly
Incorporates latest cat bond structural features: advancement of next 30-day amount,
variable reset and reduced interest event; the transaction uniquely does not rely on a third
party to identify Severe Thunderstorms and Winter Storms

Series 2015-I Notes


Issuer
Peril

Cranberry Re Ltd.
Any Named Storm Event, Severe Thunderstorm Event or Winter
Storm Event

Covered Areas

The State of Massachusetts

Trigger

Indemnity; Annual Aggregate

Risk Period
Modeling Firm

Illustrative Transaction Structure

3 years
AIR Worldwide Corporation

Collateral

U.S. Treasury Money Market Funds

Expected Loss

1.377% (base) / 1.383% (sensitivity)

Attachment Point

$300,000,000; P(attach) = 3.081 (base) / 3.102% (sensitivity)

Exhaustion Point

$1,400,000,000; P(exhaust) = 0.697% (base) / 0.699%


(sensitivity)

Issuance Amount

$300M

Initial Spread

3.80%
89

Appendix A: Case Studies


Cranberry Re Ltd. Series 2015-1 Class A Distribution Analysis
Marketing Highlights

The market welcomed an opportunity to access Massachusetts only risk in 144a format Cranberry Re is the only
catastrophe bond in the market with a Massachusetts only risk profile. In general, the U.S. Northeast is
underrepresented in the catastrophe bond market and Massachusetts only is particularly rare. The investor base was
also pleased to welcome back MPIUA as a returning sponsor to the market.

Efficient Pricing Levels Reflecting Strong Market Demand Transaction was initially marketed with a spread range
of 380 to 430 basis points. It ultimately settled at a spread of 380 basis points, while upsizing from an initial announce
size of USD 200 million to final placed amount of USD 300 million.

Class A Notes
Risk Capital Breakdown by Investor Region

Risk Capital Breakdown by Investor Type

90

Appendix A: Case Studies


Overview
October 2015

$275,000,000

PennUnion Re Ltd.
Series 2015-1 Principal At-Risk
Variable Rate Notes
due December 7, 2018

Amtraks subsidiary Passenger Railroad Insurance, Ltd (PRIL), announced the issuance of
PennUnion Re, to provide three-years of protection against earthquakes and storm surge and wind
loss as a result of Named Storm, on a parametric, per occurrence basis
- Amtrak is the national passenger railroad provider in the US
The transaction is triggered based on key intensity measurements of the physical parameters for
each respective peril captured at specified measurement locations. Depending upon the peril, the
measurements are taken from both inland on offshore locations ranging from the Washington, D.C. to
Providence, RI regions

Joint Structuring Agent


and Joint Bookrunner

Storm surge water height measurements are captured at seven tidal gauge stations in the Long
Island Sound, East River, Lower New York Bay, and Delaware River.

Wind measurements are captured and interpreted for 60 ZIP codes along Amtraks Northeast
Corridor (NEC) railways from Washington, D.C. to near Providence, RI.

Earthquake intensity is measured from 21 stations ranging from northeastern Delaware to


Providence, RI, with a concentration around the New York City metropolitan area

Series 2015-I Notes


Issuer
Peril
Covered Areas
Trigger
Risk Period
Modeling Firm

Rating (S&P)
Collateral
Expected Loss
(NT)
Attachment
Probability (NT)
Exhaustion
Probability (NT)
Issuance Amount
Initial Spread

Illustrative Transaction Structure

PennUnion Re Ltd.
Storm Surge and Wind resulting from Named Storm;
Earthquake
U.S. Northeast region
Parametric; Per occurrence
3 years
Risk Management Solutions, Inc.

BB- (sf)
U.S. Treasury Money Market Funds
2.05% (year 1)
P(attach) = 2.84% (year 1)
P(exhaust) = 1.59% (year 1)
$275,000,000 (upsized from $200,000,000)
4.50% (priced at lowest end of price guidance 4.50% - 5.25%)
91

Appendix A: Case Studies


Parameter Reading Stations
Earthquake Calculation Locations and Associated Weights

Storm Surge Calculation Locations

Wind Calculation Locations and Associated Weights

92

Appendix A: Case Studies


Risk Profile by Peril Contribution
Contribution to First Year Expected Loss by Peril
Wind,
1.03%
Earthquake,
2.22%
Storm Surge,
96.75%

Contribution to First Year Storm Surge


Expected Loss by Area

Contribution to First Year Earthquake


Expected Loss by Magnitude (Mw)
7.5,
0.76%
<6,
13.89%

Multiple,
49.03%

Area A Only,
40.61%

7 to <7.5,
23.65%

6.5 to <7,
30.56%

Area C Only,
0.39%

6 to <6.5,
31.13%

Area B Only,
9.98%

93

Appendix A: Case Studies


Investor Review
Marketing Highlights

Parametric trigger and diversifying geography increased attractiveness of the transaction Resulted in an extremely
well supported transaction. Investors continued to show interest in parametrically triggered bonds especially those bonds
exposed to esoteric underlying perils in a diversifying region. The bond was marketed during wind reason and priced at
4.50%, the low end of the initial 4.50% - 5.25% in addition to being upsized from $200M to $275M

New corporate sponsor Investors continue to show high levels on interest in new sponsors to the capital markets,
particularly non-traditional (i.e. corporate) sponsors

Marketed during wind season Despite marketing with an active Category 4 Hurricane Joaquin in the Atlantic, investors
continued to support the transaction and indicate that they are long-term partners as opposed to opportunistic investors

Series 2015-1 Notes


Risk Capital Breakdown by Investor Region
Asia Pacific
3%

Risk Capital Breakdown by Investor Type


Endowment
6%
Trad. Asset
Manager
11%

Pension Hedge Fund


2%
1%

Bermuda
21%

Western
Europe
21%

North America
55%

Reinsurer
12%

Ded. ILS
68%

94

APPENDIX B:
GC SECURITIES CREDENTIALS

Appendix B: GC Securities Credentials


Proven Capital Markets Capabilities Select Transaction Experience
2016
$75,000,000
First Coast Re Ltd.
Principal At-Risk
Variable Rate Notes
Due June 7, 2019

2010 - 2016
$870,000,000
Eight catastrophe
bonds:
Queen Street II, III, V,
VI, VIII, X, XII dac
and EOS Ltd.
Due June 8, 2016 (VIII)
Due June 8, 2018 (X)
Due April 8, 2020 (XII)

Joint Structuring Agent


and Joint Bookrunner

Sole Bookrunner (6 deals)


& Joint Bookrunner (1 deal)

2015

2009 & 2016

2014 & 2016


$220,000,000
10,125,000,000
Two cat bond
issuances:
Aozora Re Ltd.
Due April 7, 2017
Due April 7, 2020

2012 & 2016


$330,000,000

$195,000,000

2013 & 2016


$890,000,000

2015 & 2016


$600,000,000

2015 & 2016

Akibare Re II Ltd. 2012-1


Akibare Re Ltd. 2016-1

Two cat bond


issuances:

Three cat bond


issuances:

Two cat bond


issuances:

Manatee Re Ltd.

Due April 13, 2016


Due April 7, 2020

Due January 22, 2018


Due March 13, 2019

Caelus Re 2013-1
Caelus Re 2013-2
Caelus 2016-1

Galileo Re Ltd. 2016-1


Galileo Re Ltd. 2015-1

Two cat bond issuances:

Due March 7, 2016


Due April 7, 2017
Due March 6, 2020

Sole Structuring Agent


and Sole Bookrunner

2013 & 2015

$500,000,000

$275,000,000

$500,000,000

Two cat bond


issuances:

PennUnion Re Ltd. 20151

Two catastrophe bonds:

Atlas V 2009-1
Atlas IX 2016-1

Principal At-Risk
Variable Rate Notes

Bosphorus 1 Re Ltd.
2013-1
Bosphorus Ltd. 2015-1

Due January 8, 2020

Due December 7, 2018

Due August 17, 2018

Sole Structuring Agent and


Sole Bookrunner & Co-Manager

$300,000,000

Sole Structurer and Sole


Bookrunner & Co-Manager

2015

Acorn Re Ltd.
Principal At-Risk
Variable Rate Notes
Due July 17, 2018

2015
$50,000,000

Due January 8, 2019


Due January 8, 2018

Sole Structuring Agent


and Sole Bookrunner

Co-Manager

2014 & 2015


$1,100,000,000

2010 & 2015


$396,000,000

Panda Re Ltd.

Two catastrophe bonds:

Two catastrophe bonds:

Principal At-Risk
Variable Rate Notes

Alamo Re Ltd. 2014-1


Alamo Re Ltd. 2015-1

Due July 9, 2018

Due June 7, 2017


Due June 7, 2018

Shore Re Ltd. 2010-1


Cranberry Re Ltd. 20151
Due July 16, 2018

and its other (re)insureds including

Joint Structuring Agent


and Joint Bookrunner

Joint Bookrunner

2015
$100,000,000

2011,2012,2014,2015
$1,145,000,000

Sole Bookrunner & CoStructurer and Co-Lead


Manager

2014
CHF 70,000,000

Pelican III Re Ltd.

Four catastrophe bonds:

Kaith Re Ltd. (Leine Re)

Principal At-Risk
Variable Rate Notes

East Lane Re IV, V


East Lane VI (2014 &
2015)

Principal At-Risk
Variable Rate Notes

Due April 16, 2018

Sole Structuring Agent


and Lead Bookrunner

2014
$75,000,000
Collateralized Quota
Share Sidecar
Due December 31, 2016

Due January 15, 2016

Co-Manager &
Structuring Agent and Joint Bookrunner

2013

2013
$200,000,000

$125,000,000

MetroCat Re Ltd.

Tradewynd Re Ltd.

Principal At-Risk
Variable Rate Notes

Principal At-Risk
Variable Rate Notes

Due August 5, 2016

Due July 9, 2018

Sole Placement Agent


and Structuring Agent

2008, 2012, 2013

Sole Placement Agent


and Structuring Agent

2014

2009, 2012, 2013

$25,000,000

IBRD World Bank

Lion I Re Limited

Omamori (Shema Re)

Floating Rate CCRIF


Catastrophe-Linked
Capital at Risk Notes

Principal At-Risk
Variable Rate Notes

Principal At-Risk
Variable Rate Notes

Due April 28, 2017

Due Jan 24, 2017

Lead Structurer
and Joint Bookrunner

Sole Structuring Agent and


Sole Bookrunner

Sole Placement Agent


and Co-Structuring Agent

2009, 2010, 2011, 2013

2012
$300,000,000

$1,206,835,000

Three catastrophe
bonds:

Three catastrophe
bonds:

Four catastrophe bonds:

Kibou Ltd.

Blue Coast Ltd.


Blue Danube I & II

Longpoint Re II
Long Point Re III (2012)
Long Point Re III (2013)

Parkton Re 2009-1
Johnston Re 2010-1
Johnston Re 2011-1
Tar Heel 2013-1

Principal At-Risk
Variable Rate Notes

Allianz Risk Transfer


Joint Structuring Agent
and Joint Bookrunner

Lead Structurer
and Joint Bookrunner

2014

190,000,000

$1,050,000,000

Due May 18, 2016

Joint Structuring Agent

2014
$30,000,000

$535,000,000

Due May 23, 2016

Joint Structuring Agent,


Lead Manager
and Sole Bookrunner

Sole Structurer and


Sole Bookrunner
& Joint Structuring Agent

Sole Structurer
and Bookrunner

Due June 30, 2017

Due March 16, 2016


Due March 13, 2018
Due March 13, 2020

Sole Structurer
and Sole Bookrunner

Sole Placement Agent


and Sole Structuring Agent

Due February 16, 2015

2010 - 2011
$315,000,000
Two cat bond
issuances:
Foundation Re III Ltd.
2010-1 and 2011-1

NCJUA /
Lead Structurer,
NCIUA
Sole
Bookrunner,
and Co-Lead Manager
& Joint Bookrunner

Sole Structuring Agent


and Sole Bookrunner

Co-Manager

96

Appendix B: GC Securities Credentials


League Tables
2016YTD 144A P&C Cat Bond League Table

2015 144A P&C Cat Bond League Table

Position

Arranger / Dealer

Capital Raised
($ millions)

# of Deals

Position

Arranger / Dealer

Capital Raised
($ millions)

# of Deals

Aon Benfield Securities

$2,010

GC Securities

$2,425

GC Securities

$1,680(1)

8(1)

Aon Benfield Securities

$1,965

BNP Paribas

$600

Deutsche Bank

$1,025

Goldman Sachs

$550

Swiss Re Capital Markets

$925

Swiss Re Capital
Markets

$425

Citibank

$850

2012 2016 YTD 144A P&C Cat Bond League Table


Position

Arranger / Dealer

Capital Raised ($ millions)

# of Deals

Aon Benfield Securities

$12,827

43

GC Securities

$8,847(1)

38(1)

Swiss Re Capital Markets

$7,480

30

Goldman Sachs

$6,985

25

Deutsche Bank

$6,095

23

GC Securities was #1 in 2015 and is #2 2016YTD in placement of 144A P&C catastrophe bonds in volume and deal
count

Leading placement agent having raised over $800M sidecar/collateralized quota-share capital for six counterparties

Placement agent for three private cat bonds in 2014 and three private cat bonds in 2015

Experience completing 102 catastrophe bonds equating to approximately ~$23.8B of risk capital since the late 1990s

Cumulative experience
reflects the expertise, knowledge and longevity of the GC Securities personnel in the ILS
Source: GC Securities Proprietary Database (P&C catastrophe bonds issued as of November 15, 2016).
97
(1)
Figure includes 4(2) primary issuance re-sellable as 144A (i.e. Manatee Re Ltd. 2016-1 Cl A and Cl C; $95M).
space

Disclosure
Securities or investments, as applicable are offered in the US through GC Securities, a division of MMC Securities LLC. (MMCS), a US
registered broker-dealer and member FINRA/NFA/SIPC. Main office: 1166 Avenue of the Americas, New York, NY 10036. Phone:
212.345.5000. Securities or investments, as applicable are offered in the European Union by GC Securities, a division of MMC Securities
(Europe) Ltd., which is authorized and regulated by the Financial Services Authority. Reinsurance products are placed through qualified affiliates
of Guy Carpenter & Company, LLC. MMC Securities LLC, MMC Securities (Europe) Ltd., and Guy Carpenter, LLC are affiliates owned by Marsh
& McLennan Companies (MMC). Reinsurance intermediary services are offered through Guy Carpenter & Company, LLC.
This information was prepared by MMCS and/or Guy Carpenter & Company, LLC. (Guy Carpenter or GC), the reinsurance brokerage arm of
MMC. All statistical tables, charts, graphs or other illustrations contained herein were prepared by MMCS or GC unless otherwise noted.
Results from simulations and projections are for illustrative purposes only and are based on certain assumptions. Therefore the recipient should
not place undue reliance on these results. Past performance does not guarantee future results.
Neither MMCS nor GC is a legal, tax or accounting adviser and makes no representation as to the accuracy or completeness of any data or
information gathered or prepared by MMCS or GC hereunder. Your company should therefore consult with its own tax, accounting, legal or other
advisers and make its own independent analysis and investigation of the proposed transaction, as well as the financial and tax consequences
thereof, the creditworthiness of the parties involved and all other matters relating to the transaction, prior to its own independent decision whether
or not to enter into any agreements in connection with any transaction.
This document contains indicative terms for discussion purposes only. MMCS and GC give no assurance that any transaction will be
consummated on the basis of these indicative terms and no specific issuer is obligated to issue any security or instrument on such indicative
terms. This presentation does not constitute an offer to sell or any solicitation of any offer to buy or sell any security or instrument or to enter into
any transaction on such indicative terms. An investment in insurance linked securities is speculative, involves a high degree of risk and should be
considered only by institutional investors who can bear the economic risks of their investments and who can afford to sustain the loss of their
investments. Noteholders may lose all or a portion of their investment. Institutional investors should thoroughly consider the information
contained herein.
This document is not intended to provide the sole basis for any evaluation by you of any transaction, security or instrument described herein and
you agree that the merits or suitability of any such transaction, security or instrument to your particular situation will be independently determined
by you including consideration of the legal, tax, accounting, regulatory financial and other related aspects thereof. Opinions and estimates
constitute MMCSs and/or GCs judgment and are subject to change without notice. In particular, neither MMCS nor GC owes duty to you (except
as required by the rules of the Securities and Exchange Commission, Financial Industry Regulatory Authority, Financial Services Authority,
and/or any other regulatory body having proper jurisdiction) to exercise any judgment on your behalf as to the merits or suitability of any
transaction, security or instrument. The information contained herein is provided to you on a strictly confidential basis and you agree that it may
not be copied, reproduced or otherwise distributed by you (other than to your professional advisers) without our prior written consent.
This material provides general and conceptual information about certain financial strategies, and does not discuss or refer to any specific
securities or other financial product. This presentation is not intended as marketing, solicitation or offering any security or other financial product
in Japan. This material is intended only for sponsors, financial intuitions and qualified investors.
MMCS and/or GC may have an independent business relationship with any companies described herein.
Trademarks and service marks are the property of their respective owners.
The source of information for any charts, graphs, or illustrations in this document is GC Securities Proprietary Database 2016, unless otherwise
indicated.

Networking Break

Executive Order 569 - Establishing an


Integrated Climate Change Strategy
for Massachusetts

Kathleen Theoharides
Director, Climate and Global Warming Solutions
Massachusets Executive Office of
Energy & Environmental Affairs

Environmental Business Council of New England


Energy Environment Economy

Executive Order 569: Establishing an Integrated


Climate Change Strategy for the Commonwealth
Kathleen Theoharides, Director, Climate and Global Warming Solutions
Executive Office of Energy and Environmental Affairs
Environmental Business Council
November 22, 2016

101

pg 101

Executive Order 569: Establishing an Integrated


Climate Change Strategy for the Commonwealth

102

pg 102

The Order recognizes the threat from climate


change
Climate change is a threat to Commonwealths residents,
communities and economy.

Authority under the GWSA and efforts to lead by example


Transportation and energy sectors
SJC decision and Section 3(d)
Strong and prompt action beyond emissions reductions is
required to meet the serious threat from climate change
State agencies and cities and towns must prepare
Only through an integrated strategy bringing together all
parts of state and local government will we be able to
address these threats effectively
pg 103

Section 1: Mitigation and Energy Policy


Directed to the Secretary of EEA
Continue to utilize the IAC for advice and setting limits for
2030 and 2040
Continue to lead by example
Transportation sector
Reform of regional wholesale electric energy and capacity
markets to ensure state mandates for clean energy are
achieved

Comprehensive energy plan


Ensure that efforts to meet greenhouse gas emissions
limits are consistent with adaptation
pg 104

Section 2: GWSA Section 3(d)


Directed to Department of Environmental Protection
DEP shall promulgate final regulations by August 11, 2017
Establish an internet portal
Revise 310 C.M.R. 60.05 to establish declining annual
aggregate emissions limits;
Consider limits from a variety of sectors including leaks
from the natural gas distribution system; new, expanded,
or renewed emissions permits or approvals; the
transportation sector or subsets; and gas insulated switch
gear
Publish draft regs. by December 16
Hold public hearings by February
pg 105

Section 3: Adaptation and Resiliency


Directed to the Secretary of EEA and Secretary of
EOPSS
Within 2 years publish a statewide climate adaptation plan
Establish vulnerability assessment frameworks for state
agencies and municipalities
Provide technical assistance to cities and towns to
complete assessments and identify adaptation strategies

Implement the plan


Update at least every 5 years

pg 106

Section 4: Coordination
All Cabinet Secretaries will designate a climate
coordinator in each executive office
Serve as point person
Meet under the leadership of personnel from EEA
and EOPSS to assist in the development and
implementation of the Climate Adaptation Plan
Within two years of this Order assess the
vulnerability to climate change and extreme weather
events for the Coordinators Executive Office
Incorporate results into existing policies and plans for
that office
pg 107

Section 5: Timeline
This Executive Order shall be reviewed no later
than December 31, 2019, and every five years
thereafter.

pg 108

Progress
Climate coordinators have been designated for each
secretariat and met in October
EOPSS and EEA have met to discuss structure for
moving forward, development of statewide plan, municipal
technical assistance program, and coordination

Integration of State Hazard Mitigation Plan and State


Climate Adaptation Plan
Commissioning statewide climate projections for plan

Working to develop scopes of work for statewide plan,


municipal technical assistance grant program, and
statewide website
pg 109

Progress
DEP regs. in development, website live, and
stakeholder meetings were held in Worcester and
Boston the first week of November
Regulations in development can be found here:
http://www.mass.gov/eea/agencies/massdep/air/climate/sectio
n3d-comments.html

pg 110

Thank you
Kathleen.Theoharides@state.ma.us

pg 111

Panel Discussion
Moderator: Daniel Stapleton, GZA

Panel Members
Patricia Bowie, Massachusetts CZM
Wayne Cobleigh, GZA
Rhodri J. Lane, GC Securities ILS
Matt Macunas, Connecticut Green Bank
Kathleen Theoharides, Mass EOEEA

Environmental Business Council of New England


Energy Environment Economy

EBC Climate Change Program:

Financing Resilience The Big Challenge


Grants, Loans, Bonds, Insurance-Linked Securities
and More