https://www.bloomberg.com/news/articles/2018-08-30/houston-eyes-designer-bonds-in-quest-for-15-billion-storm-wallNow city and state officials in Texas are studying a possible partnership with private industry to create a new kind of bond to help pay for a $15 billion system of seawalls and floodgates, as a warming climate piles more storm risk on the nation’s fourth-largest city. They’re examining the market for catastrophe bonds, in which investors assume the risk for calamities like hurricanes in exchange for above-market returns and portfolio diversification.
“This is why we have financial markets, to come up with this type of solution,’’ said Flavio Cunha, an economics professor at Rice University. “People love when markets can come and help construct some of these projects.’’
At stake: the welfare of $500 billion in industry, including the nation’s largest concentration of oil refineries and chemical plants. The dike could prevent countless homes and lives from being swept away in the 20-foot storm surge that would accompany a direct hit from a major hurricane –- a potentially worse cataclysm than Harvey.
Harvey flooded hundreds of thousands of homes and businesses, wreaking $125 billion in damages, a reminder of how vulnerable one of the nation’s most important economic centers remains. After a decade of indecision, officials have rallied around a plan for a seawall almost 60 miles long fitted with massive floodgates at the center to protect Galveston Bay and the industry lining the Houston Ship Channel.