Sandy could hurt Combine Re bondholders - Moody's

LONDON Nov 5 (Reuters) - Investors in a specialist financial bond designed to protect Swiss Re from natural disaster claims could lose money once the bill from superstorm Sandy is totted up.

"If property losses turn out to be at the high end of the current estimates, Combine Re cat bond investors will sustain losses," ratings agency Moody's wrote a research note, referring to a claims forecast in the range of $7 billion to $20 billion.

Swiss Re, the world's second-biggest reinsurer, raised $200 million from the sale of the Combine Re catastrophe bonds in March.

Catastrophe bonds were developed in the mid-1990s to help insurers and reinsurers to manage their exposure to natural disasters by transferring some of the risk to capital market investors.

They are sold to investors such as pension funds, which receive an income in return for agreeing to pay some of the issuers' claims if an earthquake or hurricane strikes.

The proceeds from the Combine Re cat bond are earmarked to help Swiss Re to absorb potential claims from two of its insurer customers in the United States, the Country Mutual Insurance Company and the North Carolina Farm Mutual Insurance Company.

A Swiss Re spokesman declined to comment, saying that it was too soon to make a reliable estimate of the storm's financial impact.

Last week analysts said that Sandy is unlikely to trigger large-scale losses on cat bonds.