Moody's Investors Service says Superstorm Sandy could, in aworst-case scenario, cause losses for the Combine Re catastrophebond.

Combine Re is a $200 million indemnity cat bond issued by SwissRe in March for the benefit of Country Mutual Insurance Co. andNorth Carolina Farm Bureau Mutual Insurance. Moody's saysif losses end up being at the high end of current estimates, theywill exceed the first loss layer that absorbs net losses before therated tranches kick in.

“The property losses will cause Combine Re to use up additionalprotective subordination and, in the worst case, will result inlosses on the cat bond,” says the ratings agency.

Moody's notes that the cat bond covers against several perils inspecific regions of the U.S., including severe thunderstorms,hurricanes, earthquakes and winter storms, but it excludeshurricanes in Florida. 

As such, Moody's says the hybrid nature of Sandy could influencewhat type of covered event the storm will be: hurricane, severestorm or winter storm. “In the former case, losses owing to thisevent are subject to a $200 million hurricane per-event limit,while there is no limit for the latter cases,” saysMoody's.