LONDON (Reuters) – Expectations that catastrophe bond investors will not lose money as a result of superstorm Sandy have been shaken by an estimate that losses for insurers from the Oct. 30 storm will top $20 billion.
A loss of that magnitude would trigger payouts on two catastrophe bonds sponsored by Swiss Re, the world's second-largest reinsurer, according to market participants.
Cat bonds transfer insurers' potential losses from the worst natural disasters to capital markets investors, who receive hefty coupon payments but risk losing all or part of their principal if an event such as a hurricane or earthquake occurs.
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