Pandemic bonds shrug off swine flu threat

* Threatened pandemic yet to hit extreme mortality bonds

* Trigger levels high and geographically specific

* Bonds cover only a fraction of insurers' potential losses

By Catherine Evans

LONDON, April 28 (Reuters) - Fears of a swine flu pandemic have yet to affect bonds securitising insurers' exposure to a sharp rise in death rates, because millions of people would have to die from the virus before any payout is triggered.

Investors said extreme mortality bonds -- catastrophe bonds that allow investors to bet against the risk of a devastating pandemic -- had barely reacted to the rapid spread of a virus that has killed up to 149 people in Mexico. [ID:nLS803449] [ID:nLS472470].

About $1.5 billion of such bonds are outstanding, according to an October 2008 report by Guy Carpenter, the reinsurance unit of insurance broking giant Marsh & McLennan (MMC.N: Quote, Profile, Research).

"There has not been any price impact on these bonds simply because the swine flu event is insignificant at the current point in time," said Christian Bruns, VP Insurance-Linked Investments at Swiss private bank Clariden Leu. Outstanding bonds cover only the United States, Britain, Canada, France, Germany and Japan, he noted, with deaths on a massive scale required before investors face any loss.