The investment industry's main trade group has introduced a form of insurance to cover money market defaults.

The Money Market Fund Bond is being offered by ICI Mutual Insurance Co., created in 1987 by the Investment Company Institute, a Washington-based trade group.

The insurance product is designed to guard money market funds against losses due to payment defaults, issuers' insolvencies, and other credit- related events affecting the securities in the funds' portfolios.

Losses up to $100 million would be covered.

The bonds will be issued by ICIM Reinsurance Co., a new subsidiary of ICI Mutual Insurance, which will get the bonds from an international group of 10 re-insurers.

Coverage of the bonds does not extend to federal government securities, certain lower-quality securities, and losses directly caused by year-2000 computer problems.

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