Investors in the insurance sector won?t be scared off by a few losses, industry experts said last week.

?Investors don?t mind losses? said Mike Millette, a managing director of Goldman Sachs & Co., at the World Insurance Forum in Bermuda last week, but said it wasn?t clear if investors will stick around if there is another shock this year.

A number of insurers, and reinsurers who sell policies to insurers, lost more than half their capital to hurricane losses in 2005.

And the losses have taken a toll on some investors. Hedge funds have been amongst those worst hit it emerged last week, after PXRe Group Ltd., a Bermuda reinsurer, reported higher-than-expected losses.

Three large hedge funds were amongst PXRe?s largest investors, December regulatory filings show. D.E. Shaw & Co., Eton Park Capital Management and Och-Ziff Capital Management Group together hold more than 20 percent of PXRe.

But rather than run away, investors have flocked to pour money into the sector in the aftermath of Hurricane Katrina and other costly 2005 catastrophes. Investments worth nearly $20 billion were pumped into the Bermuda insurance market late last year both to replace capital lost by established companies and as founding investments in a string of new companies.

Investors have been keen to pour money into the sector in anticipation of improved business opportunities. Premium pricing is expected to rise throughout 2006 because of the scale of last year?s losses.

Large institutional investors like hedge funds or private equity groups can stomach some losses because they are generally invested in multiple insurance companies as well as in insurance-linked securities like catastrophe bonds, said Mr. Millette. ?The diversification story has worked well for investors.?

PXRe?s shares slumped last week after it reported the larger losses, and saw its financial strength rating downgraded by all the major ratings firms that track its ability to pay claims.

PXRe shares fell 6.1 percent in composite trading on the New York Stock Exchange on Friday, to $3.99. The company?s 52-week high is $26.65.

Vincent J. Dowling, Jr., a managing partner with Dowling & Partners Securities LLC, said investors occasionally got burned but overall had done very well. Investments in a wave of new insurance and reinsurance companies forming after the September 11, 2001 terrorist attacks, for example, did much better on those investments than other parts of the market.

?Every single 2001 start-up, with the exception of Quanta, has earned their founders a double digit return,? said Mr. Dowling, who produces a weekly trade newsletter widely followed by the sector.

Quanta, a Bermuda reinsurer formed in 2003, has, like PXRe, seen its share price slump since Hurricane Katrina, the August 29 storm that could cost the sector up to $60 billion.