Bermuda reinsurer IPC Holdings Ltd. yesterday saw its financial strength rating downgraded from A+ (Superior) to A (Excellent).

Oldwick, New Jersey-based ratings firm AM Best made the downgrade, also lowering its rating to ?a? from ?aa-? on the company?s reinsurance subsidiaries, saying it did not believe it had raised enough new capital in the wake of Hurricane Katrina.

The downgrades reflect the decline in IPCRe?s risk-adjusted capital position due to the group sustaining net losses from Hurricane Katrina, the devastating August 29 hurricane that hit the Gulf Coast, and other third-quarter catastrophes that resulted in IPC recording net losses and loss adjustment expenses of $856 million in the period.

A financial strength rating measures an insurer or reinsurer?s ability to pay claims. Reinsurers sell insurance to insurers, allowing them to spread the risk in policies sold to corporations and individuals.

Concurrently, AM Best downgraded the issuer credit rating to ?bbb? from ?a-? of IPCRe and assigned indicative ratings to all debt securities recently filed under a $1.25 billion shelf registration.

All ratings have been removed from under review and assigned a stable outlook, indicating the ratings are unlikely to change.

AM Best said it expects IPCRe to manage its risk-adjusted capital and financial leverage ratios within acceptable ranges to support its new financial strength and debt ratings.

While IPCRe had earlier announced raising around $600 million in capital through a common share and mandatorily convertible preferred public offering, AM Best said it did not not believe the capital boost was sufficient to support the volatility of the group?s monoline property catastrophe focus at its former A+ (Superior) financial strength rating level.

As a global property catastrophe reinsurer, IPCRe is subject to high severity losses from catastrophes across the globe.

However, the sector also expects to benefit from an increase in property catastrophe pricing as a result of the staggering cost of the 2005 hurricanes, which is estimated to reach as high as $75 billion, Best said.