IPC Holdings Ltd., a Bermuda property-catastrophe reinsurer, on Tuesday night said it sustained a net loss of $656.6 million in the third quarter, after more than $850 million in losses from natural catastrophes, particularly Hurricane Katrina.

IPC ? which was formed 12 years ago in reaction to property-catastrophe capacity contracting after Hurricane Andrew in 1992 ? said its quarterly loss amounted to $13.57 a share, compared to a loss during the same period a year ago of $17.8 million, or 37 cents a share.

President and chief executive James Bryce said that Katrina, which is expected to be the costliest insurance event ever, highlighted the important role insurers play in helping areas recover from disaster.

"The tragic circumstances of Katrina demonstrates that an improved approach to risk, risk management, and the multi-dimensional nature of risk must be more closely examined by the industry in the future." And Mr. Bryce said pricing from 2006 on needed to reflect these factors.

Most in the industry expect insurance and reinsurance rates to strengthen when policies are renewed on January 1.

IPC's operating loss was $654.56 million compared to a loss of $17.39 million during the third quarter, 2004. Operating income or loss excludes net realised gains or losses, and is the number most commonly tracked performance measure used by those following the insurance industry.

IPC sold more policies during the third quarter, primarily because of reinstatement premiums in the four Gulf Coast states hit by Hurricane Katrina. In total, $166 million in policies were sold on a gross basis, more than double the $60.7 million in gross policy sales during the third quarter, 2004.

The company bought $1.9 million in reinsurance coverage, compared to $1.4 million in the year-ago period. Reinsurance is bought by insurers or reinsurers to help spread the risk in policies they have already sold, amounting to insurance for other insurers.

IPC's storm losses were partly offset by $15.7 million in investment income during the quarter, which included $500,000 in dividends from equity fund and fund of hedge funds investments. Investment income during the same period last year was $12 million.

IPC's expectation of large catastrophe losses ? Katrina cost the company in the region of $800 million ? resulted in Standard & Poor's on October 11 putting its ratings on negative watch, indicating the possibility that ratings could be downgraded. Yesterday S&P said IPC's ratings remained on negative watch.

This "reflects the uncertainty of hurricane Katrina losses given the very early stages of the actual claim adjusting process and concerns that current estimates will deplete a significant portion of capital representing more than three years worth of earnings," analyst Damien Magarelli said. The ratings firm said it was possible IPC's ratings would be affirmed, or downgraded one notch. At present, IPC holds counterparty and financial strength ratings of 'A+'.

IPC shares, which trade on the Nasdaq, fell 41 cents yesterday to $26.34. The company's shares have traded between $25.01 and $45 in the last year.