AM Best has downgraded the financial strength rating of IPCRe from A+ to A and its credit ratings from aa- to a.
The reinsurer's ratings have been removed from under review status and assigned a stable outlook.
The move comes despite the company's efforts to bolster its balance sheet with a $600m capital raise, following its recently announced $1.25bn shelf registration.
AM Best said the downgrades "reflect the decline in IPCRe's risk-adjusted capital position due to the group sustaining net losses from Hurricane Katrina and other catastrophe events that occurred in the third quarter of 2005".
It added that it does not consider the $600m funds raised by IPCRe "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 due to catastrophic events on a worldwide basis," the agency explained in a statement. It added that ratings are likely to be affirmed with a stable outlook upon successful execution of the capital plans.
AM Best also pointed to the positive benefits for IPCRe and its peers to reap as property catastrophe prices rise in the wake of the record third quarter losses.
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