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A fight between two would-be buyers over catastrophe reinsurer IPC Holdings Ltd. (IPCR) contrasts with an apparent lack of interest in the reinsurance business mostly owned by American International Group (AIG).

For the chief executive of Validus Holdings Ltd. (VR), which is competing with Max Capital Group Ltd. (MXGL) to buy IPC, the appeal is all about which types of reinsurance prices are rising and which aren't.

"We see a good opportunity to put our capital to work in short tail lines of business," where prices are rising rapidly, said Ed Noonan, chief executive of Validus in an interview Friday. "Looking at IPC, we said it offers the opportunity to double our capital base at a time when we have a great opportunity to grow."

That appeal is missing in property/casualty reinsurer Transatlantic Holdings (TRH) because of the liability side of its offerings, where Noonan said rates are falling. Transatlantic's close business ties with AIG can't help. AIG's 59% ownership of Transatlantic has been up for sale since the AIG's massive government bailout first began in September, without any apparent nibbles. AIG is a reinsurance customer of Transatlantic as well.

"Casualty prices continue to go down," Noonan said. "I don't know how many are looking" to expand into that line of business.

A Transatlantic spokesman said that he could not comment on what AIG might do with its stake.

Casualty coverage includes liability coverage such as workers compensation, where claims can come up years after a policy is written, as opposed to the shorter timeframe for property coverage.

Max Capital, which writes property and casualty business, would also increase its proportion of property and other short-tail lines by a combination with IPC. It has argued that its offer is superior to Validus Re's, in part because its combined business would be more diversified.

In 2008, 70% of Transatlantic's total premiums came from the casualty side of its business. In January, Transatlantic said that despite AIG's uncertain future, the company managed to renew most of the business it wanted to keep.

That could change, said one observer.

"Reinsurance is a little easier for a competitor to pick off" than more long-term business deals, said Ernie Csiszar, insurance industry director with Bridge Strategy Group, and the former director of the South Carolina insurance department. He said that reinsurance customers might be leery of AIG's future. "Why would you want to buy the business when you can just take it away?"

 
   -By Lavonne Kuykendall, Dow Jones Newswires; (312) 750 4141; lavonne.kuykendall@dowjones.com