UPDATE 3-Validus sticks to offer for IPC despite rival bid

* Validus offer not raised in face of rival Flagstone bid

* IPC shares up 2.2 pct; Validus up 0.2 pct

* Flagstone shares down more than 12 percent (Recasts lead, adds analyst comment, updates share prices)

By Lilla Zuill

NEW YORK, July 2 (Reuters) - Reinsurer Validus Holdings Ltd (VR.N) reiterated its unsolicited offer for rival IPC Holdings Ltd IPCR.O on Thursday despite a competing bid from Flagstone Reinsurance Ltd (FSR.N).

Validus' stock and cash offer amounts to $28.86 per IPC share, or $1.61 billion, based on Wednesday's closing price for Validus.

Late Wednesday, Flagstone offered its own stock and cash offer equal to $33.62 per IPC share, or $1.88 billion, based on Wednesday's closing price for Flagstone. But Flagstone shares dropped more than 12 percent in morning trading on Thursday, cutting the value of its offer.

Validus and Flagstone are in hot pursuit of IPC after an IPC merger with Max Capital (MXGL.O), which had the full support of the companies' boards, failed to win IPC shareholder support last month. Validus' unsolicited offer had sought to derail the Max deal.

IPC is an attractive target because it would increase the acquirer's capacity to sell property-catastrophe reinsurance just as rates for the coverage are rising.

IPC had sought the tie-up with Max to to diversify its business, and said the company's nearly decade-long history made it a more stable choice than Validus, which is not yet 4 years old.

IPC Chairman Kenneth Hammond said in a May interview with Reuters that he and the board had concluded that Validus was not a good match.

Joshua Shanker, an analyst with Citigroup, in a research note said IPC was likely to be cool to new suitor Flagstone.

"Frankly, we believe that IPC would not want to be acquired by Flagstone," citing its view of Validus, which has a broader business profile than Flagstone.

A Flagstone representative was not immediately available for comment.

IPC said on Thursday that its board was in discussions with several parties, including Validus and Flagstone.

The company is also considering other strategic alternatives that might not involve a sale, and has not ruled out delaying the sale process until after hurricane season is past.

IPC, Validus and Flagstone are all based in Bermuda and sell property-catastrophe reinsurance. They typically get hit with their biggest claims when hurricanes strike populated areas. Hurricane season runs from June through November, with storms generally gaining strength in the middle of the season.

IPC was formed after 1992's Hurricane Andrew wreaked havoc in Florida, leading to a severe contraction in reinsurance capacity in the state. Validus and Flagstone were both formed after 2005's Hurricane Katrina, which devastated the U.S. Gulf Coast and caused a similar dearth of coverage. Validus has grown more quickly.

Reinsurers assume risks from other insurers, basically spreading the risk of loss among several carriers.

In early afternoon trading on Thursday, IPC shares were 2.2 percent higher to $28.38. Validus shares rose less than 0.2 percent to $22.39, after trading as high as $23.21 earlier in the session, while Flagstone was down 12.4 percent to $9.34. (Reporting by Lilla Zuill and Juan Lagorio; Editing by Lisa Von Ahn, John Wallace, Tim Dobbyn)