UPDATE 1-IPC asks shareholders to back Max, not Validus

NEW YORK, April 7 (Reuters) - Insurer IPC Holdings (IPCR.O) said on Tuesday it recommended that shareholders back a combination with rival Max Capital Group Ltd (MXGL.O) rather than an unsolicited bid from Bermuda-based reinsurer Validus Holdings Ltd (VR.N).

Bermuda-based reinsurer Validus made an unsolicited $1.68 billion stock offer for IPC on March 31, potentially derailing an agreement between IPC and Max Capital Group Ltd (MXGL.O).

But IPC said in a statement Validus' offer is "less certain, is riskier for IPC's shareholders and would take longer to close."

IPC, a Bermuda-based property-catastrophe reinsurer, agreed to merge with Max Capital on March 2. Validus, which was not among potential bidders at that time, gave IPC's board until April 15 to decide on its counter-offer.

The battle for IPC, formed more than 15 years ago with backing from American International Group Inc (AIG.N), ends a nearly 12-year hiatus in deals among Bermuda-based insurers.

Validus was formed in 2005 after claims from Hurricane Katrina created a surge in demand for property-catastrophe coverage. It expanded into other lines of business through its 2007 acquisition of Talbot Holdings, an underwriter in the Lloyd's of London [LOL.UL] insurance market.

IPC was formed by Maurice "Hank" Greenberg, who solicited multiple investors to create the company. AIG was IPC's largest shareholder until 2006, when AIG sold its stake.

Under Max's deal, shareholders will receive 0.6429 IPC shares for each Max share. Under Validus' offer, each IPC common share would be exchanged for 1.2037 Validus shares. (Additional reporting by Lilla Zuill; Editing by Andre Grenon)