<PAGE>   1
                                                                    EXHIBIT 10.1


                               IPC HOLDINGS, LTD.
                           DEFERRED COMPENSATION PLAN



SECTION 1: PURPOSE

The purpose of the Plan is to assist IPC Holdings, Ltd. ("IPC") in attracting
and retaining executives and other key employees by providing a compensation
deferral vehicle.


SECTION 2: DEFINITIONS

The following terms, as used herein, will have the meanings specified below.

         2.1    "ACCOUNT" means the accounts (including any Investment Account)
                and subaccounts established pursuant to Section 5.

         2.2    "AWARD" means the annual cash incentive, if any, awarded under
                IPC's annual incentive plan.

         2.3    "BENEFICIARY" means the person(s) designated by the Participant,
                in writing on a form provided by the Committee, to receive
                payments under the Plan in the event of his death while a
                Participant or, in the absence of such designation, the
                Participant's estate.

         2.4    "BOARD OF DIRECTORS" means the Board of Directors of IPC.

         2.5    "CAUSE" means (i) the Participant's conviction of, or a plea of
                guilty or nolo contendere to, a felony; (ii) the commission by
                the Participant of an act of fraud or embezzlement against the
                Company; (iii) the Participant's willful misconduct or gross
                negligence in the performance of the Participant's duties and
                responsibilities to the Company; (iv) the Participant's
                continued failure to implement reasonable requests or directions
                received in the course of his employment; (v) the Participant's
                wrongful dissemination or use of confidential or proprietary
                information; or (vi) the intentional and habitual neglect by the
                Participant of his duties to the Company.

         2.6    "CHANGE OF CONTROL" means a change of control as defined in
                Section 10.2.

         2.7    "COMMITTEE" means the Board of Directors or a committee
                designated from time to time by the Board of Directors to
                administer the Plan.

         2.8    "COMPANY" means IPC and any direct or indirect wholly-owned
                subsidiary of IPC.


                                      -15-
<PAGE>   2
         2.9    "DEFERRAL AGREEMENT" means the agreement in a form approved by
                the Committee and executed by a Participant pursuant to Section
                4 setting forth the terms and conditions applicable to the
                Participant's participation in the Plan.

         2.10   "DEFERRAL ELECTION DATE" means, as to any Award, September 30 of
                the calendar year preceding the calendar year in which such
                Award would otherwise be paid or such other date established by
                the Committee as the Deferral Election Date.

         2.11   "DEFERRAL PERIOD" means the period beginning with the day a
                Deferred Amount is credited to a Participant's Account and
                ending upon the earlier of (i) the termination of the
                Participant's employment as an Employee or (ii) if and to the
                extent permitted by the Committee, such earlier date not less
                than four years after the beginning of the Deferral Period as
                set forth in the Participant's Deferral Agreement.

         2.12   "DEFERRED AMOUNT" means the Mandatory Deferred Amount and the
                Elective Deferred Amount, if any.

         2.13   "DISABILITY" means (i) total disability as defined in the
                long-term disability plan of the Company, as in effect from time
                to time or (ii) if there is no such plan at the applicable time,
                physical or mental incapacity as determined solely by the
                Committee.

         2.14   "ELECTIVE DEFERRED AMOUNT" means the amount of an Award that a
                Participant has elected in his Deferral Agreement to be
                deferred.

         2.15   "EMPLOYEE" means an employee of the Company.

         2.16   "INVESTMENT ACCOUNT" means the accounts established pursuant to
                Section 5 to record the dollar amount and value of the Deferred
                Amount allocated thereto.

         2.17   "MANDATORY DEFERRED AMOUNT" means the amount of an Award under
                IPC's annual incentive plan that, in accordance with such plan,
                is mandatorily deferred.

         2.18   "PARTICIPANT" means an Employee designated from time to time by
                the Committee as a Participant in the Plan. A Participant will
                be deemed a Participant for so long as he has an Account.

         2.19   "PLAN" means this IPC Holdings, Ltd. Deferred Compensation Plan,
                as amended from time to time.

         2.20   "PLAN YEAR" means the fiscal year of the Company following the
                year of an Award.

         2.21   "IPC" means IPC Holdings, Ltd. and its successors.

         2.22   "RETIREMENT" means retirement from employment as an Employee of
                the Company at or after age 55.


                                      -16-
<PAGE>   3
         2.23   "VALUE" means the value of an Account, determined in accordance
                with the Plan.


SECTION 3: ELIGIBILITY

         3.1    Participants will be selected by the Committee from among those
                Employees who are eligible to participate in IPC's annual
                incentive plan.


SECTION 4: DEFERRALS AND ALLOCATIONS

         4.1    A Participant may elect to defer, under the terms and conditions
                of the Plan, all or a portion of an Award. Such election must be
                made by executing and delivering to IPC a Deferral Agreement on
                or before the Deferral Election Date. Such election will be
                irrevocable when made.

         4.2    A Participant's Mandatory Deferred Amount is deferred, without
                any action by the Participant, under the terms and conditions of
                this Plan.

         4.3    A Participant may elect, in his Deferral Agreement, to allocate
                his Elective Deferred Amount and Mandatory Deferred Amount among
                the Investment Accounts. In the absence of such an election, the
                Participant's Deferred Amount will be allocated, in total, to
                such Investment Account as the Committee may determine. A
                Participant may, subject to such terms and conditions as the
                Committee may establish, reallocate between or among such
                Accounts all or a portion of the Value thereof.

         4.4    A Participant may also elect, in his Deferral Agreement, the
                Deferral Period for his Deferred Amount. Such election will be
                irrevocable when made.


SECTION 5: ACCOUNTS

         5.1    The Committee will cause to be established and maintained an
                Account in the name of each Participant. Such Account will
                include two or more Investment Accounts and such other accounts
                and subaccounts as the Committee may determine.

         5.2    The Participant's Investment Accounts will be credited with that
                portion of the Participant's Deferred Amount allocated to such
                Accounts, respectively, in accordance with the Participant's
                election pursuant to Section 4.3. Such Account will be so
                credited as of the day such Deferred Amount would have otherwise
                been paid to the Participant. During the Deferral Period, the
                balance in the Participant's Investment Accounts will increase
                or decrease in accordance with the yield on the mutual fund or
                investment index designated by the Committee at the time of the
                establishment, and for purposes of determining the Value, of
                such Investment Account.


                                      -17-
<PAGE>   4
SECTION 6: VESTING AND TERMINATION

         6.1    A Participant will be immediately 100% vested in his Account
                attributable to his Elective Deferred Amounts and will vest in
                his Account attributable to his Mandatory Deferred Amounts in
                accordance with the following schedule:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
         PERCENT                      VESTING DATE
--------------------------------------------------------------------------------
<S>                    <C>
           25          First Plan Year end during the Deferral Period
           50          Second Plan Year end during the Deferral Period
           75          Third Plan Year end during the Deferral Period
          100          Fourth Plan Year end during the Deferral Period
--------------------------------------------------------------------------------
</TABLE>

                In the event of the Participant's Retirement, or if the
                Participant's employment as an Employee is terminated by death
                or Disability or by the Company other than for Cause, then,
                notwithstanding the foregoing schedule, the Participant's
                Account to the extent not yet vested will thereupon be 100%
                vested; provided further that, if the Participant's employment
                as an Employee is otherwise terminated, including being
                terminated by the Company for Cause, the Participant's Account
                to the extent not yet vested will, notwithstanding such
                schedule, be forfeited upon the date of such termination of
                employment.

                As soon as practicable after receipt of a written request from
                the Participant, the vested portion of the Participant's Account
                will be distributed to the Participant in a single cash lump
                sum.

         6.2    Except as otherwise provided in Section 6.1, the Value of the
                Participant's Account attributable to a Deferred Amount shall be
                distributed to the Participant (or in the event of the
                Participant's death, his Beneficiary) in a single cash lump sum
                as soon as practicable after the end of the Deferral Period with
                respect thereto.


SECTION 7: ADMINISTRATION

         7.1    The Plan will be administered by the Committee. The Committee
                will have full and complete authority, in its sole and absolute
                discretion, (i) to exercise all of the powers granted to it
                under the Plan, (ii) to construe, interpret and implement the
                Plan, Deferral Agreements and any related documents, (iii) to
                prescribe, amend and rescind rules relating to the Plan and
                Deferral Agreements, (iv) to make all determinations necessary
                or advisable in administering the Plan and Deferral Agreements
                and (v) to correct any defect, supply any omission and reconcile
                any inconsistency in the Plan and Deferral Agreements. The
                Committee's determinations under the Plan need not be uniform
                and may be made by it selectively among Employees and
                Participants, whether or not such persons are similarly
                situated. The actions and determinations of the Committee on all
                matters relating to the


                                      -18-
<PAGE>   5
                Plan, Deferral Agreements and any Accounts will be final,
                conclusive, and binding on Employees and Participants for all
                purposes.

         7.2    The Committee may appoint such accountants, counsel, and other
                experts as the Committee deems necessary or desirable in
                connection with the administration of the Plan. The Committee
                may also delegate to selected persons the authority to execute
                and deliver such instruments and documents, to do all such acts
                and things, and to take all such other steps deemed necessary,
                advisable or convenient for the effective administration of the
                Plan in accordance with its terms and purposes.

         7.3    The Committee and others to whom the Committee has delegated
                duties, authority or responsibilities for the administration of
                the Plan will keep a record of all their proceedings and actions
                and will maintain all such books of account, records and other
                data as will be necessary for the proper administration of the
                Plan.

         7.4    The Company will pay all reasonable expenses incurred in
                administering the Plan, including, but not limited to, the
                payment of professional fees.


SECTION 8: AMENDMENT AND TERMINATION

         8.1    The Board of Directors may at any time amend the Plan in whole
                or in part, provided that no amendment shall be effective (i) to
                decrease the amount credited to a Participant's Account prior to
                the adoption of such Amendment or (ii) to defer or delay
                payments to any Participant or Beneficiary in respect of any
                Deferred Amount credited to a Participant's Account prior to the
                adoption of such Amendment. Written notice of any amendments
                shall be given to each Participant.

         8.2    The Board of Directors may terminate the Plan if, as a result of
                changes in any law or governmental agency or judicial
                interpretation thereof, the continuance of the Plan, or the
                operation of the Plan in non-modified fashion, will result in
                adverse tax consequences to the Company or Participants.

         8.3    Upon any termination of the Plan under Section 8.2, deferrals
                shall prospectively cease and the Company will pay as soon as
                practicable to each Participant the Value of his Account,
                whether or not then vested, calculated as if each Participant
                had terminated employment due to Retirement on the date of such
                termination of the Plan.


SECTION 9: BENEFICIARY DESIGNATION

         9.1    Each Participant shall have the right, at any time, to designate
                a Beneficiary to whom payment under the Plan shall be made in
                the event of his death prior to complete distribution of all
                amounts due him under the Plan. Any Beneficiary designation
                shall be made in writing on a form prescribed by Committee and
                shall become effective only when filed.


                                      -19-
<PAGE>   6
         9.2    Any Beneficiary designation may be changed by a Participant only
                by written notice of such change to a form prescribed by the
                Committee. The filing of a new Beneficiary designation form will
                cancel all prior Beneficiary designations.


SECTION 10: CHANGE OF CONTROL

         10.1   Upon the occurrence a Change of Control, the Value of all
                Accounts will become fully vested.


         10.2   A Change of Control will be deemed to occur if (i) any "person"
                (as such term is defined in Section 3 (a) (9) and as used in
                Sections 13(d) and 14(d) of the United States Securities
                Exchange Act of 1934, as amended (the "Exchange Act")),
                excluding the Company or any of its subsidiaries, a trustee or
                any fiduciary holding securities under an employee benefit plan
                of the Company or any of its subsidiaries, an underwriter
                temporarily holding securities pursuant to an offering of such
                securities or a corporation owned, directly or indirectly, by
                shareholders of the Company in substantially the same proportion
                as their ownership of the Company, is or becomes the "beneficial
                owner" (as defined in Rule 13d-3 under the Exchange Act),
                directly or indirectly, of securities of the Company
                representing 50% or more of the combined voting power of the
                company's then outstanding securities ("Voting Securities");
                (ii) during any period of not more than two years, individuals
                who constitute the Board as of the beginning of the period and
                any new director (other than a director designated by a person
                who has entered into an agreement with the Company to effect a
                transaction described in clause (i) or (iii) of this sentence)
                whose election by the Board or nomination for election by the
                Company's shareholders was approved by a vote of at least
                two-thirds (2/3) of the directors then still in office who
                either were directors at such time or whose election or
                nomination for election was previously so approved, cease for
                any reason to constitute a majority thereof; (iii) the
                shareholders of the Company approve a merger, consolidation,
                amalgamation or reorganization or a court of competent
                jurisdiction approves a scheme of arrangement of the Company,
                other than a merger, consolidation, amalgamation, reorganization
                or scheme of arrangement which would result in the Voting
                Securities of the Company outstanding immediately prior thereto
                continuing to represent (either by remaining outstanding or by
                being converted into Voting Securities of the surviving entity)
                at least 50% of the combined voting power of the Voting
                Securities of the Company or such surviving entity outstanding
                immediately after such merger, consolidation, amalgamation,
                reorganization or scheme of arrangement; or (iv) the
                shareholders of the Company approve a plan of complete
                liquidation of the Company or any agreement for the sale or
                disposition by the Company of all or substantially all the
                Company's assets.


                                      -20-
<PAGE>   7
SECTION 11: CLAIMS PROCEDURE

         11.1   Any person claiming an amount under this Plan, requesting an
                interpretation or ruling under the Plan, or requesting
                information under the Plan shall present the request in writing
                to the Committee who shall respond in writing within ninety (90)
                days following receipt of the request. If the claim or request
                is denied, the written notice of denial shall state (1) the
                reasons for denial (2) a description of any additional material
                or information required and an explanation of why it is
                necessary; and (3) an explanation of the Plan's claim review
                procedure. Any person whose claim or request is denied may make
                a second request for review by notice given in writing to the
                Committee. The claim or request shall be reviewed further by the
                Committee, which may, but shall not be required to, grant the
                claimant a hearing. A decision on such second request shall
                normally be made within sixty (60) days after the date of the
                second request. If an extension of time is required for a
                hearing or other special circumstances, the claimant shall be
                notified and the time limit shall be one hundred twenty (120)
                days from the date of the second request. The decision by the
                Committee shall be in writing and shall be final and bind all
                parties concerned.


SECTION 12: MISCELLANEOUS

         12.1   APPLICABLE LAW. The Plan, the Deferral Agreements and all
                actions taken hereunder or thereunder will be governed by, and
                construed in accordance with, the laws of Bermuda without regard
                to the conflict of law principles thereof. The resolution of any
                dispute hereunder or thereunder will be by binding arbitration
                pursuant to the Bermuda International Conciliation and
                Arbitration Act 1993 (exclusive of the Conciliation Part of such
                Act).

         12.2   COMPLIANCE WITH LAWS. This Plan, the Deferral Agreements and any
                action pursuant hereto or thereto are subject to compliance with
                all applicable laws, rules and regulations and to such approvals
                by any regulatory or governmental authority as may, in the
                opinion of counsel for IPC, be necessary or advisable in
                connection therewith.

         12.3   EFFECTIVE DATE. The Plan will be effective as of December 31,
                1997.

         12.4   GENDER, ETC. In interpreting the Plan, the masculine gender will
                include the feminine, the neuter gender will include the
                masculine or feminine, and the singular will include the plural,
                unless the context clearly indicates otherwise.

         12.5   INVALIDITY. If any term or provision contained herein is to any
                extent invalid or unenforceable, such term or provision will be
                reformed so that it is valid, and such invalidity or
                unenforceability will not affect any other provision or part
                hereof.

         12.6   LIMITS OF LIABILITY. Any liability of the Company to any
                Participant with respect to an Award will be based solely upon
                the obligations created by the Plan and the Deferral Agreement.
                Neither the Company, nor any member of the Board of Directors or
                of the


                                      -21-
<PAGE>   8
                Committee, nor any other person participating in the
                determination of any question under the Plan, or in the
                interpretation, administration or application of the Plan, will
                have any liability to any person for any action taken, or not
                taken, in good faith under the Plan.

         12.7   NONASSIGNABILITY. No Account or any rights and privileges
                pertaining thereto may be transferred, assigned, pledged or
                hypothecated in any manner, by operation of law or otherwise,
                other than by will or by the laws of descent and distribution.

         12.8   OTHER PAYMENTS OR AWARDS. Nothing contained in the Plan will be
                deemed in any way to limit or restrict the Company from making
                any award or payment to any person under any other plan,
                arrangement or understanding, whether now existing or hereafter
                in effect; and no Award or payment made under this Plan will be
                taken into account in determining the benefit payable under any
                other plan unless such other plan expressly so provides.

         12.9   PAYMENTS TO OTHER PERSONS. If payments are legally required to
                be made to any person other than the person to whom any amount
                is made available under the Plan, payments will be made
                accordingly. Any such payment will be a complete discharge of
                the liability hereunder.

        12.10   RIGHTS. Status as an eligible Employee or a Participant will not
                be construed as a commitment that any Award, or, in the case of
                a Participant, any further Award, will be made to such eligible
                Employee or Participant or to eligible Employees or Participants
                generally. Nothing contained in this Plan or in any Deferral
                Agreement will confer upon any Employee or Participant any
                rights as a stockholder of IPC or the Company or any right to
                continue in the employ or other service of the Company or
                constitute a contract or limit in any way the right of the
                Company to change such person's compensation or other benefits
                or to terminate the employment or other service of such person
                with or without Cause.

        12.11   SECTION HEADINGS AND REFERENCES. The section headings contained
                herein are for the purpose of convenience only, and in the event
                of any conflict, the text of the Plan, rather than the section
                headings, will control. All section references are to sections
                of the Plan.

        12.12   WITHHOLDING TAXES. Whenever payments are to be made under the
                Plan, the Company will withhold therefrom an amount sufficient
                to satisfy any applicable governmental withholding tax
                requirements related thereto.



                                      -22-