Consumers are facing sharp increases in their home and motor insurance costs again next year, according to Hibernian.

The insurer expects motor insurance premiums to rise by 20 per cent in 2002, in addition to a similar-sized increase this year, while home insurance costs are likely to increase by a further 25 per cent.

Businesses will meanwhile face another tough year on the insurance front, with 50 per cent increases forecast for large commercial firms - while the small and medium-sized sector faces a rise of 40 per cent in its bills.

Hibernian, which holds around 26 per cent of the general insurance market, blames a number of factors for the higher cost of premiums. These include the increased incidence of floods and storms in the Republic in recent years, high claims inflation and growing reinsurance costs.

In the past, the company budgeted for one weather catastrophe every four years, but since 1998 there have been severe storms or flooding once a year.

Claims inflation is running at 15 per cent, well above the consumer price index, with price rises particularly noticeable in areas such as medical care, wages, car repairs and construction, the insurer says.

Hibernian, which is currently involved in its annual round of reinsurance negotiations, estimates that property reinsurance costs have increased by 40 to 50 per cent, while accident costs are up by close to 100 per cent.

It blames several factors for this, including major international catastrophes such as the attacks on the World Trade Centre on September 11th and the sharp fall in equity markets this year, which have created potential solvency problems in the sector.

In addition to international issues such as the cost of reinsurance, a number of domestic factors are also contributing to rising costs. The amount the company has to pay to the Motor Insurance Bureau of Ireland has risen, reflecting a rise in the number of uninsured drivers on the road.

Two recent court cases, one relating to hospital charges and the other to claims payouts, have also forced the industry to increase claim reserves.

Hibernian is not alone in forecasting increased insurance costs for the domestic and business sectors next year. Axa, the second- largest player in the general insurance market with an 18 per cent share, says its premiums will also rise by broadly similar amounts.

"We are also looking at double digit increases," said Mr Dermot Devlin, head of marketing at Axa.

However, there is growing concern that rising insurance costs will mean more and more people cannot afford essential cover.

Hibernian has already seen evidence that certain firms, particularly in the haulage and construction sectors, are operating without any insurance - while they have also seen signs that people are skimping on their home insurance.

Hibernian helps track the cost of your car insurance premium: page 2