The Axa insurance group, formerly Guardian-PMPA, is pulling out of the commercial property and liability insurance market and will not renew existing business with small and medium-sized business customers this year. Axa plans to concentrate on its core personal lines - personal and commercial motor and home business.

The move will further restrict the options available to business customers who have been suffering large premium increases in a difficult market environment. Axa was the smallest of the five main companies in the market for business and commercial risks. The main players are Allianz, Hibernian (CGNU), Eagle Star and Royal & Sun Alliance.

An Axa spokesman said the company decided about two years ago to step back from the market initially by not taking on any new business. This decision was taken because the level of losses involved was unsustainable in a market which was underpricing risks, he said. The firm had annual premium income of about €15 million from the commercial market.

In recent months, huge increases in the cost of reinsurance meant it was not economic to continue to write a relatively small book of business, he added. About 25 per cent of every euro of earned premium was going out to buy reinsurance, he said. "So we decided to withdraw from the market completely and have advised our customers to make alternative arrangements," he said.

Axa's existing annual premium income from commercial business is €3-€4 million and the company covers "a couple of thousand" risks, mainly small commercial property and employer liability, he said. Intermediaries should not have any difficulty placing this business with other insurers writing commercial risk, he added.

Axa's exit from the market comes at a difficult time for insurers and their customers. Over the past 12-18 months, business customers have been complaining of sharp rises in insurance premiums, with many businesses that paid premium increases of up to 50 per cent last year facing additional increases this year of up to 30 and 40 per cent, according to industry sources. The industry has blamed sharp increases in reinsurance costs, high legal costs, a growing claims culture and poor investment returns.