Corporate clients will continue to pay more for insurance before the market returns to profitability, Coyle Hamilton has stated in its annual review of the insurance, pensions and risk management sector.

Part of the reason for the bleak outlook is that insurers can no longer rely on returns from investing premium income to offset underwriting losses and ensure their liquidity, Commentary 2002 said.

The hardening insurance market is also being driven by increases in the cost of meeting claims and a growing reluctance among insurers to cover some risks. In the wake of the September 11th attacks, terrorism cover is either impossible to obtain or only available at prohibitive premiums. This left Irish businesses with dangerous levels of exposure and no State safety net, Mr Jim O'Mahoney of Coyle Hamilton said. "The two main issues ahead of us are the terrorism exclusion and the collapse of Independent Insurance."

Mr O'Mahoney said the full impact of the British firm's collapse last year had not yet surfaced but he estimated the total cost to business could be as high as €60 million (£47 million).

The Coyle Hamilton review also discussed health and safety matters. "Tough on-the-spot fines for minor breaches of health and safety-at-work legislation and six-figure court penalties for more serious offences are on the cards."

Commentary 2002 also explains why recent court decisions in two landmark cases will mean further increases in the cost of claims. These provided for the index-linking of awards in medical compensation cases and the levying of full hospital costs on insurance claims.

One measure which may help to reduce the cost of delivering compensation is the Government's proposal to establish a Personal Injury Assessment Board.

The purpose of the board is not to reduce awards, according to Coyle Hamilton, but to reduce the level of legal costs where liability is admitted.