GUARDIAN PMPA, the country's biggest motor insurer with an estimated 40 per cent of the market, has warned that insurance premiums could rise if the "worrying increase" in the number of motor accidents continues.

Guardian cut its motor insurance premiums by 5 per cent last year and by a further 4 per cent earlier this year, but Guardian director, Mr Aidan Cassells, warned that the group did not expect such a sudden deterioration in the number of road accidents when premiums were reduced.

Garda statistics show that there was an 11 per cent increase in road accidents in the first half of the year, an increase that Mr Cassells said was reflected in the number of claims against the company. He said Guardian no plans "at this stag " to increase premiums, but added: "If things disimprove further, a price adjustment can't be ruled out."

Guardian reduced its motor premiums in 1995 and early 1996, mainly due to a better underwriting performance and to cost cutting. "We made a conscious decision then to reduce rates because we performed very well in 1995," said Mr Cassels.

But the first half of 1996 has seen the situation deteriorate sharply, with underwriting profits collapsing from £7 million in the first half of 1995 to break even.

Realised investment income fell from £18 million to £16.8 million, reflecting lower interest rates in the period, with the results that operating profits in the period fell from £25 million to £16.8 million. Net premiums received in the period rose slightly from £147.7 million to £150.1 million.

Guardian also moved from an unrealised investment gain of £4.7 million in the first half of 1995 to a loss of £3 million in the current period, although losses in the group's operation in the International Financial Services Centre fell from £2.2 million to £1.2 million.

Overall, insurance profits fell by over half to £12.6 million and Guardian is facing a big fall from last year's full year insurance profits of £75 million and pretax profits of £105.1 million.

Guardian's chief executive, Mr Gerard Healy, said: "Our performance in 1996 is satisfactory and bin line with expectations. Our decision to reduce motor premiums last year and again this year has inevitably had a negative effect on our profitability.

"However, in addition, we have seen a worrying increase in the number of accidents this year . . . and we would be very concerned if this upward trend were to continue."

Mr Healy said that immediate steps must be taken by the authorities to identify and address the underlying causes of the increased level of accidents.