The EU Council of Ministers has backed down on its stated aim of introducing automatic compensation for pedestrians and cyclists involved in road accidents.

The U-turn on the Fifth Directive legislation will be seen as a victory for the ABI and insurers concerned the rules could attract a flood of compensation claims.

A spokesman for the ABI said: "The EU recognises that while pedestrians and cyclists are special cases, where they are entitled to compensation that will be made by normal civil law. They will not automatically be entitled to compensation, rather, only when negligence can be established."

The meeting last week also set a minimum of ¤1m for personal injury cover, a requirement the ABI had been campaigning for.

The spokesman said: "This will bring other EU states up to the standard of cover enjoyed by UK motorists."