Bacon & Woodrow suggests the household insurance market will return to profit in 1999 following record losses of more than £350m in 1998.

Higher premiums and an improved claims experience have helped boost the sector's profit margins.

Improved weather conditions in 1999 provided a silver lining, compared to the drastic floods and storms of 1998.

Contents insurance premiums are set to remain stable after domestic theft claims fell 6% last year. Subsidence claims were also down 10% in 1999.

However, premiums for buildings insurance may face further rises since insurers are not felt to be charging enough to cover the risk of potentially severe floods in the future.

Edward Plowman, insurance consultant at Bacon & Woodrow, said: "Some insurers have implemented modest increases to premiums following the bad results in 1998, and there may be some more to come."

But he qualified this by adding that consumers should not see similar rises to the huge premium hikes of more than 20% last year in the motor insurance market.

Household insurers paid out 68p in every £1 spent by policyholders, compared to £1.20 for every £1 in the motor market.

Plowman added that contrary to received wisdom, recent mergers in the household insurance market have led to rate increases instead of reduced premiums from cost savings.

Four years ago the top five household insurers held 38% of the market, now their market share is near to 56%, although no one company has more than 20%.

Plowman holds out better news to household policyholders in the longer run.

He said the growing trend for companies to sell household insurance over the internet will reduce costs and some very good deals are already available.