Personal injury claims costs are set to soar again after reinsurers abandoned support for periodical payments.

Though some contracts have yet to be finalised, reinsurers such as Swiss Re are reported to be writing themselves out of any long-term involvement in periodical payments, leaving primary insurers to shoulder the burden. This could add hundreds of millions of pounds to the annual UK claims bill.

While larger insurers are looking at their life insurance companies to provide annuities, smaller insurers could be left exposed.

AXA claims director Dave Williams said: "Reinsurers have come in at the 11th hour very hard. The whole point of buying reinsurance is to bring a degree of certainty to our exposure. But what happens if the claimant ends up living twice as long? Reinsurance managers are underestimating the problems that these clauses could cause."

The other problem Williams highlighted was the lack of suitable annuities on the market, a point backed up by Joe Monk, partner at actuarial consultants Lane, Clark & Peacock.

Monk warned that the lack of annuities for those suffering mental or physical impairment meant the products were extremely expensive and in many cases unsuitable.

He said: "There are some annuities on the market, but they do not currently meet court requirements and they are very, very expensive. This could load a massive amount of claims inflation on to insurers' books.

"I don't think awareness of this is as high as it should be and I don't think the industry thinks periodical payments will actually happen, a strange attitude given that it is the courts that will decide."

But, the annuities market could be expanding with AIG tipped to join Scottish Widows and Canada Life in selling the products.

Both AXA and Norwich Union are thought to have reached provisional agreements with their life insurance companies to supply annuities to service periodical payments.

Swiss Re said it was undertaking negotiations with individual insurers about periodical payments.