Demand for product recall insurance will increase significantly across Europe due to the General Product Safety Directive, according to PricewaterhouseCoopers (PWC).

Since the introduction of the Directive at the beginning of 2004, the weekly volume of product recalls notified to the European Commission has leapt from an average of four per week in February 2004 to 11 in February 2005.

"The Directive has raised the profile of recall insurance cover," said PWC insurance claims and forensic services director Graeme Berry.

"People are going to be much more aware of the need to understand the risks and manage the risks of recall, but there will inevitably be increased demand for the residual risk to be insured."

But whether the market will respond and provide sufficient capacity, is another question, said Berry.

More legislation could soon be introduced in this area, PWC warned.

The Department for Trade and Industry is currently consulting on plans to introduce fines of £20,000 or 12-month jail terms for companies who fail to recall unsafe products.

The consultation period ends this month.

"It's not a widely held cover at the moment, but it will become a significant product area," said Berry.