A top insurance firm is set to introduce a `bounty hunter' to track down bike bandits.

Colonial Insurance is also to introduce cash rewards for people who help recover stolen bikes or who finger cycle thieves.

And the twin-pronged attack could leave Colonial customers with smaller premiums in the long term.

Colonial Insurance chief Mr. William Madeiros said: "Hopefully, the scoundrels who steal bikes will have to start looking over their shoulders.

"They'll also have to think very carefully about who their friends are -- and consider the risk of selling a stolen bike to someone who'll turn them in later for a reward.

"It's really going to set the cat among the pigeons when it comes to bike thefts.'' The firm is currently in discussions with Police over the hiring of a full-time private investigator to act as a deterrent to bike thieves and track them down if they get away with a machine.

Mr. Madeiros said: "He could go around keeping an eye on things and follow up thefts.

"However, we have to look at how that would tie up with the Police -- everything would need their approval.'' But he added that the bounty scheme could be up and running before the end of the year. Rewards would be paid on the recommendation of the Police.

Mr. Madeiros said: "The Police like the idea. It's a matter of sitting down and working out the details. But we've already set aside a fund to pay the rewards.

"All we need to do is ensure there are adequate checks and balances, but dealing with the Police we have no fears on that.'' And he said -- if the measures prove to be successful -- it could be good news for the firm's customers.

Mr. Madeiros explained: "I'd like to see a situation where theft came down to such a low level that eventually we could pass on savings to clients through more competitive rates.'' He added the firm acted amid an epidemic of cycle thefts, which saw last year's total reach more than 2,530 bikes worth around $3.8 million, although around half of the bikes -- with a total value of $1.2 million -- were later recovered.

Mr. Madeiros said: "If something isn't done, there could come a time where people won't be able to get theft insurance for their cycles. It would be a last-ditch thing, but it could happen.

"It sounds extreme, but last year we were considering that. That's how bad things got.'' Colonial helped pioneer the U-Mark scheme, where bike parts are specially marked to deter thieves, and the U-Mark sticker scheme.

The firm was also instrumental in the introduction of new hard-to-beat cycle locks and have paid for anti-theft posters and literature.

Mr. Madeiros said the U-Mark scheme alone had already contributed to a "very large'' drop in cycle theft payouts for his firm so far this year compared to 1994, although the overall number of thefts for 1995 appeared to have remained at around the same levels as last year.

But he praised the Police for their determination to beat the bike theft problem by introducing and supporting new schemes.

Mr. Madeiros said: "The Police have been very supportive and pro-active in dealing with this problem and we're grateful for everything they have done.'' Police spokeswoman Insp. Roseanda Jones said last night: "Any initiative which someone is willing to employ to reduce bike crime is welcome.

"I would commend Colonial for the initiatives they have introduced. They have taken every step possible to help combat the problem of bike theft.''