Insurance firms warn on flood cover

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Insurers have warned that householders could be denied cover if new homes were built on flood plains, as the estimated total cost of the disaster was raised to more than £2bn.

The Association of British Insurers also joined opposition MPs yesterday in demanding that ministers spell out exactly when the extra £200m of promised spending on flood defences by 2011 would be made available.

The ABI called for action as the Government unveiled plans to build millions of new homes, and refused to rule out building some on flood plains.

Malcolm Tarling, of the ABI, said: "We don't want any building on flood plains at all. If a property is build on a flood plain with inadequate defences, insurers will have to consider whether they can offer new customers cover.

"We have said we will offer cover to existing customers if the Government lives up to its end of the bargain and improves flood defences. We need to spend money now."

Mr Tarling admitted that the £2bn estimated cost to the industry of Britain's washout summer - a sharp rise from the original £1.5bn - was likely to increase. He also said the industry was becoming increasingly frustrated at the lack of an answer from ministers on when the extra £200m would be made available.

The ABI has in the past been reluctant to challenge the Government, but tensions have now reached breaking points as the bill faced by the UK insurance industry continues to mount as the waters rise. The UK is virtually unique in offering protection from floods as apart of regular home and buildings insurance policies.

A spokesman for the Department of the Environment said an announcement on the budget for next year's flood defence spending would not be made until the outcome of the Comprehensive Spending Review had been published.