FLOOD victims in North Yorkshire could face more misery after insurance companies threatened to stop offering cover unless the Government comes up with more cash.

The Association of British Insurers (ABI) says it cannot afford to keep compensating people whose homes are devastated by rising waters, as they were in the summer when millions of pounds of damage was caused in the region, unless flood defences are improved.

It has demanded the Government devotes more money to managing the threat of floods than it announced in its comprehensive spending review this week.

But while some have praised insurers for their stance, others claim it will panic homeowners in flood-risk areas - while estate agents warn a lack of insurance cover would slash up to a quarter off the value of some houses.

The ABI says Environment Secretary Hilary Benn's pledge that spending on flood management will rise to at least £650m in 2008-09 and £800m by the start of the next decade is nowhere near enough.

"We really want to carry on providing the service, but obviously we can't keep providing it at a significant loss," said ABI director general Stephen Hadrill.

"What we are looking for from the Government is a recognition of what happened this summer and an increase in the level they've announced to reflect the lessons learned." He said the amount of spending promised over the next three years was less than the ABI wanted even before the summer deluge.

Pickering was one of the worst-hit areas in North Yorkshire, with floods wrecking 70 homes at a cost of about £2m, and Ryedale councillor Howard Keal, of the Pickering Flood Defence Group, said: "It's completely correct for the ABI to hold the Government to account for its failure to adequately fund defences and press home the message that a sticking plaster is being used to treat a gaping wound. But it is outrageous that an industry worth billions of pounds is threatening to renege on its responsibilities and threaten the welfare of its customers. The point of having insurance is to help people in their time of need, and it's uncomfortable to think that help might be taken away."

Pocklington also suffered from the summer downpours, and town council clerk Richard Wood said: "Although it's disappointing and not what anybody wants to hear, it's sadly predictable. Flooding is a traumatic experience for those it affects, but insurance is, after all, a business."

Councillor Andrew Waller, who represents City of York Council on the Yorkshire Regional Flood Defence Committee, believes the Government's spending plans cannot keep pace with flood defence demands.

"At least insurers are being honest and upfront about their position - they've kept their side of the bargain," he said.

"Now the Government must come clean about its spending programme, otherwise this will just be a recipe for future heartache. Promises made when floods arrived have evaporated as soon as they are off the political agenda - that's not good enough."