HOMES at risk of flooding could lose insurance cover if the Government slashes spending on new defences, Gordon Brown has been warned.

The Association of British Insurers (ABI) has urged the Chancellor to resist trying to save cash by cutting back on budgets for new flood barriers.

In a submission to the Treasury, which is carrying out a review of Government spending plans, the ABI warns such a move could lead to some homes in areas at the biggest risk of flooding missing out.

Following the disastrous floods of 2000, which had a devastating impact in York and North Yorkshire, spending on defences was increased by Ministers.

At the same time, they struck a short-term deal with the ABI to ensure policy holders would continue to get insurance cover.

The insurance companies believe that properties should by protected to the extent that flooding could be expected to return not more often than one in 75 years, in order to make insuring them a viable risk. The ABI says that despite the increased expenditure, one in ten of the 1.8 million properties threatened by flooding will be in greater danger than the one-in-75-year risk.

The association has told Mr Brown that it was prepared to continue covering those properties after that date if the Treasury continues its level of spending on defences, which will be £564 million in 2006.

But the expenditure is only enough to protect an extra 80,000 properties a year, so it will still take at least three years to improve the flood defences covering of the most vulnerable properties.

As a result, a cut in spending could leave more than 200,000 properties still vulnerable. These homes could lose insurance cover.

The ABI said: "It is not a threat to withdraw cover so much as a sound business decision that we cannot afford to take these risks.

"In the light of climate change we have to keep the risk of flooding under constant review."

According to research, the average home in Britain spends £295 on household insurance, including flooding.

Updated: 11:08 Tuesday, April 20, 2004