Flood defence cuts to make London homes 'uninsurable'

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Insurers who were heavily hit by claims from recent devastating floods will "inevitably" seek to increase premiums or refuse cover altogether, industry experts said.

Owners of properties next to the Thames will be most at risk, but premiums across London could rise by as much as 10 per cent.

The insurance industry has pledged to guarantee cover even to those living in flood-prone areas, under the Statement of Principles on Flood Insurance, but this runs out in 2013.

The Chancellor has earmarked only £500million a year to spend on flood defences from 2011 to 2015, a reduction of £216million.

Malcolm Tarling, of the Association of British Insurers, said: "The Environment Agency has said flood spend needs to double each year just to keep pace with current flooding."

Simon Douglas, director of AA Insurance, said: "My greatest fear is that inadequate spending on defence will affect home insurance premiums and could leave thousands of homes uninsurable and thus un-mortgageable."