The Association of British Insurers (ABI) has warned the UK government that flood insurance will dry up unless more money is spent on defending homes and businesses from flood damage.

The ABI said that government spending on flood defenses needs to increase by 10% a year to GBP750 million by 2011 to deal with the growth in flood risk. Currently flood defense spending has been frozen at levels agreed in 2002 and is now falling in real terms.

The availability of flood insurance depends on government investment to bring flood defenses up to an adequate standard, said the ABI. Stephen Sklaroff, the ABI’s deputy director general, said: Britain is one of the few countries where flood insurance is widely available from the private market. Insurers want this to continue. But the new, higher estimates of homes and businesses at risk means that the government needs to invest more in flood defenses.

Flooding is set to worsen, according to some predictions, with sea levels rising more quickly as a result of climate change. South-east England – where the government is planning to build thousands of low cost homes to solve a housing crisis – is at significant risk of flooding. Recent Environment Agency statistics put over half a million homes at high flood risk, compared to the estimate of 220,000 when current flood spending levels were set in 2002.