LEADERS of the British insurance industry, dismayed at the lack of preparation against this summer's disastrous floods, are warning the Government to spend more on flood defences - or they will consider withdrawing insurance cover for home owners and businesses in threatened areas.

Unlike most European country's, says the Association of British Insurers (ABI), most flood damage is paid for mainly by private companies. In continental Europe, governments pick up the largest slice of the bill.

But in a sinister warning, the ABI says it might reconsider this arrangement unless the Environment Agency spends much more on flood defences and might, in future, refuse to cover developments built on flood plains.

These stark threats are also thought to reflect the fury of the insurance industry at the Government's penny pinching towards compensation for this year's floods, which are estimated to cost at least £3 billion and perhaps much more when the final bills come in. So far, the Government has offered a measly £15 million.

This news will make grim reading for hundreds of Yorkshire home-owners who have been devastated by flood water in the past three months, ranging from Filey to Sheffield. Many Yorkshire Dales rivers regularly flood and to have insurance cover refused would be a nightmare for home owners at risk.