HOMEOWNERS in flood-prone areas across the region are facing an insurance nightmare which leaves them in danger of becoming trapped in unsaleable properties, it was claimed yesterday.

The Association of British Insurers (ABI) warned that a lack of Government action to tackle flooding problems had left many companies with no choice but to refuse cover to some householders.

The ABI said an already grim situation could get far worse for desperate homeowners unless the Government agrees to plough hundreds of millions of pounds into flood defence schemes as a matter of urgency.

Borrowers must have buildings insurance as a condition of obtaining a mortgage. Without that protection, banks will refuse to lend money, forcing flood-affected properties to become unsaleable or see their value fall dramatically, experts believe.

More than 1,600 homes in the North-East and North Yorkshire were flooded during the last crisis in late 2000, and residents were recently warned that they could be hit by a new "flood plain" tax under controversial proposals currently under review.

Following the 2000 disaster, insurers said they would continue to cover people in high-risk areas who already had policies, for another two years.

But the industry warned that the agreement, which ends this December, would not be continued unless more funding was allocated for defences and the Government came up with a co-ordinated flood management strategy. The ABI believes its conditions have not been met.

Spokeswoman Gemma Hawes said: "In the face of increasing flood risk, we want to see urgent Government action.

"Better flood defences will enable insurers to continue to offer affordable flood insurance to as many properties as possible."

The Department for the Environment, Food and Rural Affairs said it was in talks with the ABI about flooding cover and was awaiting a decision from the Treasury on defence schemes spending.