A crisis in the supply of liability insurance is threatening economic development in the UK.

That is the stark warning The Underwriter chief executive Keith Rutter will deliver to Financial Services Authority (FSA) managing director John Tiner at a meeting on 24 June.

Rutter admitted that his own insurance company was rapidly running out of capacity and had been writing to brokers ahead of renewals warning that capacity might not be available.

The Underwriter is one of many insurance companies running out of liability capacity. Earlier this month Lloyd's RJ Wallace syndicate admitted that it had stopped writing new UK employers' liability and public liability business, while fellow Lloyd's syndicate Abacus announced an underwriting moratorium on all new business.

The shortage is hitting construction trades hardest, according to Rutter. He said that roofers and scaffolders were finding it almost impossible to find cover that was not financially crippling.

One underwriter who is still in the market said cover could cost £2,000 per man at current prices. "The problem is that injuries usually hit our balance sheet because they come in under our reinsurance level," he said. The underwriter added that roofers and scaffolders only had themselves to blame because safety levels in the trades were poor. "The construction industry is the only industry that is killing more of its workers every year," he added.

Rutter feared that roofers, scaffolders and other trades perceived to be risky will not find cover and therefore would not be able to trade.

"This will mean that building work will stop or increase in price dramatically as contractors pay through the nose for firms which have cover," he said.