Insurers concerned over targeting of Chancellor's £150m hand-out

The Department of Environment, Food and Rural Affairs (Defra) and insurers are still unsure about how much new money has been promised by the Treasury to combat flooding.

While Gordon Brown promised £150m extra over the next three years, neither insurers nor Defra know how much is new money. The figure falls well short of the Association of British Insurers' (ABI) demand for an extra £145m per year.

The increase announced in the Chancellor's comprehensive spending review is a step in the right direction but not a solution, according to Norwich Union head of household products Nick Pierson.

He echoed the caution that other insurers and the ABI expressed after the announcement. Pierson said spending on defences alone would not tackle the problem of flooding.

"Organisation, prioritisation and land use management also need to be overhauled," he said.

The ABI said it would need to look at the figures very carefully.

ABI director general Mary Francis said: "We want to be sure that the planned spending will tackle unacceptable flood risks affecting our policyholders and that decision-making procedures will be improved to make this funding effective."

Royal & SunAlliance managing director Steve Broughton said it was vital that the funding was invested through a co-ordinated programme if real improvements were to be seen.

"The key now is that this funding is used as effectively as possible if we are not to find ourselves in a similar situation in a few years time. This means "joined-up" management through a proper flood defence and river management programme across the key regions.

"Otherwise a supposed solution in one area can create a flooding risk in another," he said.

A Defra spokeswoman said: "Defra will also act to improve the effectiveness and efficiency of flood defences by streamlining administrative arrangements."

She said the department would be building on the recommendations of the Review of Flood and Coastal Defence Funding, which may also recommend introducing new ways of funding. This review is scheduled for the autumn.