Government must force developers to pay for flood barriers if they choose to build in flood sensitive areas, according to the ABI.
The call was prompted by John Prescott's proposals to allow development of the Thames Gateway and Canterbury areas. Both areas are prone to flooding, experts said.
The government recently suggested developers should pay tax if they wanted to build in flood prone areas.
ABI manager of property and household Jane Milne said: "New developments should pay for flood defences as part of the cost, especially if it will worsen risk for existing properties. Why should the taxpayer pay?"
The ABI is also holding a flood seminar on 16 May for insurers to eliminate confusion over flood risk data supplied by the Environment Agency (EA).
The institute wants the EA to provide more data, so that insurers do not automatically blight properties in high-risk areas.
Milne said: "We need to fully understand the risk of flooding.
"And insurers need to interpret the data by the number of properties that will be affected by flood, so that insurers can implement the statement of principles."
The statement of principles encourages insurers to continue providing cover for homes in high flood risk areas as long as the Department for the Environment and Rural Affairs (Defra) implements flood defences by 2007.