It’s little surprise that the coalition government has effectively slashed flood spending by one-third

The scale of its swingeing cuts had been widely, even proudly, advertised, and in spite of airy promises from environment minister Richard Benyon, it was highly unlikely that flood defence spending would escape unscathed.

Now at least the industry has certainty and, as in all sectors, the government must accept the consequences of its choice. As Peter Cullum tells us bluntly this week: “Insurers will be forced to significantly increase premium rates, and homeowners living on flood plains will find it increasingly difficult to obtain cover at all.”

That’s the stark fact of the matter. Insurers are organisations run for profit, with a responsibility to their shareholders, and in the face of increased risk they will have no choice but to increase their prices or withdraw cover completely. They cannot compensate for an overstretched public budget by effectively subsiding development on flood plains – nor should they be asked to. The government has played its hand. When the statement of principles expires in 2013, the insurance industry will respond accordingly.

• Greetings to Mike Smith, the ebullient boss of Giles-owned Ink Underwriting, who talks to us exclusively this week. Smith is one of a new breed of senior bosses at the consolidators, along with Giles’s Sarah Lyons, Jelf’s Phil Barton and, of course, Amanda Blanc, Clive Nathan and Tim Johnson over at Towergate. Their mission? To manage these sprawling businesses into their second generation, and prove they are bigger than the personalities that built them. IT