Insurers are preparing for payouts of more than £1 billion to flood-devastated homeowners in northern and central England as the country braces for another barrage of bad weather is expected over the weekend.

The unprecedented number of claims, which some experts have put at 9,000, has sparked fears of a rise in home and car insurance premiums as insurers look to recover the cost of the disaster.

The Association of British Insurers said yesterday that damage claims from June alone were likely to reach a record £1 billion. In 2000, insurance payouts hit £1.3 billion for the full year after severe flooding during the autumn and winter.

Lloyds TSB, the UK’s largest home insurer, said that it had not anticipated the number of claims received after flash floods last weekend.

Lloyds said it had received 3,506 claims since June 14 – 897 per cent higher than the same period in normal summer conditions. Halifax, another insurer, received about 2,500 claims to do with storm and water damage in the first three days of last week.

Lloyds TSB said that call volumes had been running at twice their usual level.

Deloitte Touche Tohmatsu, the global accountancy firm, predicted that insurers would be forced to increase premiums after claims from storms earlier this year were taken into account.

Lis Gibson, an insurance partner at Deloitte, said: “This is a level of losses that insurers can’t ignore when deciding what premiums to charge for the remainder of the year and 2008.”

Debra Williams, of Confused. com, the financial comparison site, said: “There are no two ways about it – premiums in those areas will rise.”

However, the ABI played down future rises in premiums, saying that prices would be determined by weather patterns later in the year and the distribution of claims among insurers. Richard Mason, from Moneysupermarket.com, said that it was unlikely that insurance premiums would rise as there was heavy competition in the insurance market.

The average insurance claim from the latest storms is about £30,000, but could reach £1 million according to Halifax. Robert Muir Wood, chief risk officer at Risk Management Solutions, which models insurers’ exposure to natural disasters such as flooding, said that many parts of England remained extremely vulnerable to damage from flooding.

“You’re going to see this repeated in a lot of cities across Britain in future,” he said.

The ABI earlier this month called on the Government to increase its annual spending on improving flood defences to £750 million by 2011.

Insurers that are members of the ABI have promised to continue to cover homes in those areas vulnerable to flooding, as long as the Government delivers on previous committments to increasing spending on flood defences in those places.

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