The Government has applied for a European grant to help the long-term recovery from last month’s floods, the first time it has asked for aid in the aftermath of a natural disaster.

The application to the European Union Solidarity Fund came as John Healey, the Minister in charge of the recovery operation, raised the estimate of damage to £2.7 billion — a figure that could rise still farther.

In a letter to Hilary Benn, the Environment Secretary, the Association of British Insurers (ABI) put the cost of the floods at £3 billion and has demanded that he spend more on flood defences.

Even if the grant is approved, only a proportion of the costs would be covered and it is likely to take nine to 12 months before the resources become available. Previous decisions by the Commission suggest that, if Britain’s total damage bill is £2.5 billion, the funding would be between £62.5 million and £125 million.

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Any money received would have to be spent within a year, after the Government has signed an agreement on how the grant would be used. If any money is left over, it would have to be returned to the EU.

The European Commission will now decide on the application and the size of the grant. If approved, it will move to the European Council and the European Parliament for final determination.

Richard Ashworth, the Conservative MEP for the South East and a member of the European Parliament’s budgets committee, said that it was sensible to reclaim some of the funding contributed by British taxpayers.

He added: “The solidarity fund will only provide a small contribution compared with the overall damage caused, but for families attempting to rebuild their lives, every penny the Government can secure will be important.”

The application for funding comes as the ABI gave warning that Britain is vulnerable to further flooding because much ground is still saturated, meaning that any rainfall will feed through to already raised water levels in rivers.

In a letter to Mr Benn, Stephen Haddrill, director-general of the ABI, said: “The scale and impact of the floods has been massive. The cost to the industry of more than 60,000 claims is approaching £3 billion and more claims continue to come in.

“It is worth noting that in other countries this cost would have fallen on the state, as the UK is almost unique in covering flood risk through insurance.” Of the 60,000 claims, about three-quarters were domestic and nearly 15,000 were business.

Last month Mr Benn committed the Government to increase spending on flood defences and risk management from £600 million to £800 million by 2011. But the ABI has also called for an extra £150 million for maintenance.

Gloucestershire County Council said that its bill had risen to more than £50 million, and that some families had been told that they would have to stay in temporary accommodation until Christmas. The results of a questionnaire suggested that one in six families in Gloucestershire had to move out of their homes because of the floods.