Luol Deng, the Chicago Bulls forward, will not be permitted to play for Great Britain in next month's European Championship qualifying campaign after an insurance company refused to provide adequate cover on his new £37.8million contract. The news will come as a devastating blow to the Britain team, who were considered capable of qualifying for next year's finals from a group containing Israel, Bosnia and the Czech Republic, as they continue their preparations for the 2012 Olympic Games in London.

Deng, 23, signed a guaranteed, six-year £37.8 million contract with the Bulls two weeks ago after passing a number of medical tests. But the NBA's New York-based insurance company has refused to cover him, citing an MRI scan from last November of a lower-back injury. Deng, who was born in Sudan and grew up in South London, missed three games because of the injury and, although the Bulls were happy to give Deng a new contract, the insurer claims that medical evidence suggests that the injury could be a long-term problem.

Under an arrangement with Fiba, world basketball's governing body, the NBA is obliged to release any player who wishes to play for his national team, but it has to do so only if adequate insurance is in place. Although the insurer has issued a policy, it does not cover potential back injury, effectively rendering it useless.

Officials from the Britain team were preparing last night to lodge an appeal with the insurer, a step that sources say would be futile. The only alternative would be for Britain's basketball federation to satisfy the Bulls by insuring Deng's contract, which is likely to prove impossible or financially prohibitive.

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Britain, who failed to qualify for the Beijing Olympics, are in Sardinia to play in a warm-up tournament, but Deng is understood to be devastated by developments. Great Britain Basketball refused to comment other than to say that the player is unavailable for the three games in Sardinia.

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