Westcountry homes at risk of flooding could be "uninsurable" after the Government reached deadlock with the insurance industry to provide affordable cover.
As Devon and Cornwall continued to be battered by torrential rain and deal with the aftermath of a weekend deluge, it emerged ministers are struggling to strike a deal to offer universal flood insurance.
The Association of British Insurers (ABI) said talks had reached an "impasse", though Environment Secretary Owen Paterson said the claim was "nonsense" during an urgent ministerial statement to the Commons.
Against more ominous forecasts, Mr Paterson yesterday visited flood-hit Devon, including Exeter, where riverbanks were close to bursting but defences saved 6,000 homes. Ben Bradshaw, Labour MP for Exeter, said: "Exeter escaped by a whisker this time. The Government repeatedly promised it would have a deal in place before last summer's deadline.
"It failed and now thousands of householders and businesses in Exeter and elsewhere face the real possibility of not being able to get cover."
Under the so-called "statement of principles", the ABI has a deal with the Government whereby it agrees to provide affordable insurance for those in high flood risk areas.
In return, ministers have to put forward enough funding for defences to reasonably avert the risk of flood.
The existing deal ends in June 2013, but the insurance industry has been alarmed that the Government has made cuts to flood defence spending to help tackle the deficit.
To ease their fears, insurers want the Government to provide a temporary overdraft facility, to be paid back in full, to underwrite claims for 200,000 high-risk households in the event of serious flooding, such as those seen in 2007.
If the "statement of principles" expires, households at risk of flooding – many more than just the 200,000 high-risk properties – would be at the mercy of the free market, with many facing premiums that are prohibitively high or even not being offered any insurance at all.
The Westcountry peninsula is vulnerable to flooding due to its long coastlines and steep valleys, underlined by brutal flash floods in Mid Cornwall, Boscastle and Ottery St Mary, East Devon, in recent years and last week's chaos.
Nick Starling, director of general insurance at the ABI, said: "We have had two years to sort this out.
"During that time the insurance industry has put a massive amount of work and money into coming up with an insurance-led solution.
"We seem to have reached an impasse. The Government has made it clear it's rejected our solution."
But Mr Paterson refused to be drawn on whether alternative plans to the ABI's "safety net" were on the table.
"I think the timing was unhelpful," he said. "There are a lot of people across the country who are going to face some very bad weather over the next few days.
"Many people are extremely worried and I think it is not helpful to alarm people when we are in close, detailed negotiations with them."
Mr Paterson insisted the Government was "completely determined" to come up with an affordable and comprehensive scheme that did not burden taxpayers.
Stephen Gilbert, Liberal Democrat MP for St Austell and Newquay, said: "For the second time in just two years communities across the heart of Cornwall have been hit by destructive flooding.
"The Government must now respond, and ensure that businesses and home owners are able to access flood insurance at a reasonable cost."
But Hugo Swire, Conservative MP for East Devon and Foreign Office Minister, insisted: "We are working very hard with the insurance industry on this complex issue.
"We need a lasting solution that ensures affordable insurance bills for those at flood risk but do not place unsustainable costs on wider policyholders and the taxpayer. We understand the need to make a decision quickly and will announce our preferred approach shortly."