An agreement between the government and insurers to guarantee insurance cover for developments in areas at risk of flooding is flawed, the British Property Federation has warned.

According to the BPF, the deal with the Association of British Insurers (ABI) will only benefit home owners and small businesses, and will entail a £25,000 excess and a £100,000 cap for high-risk areas.

Buildings completed after 1 January 2009 will also be unprotected, as they will not be covered by the agreement, which expires in 2013.

Defra announced the arrangement with the ABI on 11 July, saying it would ensure that “flood insurance remains widely available now and in the long term”. It added that it was committed to a 25-year strategy to improve flood defences.

However, the BPF voiced concerns that no new funding had been agreed to upgrade the country’s ageing flood management systems.

Liz Peace, chief executive of the BPF, warned that a repeat of last summer’s floods could leave property owners without cover. She said: “It’s a simple case of either pay now or suffer later.”