Towns at risk from flooding could slowly die if insurance companies increase premiums on homes and businesses.

An appeal has been made to both the Government and the insurance industry to recognise a serious threat to towns such as Lewes.

From next year, insurance companies will be able to increase charges or even refuse cover if they believe a town's flood defences are inadequate.

Campaigners believe this is a time bomb because the future of flood insurance for ordinary households and small businesses is still unresolved.

Lewes Flood Action, which represents the interests of people whose properties were flooded in October 2000, has written to the Department of Environment, Food and Rural Affairs and to the Association of British Insurers demanding urgent action.

Many residents fear they may not be able to get any cover against flooding from next year onwards and if they do, it may be at hugely increased premiums.

After the floods of 2000, the insurance industry told the Government it would avoid big increases in premiums for two years.

However, the Environment Agency has admitted it will be several years before major flood defence work can begin to prevent the Ouse flooding.

This has resulted in growing anxiety in Lewes and many other towns in Britain.

Lewes Flood Action's Peter Atkins said: "Many people fear that without affordable flood insurance the whole of the lower-lying part of Lewes, including the town's commercial centre, will fade away and lose viability as people and businesses find they cannot get insurance and, consequently, mortgages.

"People are not going to move in and businesses will not start up or even stay. The town will slowly die."

The principle of insurance should be to spread risks, not hit people who were already battered and unable to change their circumstances.

He said the Government must not treat the question of building flood defences as unconnected to insurance and called on East Sussex County Council to treat the problem of Ouse Valley flooding as a greater priority.