Insurers, who have seen claims increase substantially after recent floods, may either seek to increase premiums or refuse cover altogether, property and insurance experts told an industry summit.
Bill Gloyn, a partner at insurance brokers Jardine Lloyd Thompson and Chair of the British Property Federation's Insurance Committee, told delegates: "Flooding is a catastrophic risk... If cover is not available - and that is already the case in some areas of the UK - the consequences are almost too frightening to contemplate. The widespread breaches of contract will lead to chaos and a potential collapse of the property market - both commercial and residential.
"Without insurance there is no mortgage. Without mortgages, there is no property market."
The extension of an agreement between the insurance industry and government to insure the bulk of homes at risk of flooding, which ends in 2013, is dependent on the government continuing its previously proposed programme of flood defence work.
However, Chancellor of the Exchequer George Osborne has earmarked only £500million a year to spend on flood defences from 2011 to 2015. This is a reduction of £216million and substantially less than the Environment Agency's recommended total of £1bn a year by 2035 to maintain the number of houses currently protected.
Anne McIntosh MP, Chair of the Environment, Food and Rural Affairs Select Committee, said it was vital to discuss "important issues regarding flooding, such as insurance and flood defence spending, in the hope of raising further awareness of flood risk with property owners, landlords and tenants alike and getting issues relating to increasing resilience and possible lowering of insurance premiums in a form of a Green Deal high on the political agenda."
The British Property Federation has argued for continued investment in flood defences to meet future risks, and also for insurers to take greater account of actions taken by landlords and households that reduce the threat of flooding to their property.
Liz Peace, chief executive of the BPF, said: "The devastation caused by the floods in 2007, and even in Cornwall only a matter of weeks ago, are still fresh in the memory. All property owners - commercial and households - need to be aware of the risks and to investigate the measures they can take to protect their properties."