The Government’s Fair Funding rules, to be introduced in April, will allow headteachers to opt out of local authority-run schemes and take their own risks on the insurance market.

But cheap individual deals for schools in well-to-do areas may leave poorer neighbours unprotected, according to Zurich Municipal, the country’s leading insurer of local education authorities.

It has written to 50,000 heads and chairs of governors highlighting the problems of individual insurance for large risks, which until now has only been available to grant-maintained schools David Forster, marketing manager with Zurich Municipal, said some schools would be “uninsurable” if local authority policies broke down. “If the best risks opt to leave, it will make it worse for other schools. There are quite a lot which would find it almost impossible to get insurance at any price,” Mr Foster said.

Mark Stephens, insurance manager with Rhondda Cynon Taff council, south Wales, said the consequences could be severe for some schools in his district. Rhondda has had 26 fires in its schools over the past four years, but a few institutions had suffered the brunt of the problem.

“If we have six fires in a year in the authority, that is an OK risk in about 180 schools. But if three of those were in one school, that school would have difficulties.”

Stephen Parry, headteacher of Tonypandy comprehensive, said his school would be one of the victims. He experienced three major fires after arriving at Tonypandy in January 1996, and a confidential report by an insurer showed that the school would face very high premiums in a “free-for-all”.

He said: “We would be looking to go with the local authority. I hope most schools in this authority will be doing the same.”

Zurich Municipal’s circular also warns that cheap deals may carry hidden costs for schools which decide to go it alone.

Heads will face “burgeoning new legislation and regulations” affecting risk management, and constantly monitor their cover for new types of risk. In the event of a major claim, they might become immersed in paperwork usually dealt with by council officers.

Janis Grant, head of the Funding Agency for Schools’ “Value for Money” team, said the grant- maintained schools she had worked with had not met significant difficulties.

“The workload has not been a problem in our experience. You only buy insurance once a year and, quite often, you can get a three-year deal,” she said.