Munich Re, the world's biggest reinsurer, says people who do not have flood coverage should not be compensated. Reinsurers provide insurance cover for insurers.
Australian Prime Minister Julia Gillard has called on insurance companies to be generous in their interpretation of policies towards flood victims in Queensland and Victoria.
But Munich Re Australia managing director Heinrich Eder says people who do not have flood insurance cannot expect to be compensated for flood damage.
UBS estimates that 60% of homeowners affected by the floods in Queensland may not be covered for floods in their insurance policies.
Mr Eder told the ABC that most people do not read the fine print in product disclosure statements and consumers should not be covered if they did not buy flood insurance.
"If you have a house and you have no fire insurance and unfortunately you have a fire then no-one would suggest your house should be paid [for] by the insurance companies."
"We have a large scale disaster and those who have bought insurance for flood, they will be compensated by those insurers, and those who haven't can't expect, compensation for a cover which they have not bought," he said.
Mr Eder said insurance companies had been generous in the past towards policy holders.
"What people always suggest they will insist on the fine print or whatever, that is just to get everything a bit sensational, but it is not the facts," he said.
Less than half of 45 insurance policies surveyed by consumer group Choice provided insurance for floods.
Insurance Council view
The Insurance Council of Australia says insurers will try to be flexible but cannot make exceptions for people who did not buy flood insurance.
"Unfortunately those who don't have flood cover, (if) it's not specifically allowed for on their policy, won't be covered," said chief executive Rob Whelan.
"That's a very unfortunate circumstance and we do regret that, but unfortunately that is the case."
The ABC reports Australian insurers have so far received around 12,000 claims worth $A410 million from the floods in Queensland.
Reinsurers will cover the bulk of the payouts because of reinsurance policies held by insurers such as Suncorp and Insurance Australia Group.