Thousands of City workers are now being denied unemployment cover or facing premium increases of up to 200 per cent on new policies, as insurers limit their exposure to the troubled finance sector.

With the credit crunch taking a tighter hold on the economy, job losses are forecast to run into the hundreds of thousands over the next few years. But many workers most in need of a safety net in the banking, insurance and general finance sectors are considered too risky by insurers.