ABI agrees Whitehall flood deal

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Statement of Principles to be revoked within five years.

The ABI has finally reached a deal with the government that will see millions of homes retain flood cover.

Previously, the ABI had threatened to stop offering flood damage protection unless ministers put more money into flood defence spending, which is currently due to rise to £700 by next year, and £800m by 2011.

The ABI said it would still offer cover to existing properties at significant risk under the deal that was negotiated under the Statement of Principles, which was introduced in 2000, and revised in 2005.

However, the negotiation depends on the government delivering further improvements to flood defences by 2013, at which point the agreement will cease to exist.

517,000 homes in the UK are at significant risk of being flooded.

The government also said it would ensure that the planning system will stop inappropriate development in flood-risk areas, a move that will see a backlash from developers.

ABI director of liability, Justin Jacobs said: "What we've agreed with the government is that if they can make sure as many people as possible are protected, we'll be able to make sure we can offer affordable insurance to all our customers who want it.

"The pressure remains on the government because they must deliver those defences to people in order make sure we can offer affordable insurance."

The ABI had been highly critical of the amount of money ministers had pledged for flood defence after last years flood's led to claims in excess of £3bn.

The UK insurance industry is one of only three countries in the world, the others being Sweden and the Cayman Islands, that guarantee flood cover for existing properties.

A joint statement from the ABI and Defra is expected later today.

Full analysis to follow shortly.

Click here to see The Statement of Principles