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Money alert: Flood insurance

In a landmark agreement, the Government this week agreed to spend £344m next year on flood defences and prevention schemes to help protect some 200,000 homeowners who were at risk of becoming uninsured.

After years of negotiations with insurers, a last-minute agreement was struck on Thursday to develop a not-for-profit scheme called Flood Re to replace an existing agreement which runs out next month.

Insurers had refused to sign a new agreement without a Government commitment to improving flood defences. The new deal will put a cap on flood insurance premiums and link them to council bands.

The agreement costs roughly £10.50 per household which is already built into the cost of premiums, says the Association of British Insurers.