MPs on the Environmental, Food and Rural Affairs Committee has welcomed plans for a new flood insurance system.

The government had been negotiating with the Association of British Insurers (ABI) for some time on a replacement for the Statement of Principles, to ensure households in flood risk areas can still get flood insurance cover at a reasonable price.

Last month, they finally struck a deal, with the proposed Flood Re system seeing insurers pay into a fund that can be used to pay claims from those in vulnerable locations. Meanwhile, flood insurance premiums will be capped and linked to council tax bands, so people have greater certainty over how much they will be expected to pay.

The Environment, Food and Rural Affairs Committee is pleased an agreement on the issue has been reached, since the delay in coming up with a deal led to many households experiencing “unnecessary uncertainty”.

However, MPs on the committee insisted certain steps need to be taken to ensure Flood Re delivers maximum results for households.

Anne McIntosh, chair of the committee, said: “The opaque cross-subsidy provided in the current Statement of Principles must be translated into a more transparent scheme with clear and robust governance arrangements.”

She went on to note that record levels of rainfall over the last few years have triggered “extensive flooding” across the UK, which has caused considerable distress to households and cost the economy millions of pounds.

Ms McIntosh has therefore insisted the government needs to go further in ensuring the UK is able to cope with major flooding incidents.

“Spending on flood defences has not kept pace with rising risks from more frequent severe weather,” she commented.

Chancellor George Osborne has therefore been urged to increase investment in flood defences by £20 million year on year in order to provide adequate protection for homes and businesses.

Ms McIntosh added that every £1 spent on flood defences to safeguard communities delivers £8 worth of economic benefits.