UK insurers will continue to offer flood insurance to existing customers in high risk areas providing there are plans to reduce the risk within five years.
The condition is part of a deal between the Association of British Insurers (ABI) and Government on the future of flood insurance.
Under the deal, Government will draw up a long-term investment strategy to improve flood prevention.
The ABI had threatened to stop offering flood damage protection unless Government invested more in flood defences.
It follows last summer's floods, which cost the insurance industry £3m.
Ministers have also agreed that the planning system will prevent inappropriate development in flood-risk areas.
In a joint statement, the ABI and Defra said insurers will also continue to offer flood insurance to homes and small businesses with a medium flood risk.
Floods Minister Phil Woolas, said: "The devastation caused by last year's unprecedented rainfall has shown just how vital it is for people to be able to insure their homes and livelihoods against the risk of flooding.
"Working together we have succeeded in ensuring that flood cover is available in both the short and long term."
Stephen Haddrill, the ABI's director general, said: "This agreement is good news for everyone at risk of flooding.
"We are pleased that the Government recognises that a long-term investment strategy, adequately funded, is the best way to manage the growing flood threat.
"It will help ensure that the flood insurance protection, relied upon by millions of householders and businesses, remains widely available."
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