Record rainfall over recent weeks that has triggered flooding is expected to result in claims of more than £3 billion, according to the Association of British Insurers.
Cover for homes and business is at risk as an agreement between the government and insurers expires – with insurers threatening to put up premiums if the government spends less on flood defences.
Environment Secretary Caroline Spelman has confirmed both sides closer to a new agreement.
The government is pressing for home insurance companies keep the same level of cover without putting up prices by re-allocating money already levied as a subsidy within the industry.
Most insurance companies take small amount from customer premiums to cover the cost of insuring homes at high-risk of flooding.
The sticking point is some insurers do not levy the subsidy and can offer cheaper cover than those that do – but the government insists any new agreement will not increase prices for consumers or taxpayers.
Spelman said: “We want to reach an agreement that ensures both the availability and the affordability of flood insurance for the first time.
“The insurance industry and the government, working closely together, have made great progress towards this goal. We are now considering a cross-subsidy mechanism that would ensure high risk households can get affordable insurance without extra costs being placed on policy holders or taxpayers.
“The best and most sustainable way of keeping insurance affordable in the long-term is to help prevent flooding in the first place. We are spending more than £2.1 billion on flood risk management, and are on course to exceed our goal to better protect 145,000 homes by March 2015.”
The government is also working with local councils and other partners to look at the extent to which communities, through acting together, can help to manage the costs of flood insurance.