It is understood that the residents of Northampton are being instructed by legal firm Shoosmiths, backed by their local MP, Tony Clark (MP Northampton South).

It is understood Defra will make a formal announcement next week on its position.

This follows last week's Insurance Times article which stated that the Treasury, ABI, Council of Mortgage Lenders (CML) and various interested parties has discuss the idea of a flood mutual, similar to Pool Re, in the past few months.

Discussions are now taking place as to whether flood risk homeowners should be included in the proposed Planning and Compulsory Purchase Bill.