Trade with the EU currently accounts for about 11% of Lloyd’s gross written premium and is conducted under the existing passporting regime. “In theory, anything that restricts our access to the EU could have an impact on that business,” says Stewart Todd, a spokesman for Lloyd’s, “but I wouldn’t say we forecast a fall in revenues, because we have been working on contingency plans since the referendum was announced.”

That work stepped up considerably after the vote, Todd says. “The aim for us in terms of dealing with a post-Brexit landscape was always to ensure that our customers could continue to access the EU market seamlessly,” he says, “and that European clients could access Lloyd’s so as not to affect their ability to conduct business.”

Lloyd’s has been assessing its options since June 2016, including the establishment of multiple branches in several EU countries or an EU-supervised subsidiary. Late in the year the market announced its intention to open a licensed EU entity. “That’s the best way to ensure we can continue to trade with the EU, and therefore that was the plan we decided to focus on,” Todd says.

“The branches model would be expensive and would essentially restrict our access to the traditionally stronger European markets of France, Germany, Spain, Italy and the Nordics. To run that model would require branches in those specific territories and the associated costs, resources and regulatory framework to work through. Given that, we are focusing our efforts on the subsidiary model.”

Widespread reports in April suggested the shortlist for the Lloyd’s jurisdiction had been pared to Frankfurt and Luxembourg. Todd told Leader’s Edge Lloyd’s was holding discussions with the countries it was considering and was exploring details of how the new model would work from the perspectives of staffing, resources, regulation and tax just days before it announced that the subsidiary will be located in Brussels, Belgium, the effective political capital of the European Union. Chief Executive Inga Beale told reporters that the number of employees located in the subsidiary would be “tens, not hundreds.” The decision appears to have been motivated by attractive proximity to the regulators and legislators who lay down the European Union’s insurance rules.

Belgium will also allow Lloyd’s to cede the lion’s share of its premium—perhaps 100%—back to London. Lloyd’s is still examining how best to channel business into the subsidiary from the Lloyd’s-based underwriting companies that operate Lloyd’s syndicates.

Many brokerages had been waiting to see how Lloyd’s would handle Brexit before making any major plans. “Those who conduct business with the EU have said they are looking to see what solution we put in place, and I think that also goes for coverholders in the EU,” Todd says. “They are waiting to see what we do to enable them to continue conducting business with us. Will there be costs? Almost certainly, but still, the question for us is: can we make this work in a way that means it is still an attractive proposition? We have been talking to the market as this process has developed, so we believe that they are in step with us and can see the benefit of this approach for them.”