Analysis: The new Brexit landscape

Brexit landscape

  • Luxembourg, Brussels, Dublin are coming out on top
  • Loss of passporting and need for market access is driving decision making
  • Experience and flexibility of regulator is essential
  • EU subsidiaries could protect UK from ‘cliff-edge’ Brexit 

Insurers look for alternative bases

There are now less than 500 days before the UK exits the European Union. With Brexit looming and little sign of a consequential diplomatic agreement on the horizon, the UK insurance sector is looking to the likes of Luxembourg and Brussels to secure its future.

The ability to conduct business and to sell insurance policies across the European Union from one EU country to another has long been a subject requiring little pause for thought. However Britain’s decision to withdraw from the EU has changed this entirely.

Insurers no longer expect to be able to retain those rights after Brexit, and, as a result, a number of UK-based reinsurers and insurers have already announced plans to set up subsidiaries in remaining EU 27 countries, in order to maintain passporting rights with other parts of the bloc.

27 Choices

Luxembourg and Brussels, along with Frankfurt, Paris, Malta, Lisbon and Dublin are touting themselves as an alternative base for firms wishing to retain access to the EU after Brexit.

With 27 member states of the European Union, there are, in theory at least, 27 states where insurers can open up. However, some jurisdictions are proving more popular among UK insurers than others.

Paul Merrey, insurance partner at KPMG, said there are a series of common concerns that occupy insurers’ thinking when they are looking at post-Brexit jurisdictions. These include the jurisdictions’ tax rate, talent pool, authorisation process and regulatory environment. At the core of an insurers’ thinking remains market access however.

“The market is still very much building plans around a hard-Brexit scenario and any deal being done later will be largely on the upside,” Merrey said. “Most insurers are working on the basis that they need a European subsidiary to hold the licenses and authorisations to maintain access with the EU.

“At the very heart of this is market access. Without a subsidiary that can passport to other EU countries many insurers will be left unable to write European business.

“We’ve seen Luxembourg, Belgium and Ireland come out on top because those regulators have been open to frank, open dialogue with insurers, which helps the insurers build practical plans around their futures.”

Insurers are largely targeting a ‘minimal change’ Brexit strategy, said Jonathan Burdett, partner in risk advisory at Deloitte. The goal is to continue trading in a manner as closely aligned to their current operating model as possible.

“The locations chosen for UK insurers have either been existing locations for the insurer that can be easily converted from a branch to a subsidiary, or a new location where a simple, low cost subsidiary can be established,” Burdett added.

UK insurers have looked for locations where there is already an established insurance industry and a mature regulatory regime for the sector and so we’ve seen Ireland, Luxembourg and Belgium the principal destinations of choice where there is not another obvious option.”

Who’s going where?


AIG, CNA Hardy, FM Global, Hiscox, Liberty Speciality Market, RSA, Tokio Marine, Sompo International


Beazley, Chaucer, Everest Re, XL Group, Aviva, Legal & General, Standard Life


Lloyd’s, MS Amlin, QBE




UK PI Club


Brexit negotiations only started in June 2017, but Luxembourg has already attracted insurance giants including AIG, CNA Hardy, Hiscox, Liberty Speciality Markets, RSA, Tokio Marine and Sompo International; big names for a country with a population of 582,972.

Sandwiched on three sides by Belgium, France and Germany, the tiny European country is nestled right in the centre of three of EU’s industrial powerhouses and as such, it has established itself as global centre of trade in its own right.

FM Global, one of the world’s largest insurers, is another name that has applied to set up a Luxembourg domiciled insurance business. Opening up about his firm’s decision, Chris Johnson, executive vice-president of FM Global and the man who will serve as managing director of the Luxembourg business outlined the reasons behind the choice.

“We chose Luxembourg as our European Economic Area hub because it’s a multinational business-friendly financial centre with regulatory expertise that enables us to remain true to our mutual insurance company business model,” Johnson said.

“Most notably, Luxembourg is a hub that permits EU passporting — which fits our business model perfectly.

“We wanted a country that was used to a multinational environment,” Johnson said. “If you can’t hire accountants, insurance professionals and lawyers, you’re in a world of hurt.”

Other considerations included being allowed to hold board meetings in English and have board members who are also policyholders, he added.

Such concerns are broadly the same for all the larger insurers looking to establish a EU subsidiary. Charles Rix, insurance partner at Hogan Lovells, said the most significant concern in setting up a subsidiary is the timetable for obtaining permission to conduct insurance business.

“All EEA regulators have a year to consider an application from the time of submission of a completed application including business plan,” Rix said.

“Although in practice many regulators would grant permission much sooner than the full year, this does create a timetable issue particularly when time to prepare the application is taken into account.”

Rix added that some regulators have indicated a certain degree of flexibility around this by offering to review applications which can then be put “on the shelf” for a “fast-track” process nearer to Brexit.

Like Rix, Burdette sees the speed of the regulator as the major draw for insurers. “The process of establishing this entity will typically take between six and 12 months, culminating in an application to the local regulator,” he said.

“This application will have to include the business plan for the venture along with the key management and board members named, governance, risk and control framework set out and a description of the key control functions required to manage an insurance company, such as finance, actuarial, risk and internal audit.”


Although regulators are bound to the same European laws, this degree of flexibility found within certain jurisdictions has been a central factor in the success of places like Brussels in drawing in UK businesses.

“[EU authorities] have made it abundantly clear that there will be no regulatory arbitrage, that Europe is a level playing field and that regulation will not differ from country to country,” Merrey said.

“What does differ however, is how regulators engage with organisations. Some are more welcoming, open, practical, and willing to find solutions at the early application stage. In other cases conversations have been more formal and regulators have been less engaged at the early stages until a more solid application is put forward.”

The powerhouse that is Lloyd’s of London clearly found this to be the case when in March, and on the same day Theresa May decided to invoke Article 50, Lloyd’s confirmed it would be setting up a new European business in Brussels.

Lloyd’s has been very open about its decision to head to Brussels. In March, chief financial officer John Parry said: “One of the reasons for selecting Belgium is the bandwidth and the skills of the regulator. It seems to have been quite well informed about Lloyd’s. Time is not our friend here. We want to be up and running for 2019.”

A spokesman for Lloyd’s said: “We looked at several criteria when making the decision to set up the company in Brussels, including easy access to London, being at the heart of Europe, a good talent pool, and a robust regulatory framework. The Belgian regulator also understands the unique nature of the Lloyd’s model and how it works.”

The Lloyd’s subsidiary also presents the market with greater opportunity to pursue growth in Europe, the spokesperson said.  “For the first time Lloyd’s has a physical capitalised presence in mainland Europe. This will present us with new opportunities to grow our European business over the coming years.”

The reasons that led Lloyd’s to decide on Brussels, namely the speed, understanding and approachability of Brussels and its regulator, are common features that many insurers are looking for when choosing a subsidiary location.


Despite few early movers naming it as a go-to jurisdiction and missing out on the Lloyd’s business, Dublin has emerged as a firm favourite among UK insurers owing largely to its English-speaking workforce, welcome tax environment and a well-established, efficient and proven regulator in the form of the Central Bank of Ireland.

So far Chaucer, Everest Re, XL Group, Aviva, Legal & General, Standard Life and Beazley have decided to relocate European business operations to Ireland.

The London market carrier Beazley was the first mover and said it will use Ireland as a base to increase European business as it prepares to operate across the region following Brexit.

Despite having no significant Europe business, Beazley has opened an office in Dublin with plans for further offices elsewhere on the continent. The insurer plans to use the opportunity raised by Brexit to expand further in Europe.

Kevin Thompson, CEO, of trade body Insurance Ireland, said: “Ireland is proving to be a popular location for UK insurers for a number of reasons, but it is primarily due to UK insurers having an understanding of Ireland’s strengths as a location and the certainty of access it provides to the EU.”

Ireland has a strong pool of talent and an extensive insurance ecosystem employing approximately 28,000 people, both of which are attractive to UK insurance businesses.

Thompson added that there is a high degree of interconnectedness between both insurance markets and so there is a complementary relationship to draw on.

“The importance of the complementary relationship is vital as London will remain a global insurance hub and Irish operations will continue to support it post-Brexit,” he said. “In addition, the value of Ireland’s common law system and cultural ties to the UK cannot be underestimated.”

Deal or no deal

The subject of business moving abroad is a divisive one. For passionate ‘Brexitiers’ it is the result of unfounded scaremongering and a sign of weak-willed executives, too impatient to wait for the success of a post-Brexit UK. For the Remain camp, such news reaffirms a belief that the vote outcome was wrong and serves as evidence that the country is heading for economic disaster.

Politics aside, the danger of a hard Brexit is a very real one for UK insurers, particularly those that rely on passporting rights to access European business. However, it would appear that by protecting access to the EU, insurers’ contingency plans could serve to help steer the UK away from a ‘’cliff-edge” Brexit scenario.

This danger was highlighted by the findings of a recent report by reinsurer Swiss Re. The report listed a “disorderly” Brexit as one of the greatest threats to business both domestically and for the rest of the union.

Astrid Frey, chief EMEA economist at Swiss Re said: “I’d define a disorderly a Brexit scenario as one where there is no new deal by the end of March 2019 and no transitional arrangement in place between the UK and the rest of the EU.

“That would have a negative impact mainly for the UK economy; in a worst-case scenario we’re looking at the UK falling of that ‘cliff edge’ which would have serious repercussions not only for the UK but also the rest of the Union.”

Frey added that the preparations made so far by insurers are protecting firms and making a worst case Brexit less likely.

“We don’t think such a severe scenario is likely because what we’re seeing is that companies are preparing. The disorderly Brexit scenario is still very much on the cards though. While insurers are preparing, you can never fully prepare for a situation where all of a sudden the framework changes overnight.”

Frey added that alarm bells would be ringing for the business community if there were still no sign of deal in the next five to nine months. However, Frey acknowledged that any deal will take time.

“It will take a couple of months for all the other European Union member states to ratify any agreement or deal.

“We can say that it will be quite likely that any agreement will be of the last minute kind. We’ve seen this time and time again during any crisis relating to European agreement. This will be no different.”

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