Lloyd's of London, the world's largest speciality insurance market, will this week pick Brussels or Luxembourg for its planned European Union subsidiary, with hopes now fading for early favourite Dublin, sources say.
Dublin was initially seen as first choice for Lloyd's and other UK-based insurers after the Brexit vote, helped by its proximity to Britain and use of English. Ireland was already the European Union hub for insurers Zurich and Metlife.
But, according to Reuters, Brussels and Luxembourg showed more flexibility on capital, making it easier for Lloyd's to shift capital needed to launch an EU subsidiary back to its London headquarters, two sources said.
"Insurers are keen to work with regulators that ... show some flexibility in tailoring the approach in particular circumstances," said Paul Merry, partner at KPMG, adding regulators were generally comfortable with using reinsurance for 90pc of an insurer's capital.
Lloyd's is home to around 100 insurance syndicates, but does not underwrite insurance itself. It will announce its choice for a new EU hub on Wednesday after its council meets, a Lloyd's spokesman said, the same day British Prime Minister Theresa May triggers Article 50 of the EU's Lisbon Treaty.
Lloyd's shortlist of six locations has been reduced to Brussels and Luxembourg, three sources said. Alongside Dublin's removal, Frankfurt, Malta and Paris have also been dropped.
Lloyd's move might include just dozens of but its influence in the market could affect other insurers' plans.