In its 59-year history, no country has left the EU. Until the results of the referendum on the UK membership of the EU started coming in this morning, many would have thought that no country would ever do.
The rules of the process for leaving the EU are set out in article 50 of the Treaty of Lisbon, but only in brief. It determines once a country notifies the EU of its intention to withdraw, the two sides have two years to conclude the agreement. At the end of that period, they part ways.
The exit deal, as the name suggests, is all about severing ties, and should not be particularly difficult to negotiate. It will settle outstanding bills and spending projects and decide on the fate of the expatriates in the UK and the EU, but will say nothing about post-Brexit relationship between the UK and the EU.
By default, once out, Britain would rely on basic World Trade Organisation trading terms. Since this gives no privileged access to each other's markets, it would be painful an outcome to both sides. To avoid that, a second agreement must be struck, where more favourable terms of association are set. At this stage, things are likely to become ugly.
Before substance, there is a time problem. The UK wants the two processes of negotiation to move in tandem, to avoid the risk of being forced to walk out of the door before agreeing on a way to keep its foot in the single market.
However, a trade deal is likely to take more than two years to negotiate, not least to be ratified by member states, some of which may call a referendum.
This goes a long way to explain why David Cameron, in his speech outside 10 Downing Street, said he will leave to his successor the decision of when to trigger article 50 – the same that starts the countdown. It also explains why Boris Johnson, one the top candidates to replace the prime minister, suggested he is no rush to do it, either.
EU leaders, however, do not feel like waiting. "We expect the UK government to give effect to this decision of the British people as soon as possible, however painful that process may be. Any delay would unnecessarily prolong uncertainty," they said in a joint statement.
Assuming a solution is found to synchronise the two processes, there is no certainty about what an agreement of association with the EU would look like for Britain.
It seems far fetched to replicate the agreement that Norway has. While this would grant access to the single market, it would require Britain to contribute to the EU budget, accept most EU rules without discussion and keep its borders wide open to EU workers.
This would mean that the UK would have the status of a third country, like Switzerland or any other, and that would have implications for the financial sector, and insurers in particular.
Full access to the single market would not be guaranteed, and the same can be said about passporting rights, which enable UK-based insurers to conduct business across the EU without obtaining a licence in each individual country.
In order to retain that flexibility they would have to set up a subsidiary within the EU, which would comply with EU rules and hold capital.
Finally, being a third country Britain would then have to apply for Solvency II equivalent status before the European Commission. In theory, this would be easy to secure – Solvency II is transposed into English law – but it would limit the ability of the UK regulators to materially change that.
At this distance, it seems like a long journey that is fated to end up back at the start.
Hugo Coelho