Category: Comparative markets · Reviewed by Chrissie Anderson, Client Executive · Last reviewed 2026-06-05
A Bermudian sidecar is a special purpose insurer (SPI) established in Bermuda to take a quota share of a sponsoring reinsurer’s book of business, fully or substantially collateralised by investors. The sidecar provides the sponsor with capacity expansion without permanent balance sheet equity and provides investors with direct exposure to insurance underwriting returns.
Category: Comparative insurance markets Jurisdiction / Domicile: Bermuda; Cayman Islands; Guernsey (parallel structures) Regulator: Bermuda Monetary Authority (BMA) Established: First sidecars 2001-2002 (post-9/11); proliferation post-Hurricane Katrina (2005-06) and post-Hurricane Ian (2022-23) Related concepts: Bermuda reinsurance market, Cayman ILS, Reinsurance
A sidecar is structured as a Bermuda Special Purpose Insurer (SPI) under the Insurance Act 1978 — a limited-life, limited-purpose entity authorised to take a specific reinsurance cession from a sponsor, with capital provided by investors (typically institutional investors, hedge funds, and pension funds). The sidecar is fully collateralised through a trust or letter of credit arrangement, so the sponsor’s cession credit is not dependent on the sidecar’s residual rating.
Bermuda SPIs are authorised under section 4(F) of the Insurance Act 1978 with a streamlined approval process reflecting the limited-purpose nature of the vehicle. Cayman parallel structures use the Segregated Portfolio Company (SPC) regime under the Insurance Act 2010. Investors typically subscribe for preference shares with mandatory redemption tied to the run-off of the underlying reinsurance.
A sponsor reinsurer that wishes to expand capacity for the upcoming renewal but cannot or does not wish to add permanent equity sponsors a sidecar. The sidecar takes (for example) a 25% quota share of the sponsor’s property catastrophe book for the underwriting year. Investors put in capital equal to the maximum aggregate exposure on the cession (or a layer thereof). Premiums flow to the sidecar in proportion; losses are paid by the sidecar up to the collateral; after the underwriting year is closed (typically 18-24 months after inception), residual capital is returned to investors.
The model is highly capital-efficient and has been used by virtually every major Bermuda reinsurer at some point.
UK ILS Regulations 2017 introduced the UK ISPV (Insurance Special Purpose Vehicle) regime to compete with Bermuda and Cayman for sidecar and catastrophe bond business. UK uptake has been modest but growing.
A sponsor Bermuda reinsurer establishes “Project Reef Re Ltd” — a Class SPI — to take a 30% quota share of its Florida hurricane book for the 1 June 2026 renewal. Investors subscribe for $250m of preference shares; the SPI receives $80m of premium from the sponsor; following a benign hurricane season, the SPI returns $310m to investors in early 2028 (capital + premium + investment income, less paid losses).
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-05. Next review: 2026-12-05.
Apex Insurance Brokers Limited. Authorised and regulated by the Financial Conduct Authority, FRN 724952. Registered in England and Wales, Companies House 07014570. This entry provides general information about UK insurance concepts and is not regulated advice. Consult your insurance broker on your specific position.
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