Category: Comparative markets · Reviewed by Mark Fox, Broker · Renewals · Last reviewed 2026-06-05
The Cayman Islands is the world’s leading domicile for insurance-linked securities (ILS), including catastrophe bonds, collateralised reinsurance vehicles, sidecars, and industry loss warranty (ILW) structures. The Cayman ILS market accounts for approximately two-thirds of all outstanding catastrophe bond issuance and a substantial share of the global collateralised reinsurance market.
Category: Comparative insurance markets Jurisdiction / Domicile: Cayman Islands (British Overseas Territory) Regulator: Cayman Islands Monetary Authority (CIMA) Founding statute: Insurance Act 2010 (Cayman); Segregated Portfolio Companies Act Related concepts: Bermudian sidecar, Parametric insurance, Cayman captive insurance market
ILS are financial securities whose performance is linked to defined insurance risks — primarily catastrophe (hurricane, earthquake), but also longevity, mortality, terrorism, and certain casualty risks. The principal ILS structures are: catastrophe bonds (multi-year, securitised cat risk transfer); collateralised reinsurance (typically one-year, similar economics, no securitisation); sidecars (quota share with collateral); ILWs (industry-wide loss triggers); and reinsurance sidecars in segregated portfolio (cell) form.
Cayman ILS vehicles are typically organised as Segregated Portfolio Companies (SPC) under the Companies Act, with each cell constituting a separate risk-bearing entity. The vehicle is authorised as a Class B insurer under the Insurance Act 2010 (the “Class C” framework is used for SPC-based reinsurance vehicles in Cayman terminology). The CIMA’s fast-track approval process for ILS structures is a competitive advantage of the jurisdiction.
The UK competes through the UK Risk Transformation Vehicle framework (Risk Transformation (Tax) Regulations 2017 and the FCA / PRA ILS framework), but Cayman remains the dominant jurisdiction.
A typical catastrophe bond: a sponsor cedant (US insurer or reinsurer) sets up a Cayman SPC to issue catastrophe bond notes to capital market investors; investors subscribe for the notes at a coupon (typically risk-free rate plus 5-10% expected loss-related spread); the principal is held in collateral; the SPC writes a reinsurance contract to the sponsor; if a triggering event occurs (per the indemnity, modelled loss, industry index, or parametric trigger), the principal is paid to the sponsor; otherwise principal is repaid to investors at maturity (typically 3-5 years).
The UK ILS Regulations 2017 introduced the UK ISPV framework. Uptake has been modest — approximately a dozen ISPVs at the time of writing — but Lloyd’s has been active in promoting the UK as an ILS domicile and growth from the FCA / PRA regime is expected.
A US insurer sponsors a $300m Cayman catastrophe bond covering Florida hurricane risk: investors subscribe to a 3-year note; collateral held in US Treasury money market; if a defined hurricane event occurs and modelled losses exceed the trigger of $5bn industry-wide, $200m of principal is paid to the sponsor; the remainder and any earned coupon are returned to investors.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-05. Next review: 2026-12-05.
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