Category: Reinsurance brokers and structures · Reviewed by Amy Price, Account Executive · Last reviewed 2026-06-05
A reinsurance sidecar is a special purpose vehicle (SPV) that takes a quota share of a sponsoring reinsurer’s portfolio, funded by third-party capital — typically hedge funds, family offices, pension funds and other alternative capital providers. Sidecars provide capacity, fee income to the sponsor and access to insurance returns for investors.
Category: Reinsurance brokers and structures Also known as: sidecar, reinsurance sidecar Related concepts: insurance-linked securities, catastrophe bond, reinsurance capacity, collateralised reinsurance
A sidecar is typically structured as a Bermuda- or Cayman-domiciled SPV (or as a UK insurance special purpose vehicle under the Risk Transformation Regulations 2017) that enters into a quota share with the sponsoring reinsurer. The investors fund the SPV at inception; the funds are held in trust as collateral; the SPV receives a share of the reinsurer’s premium and pays a share of the reinsurer’s losses on the in-scope portfolio.
Sidecar structures are characterised by: short contract lives (typically 12–24 months); pre-agreed return profiles (with downside capped at investor capital); fee arrangements for the sponsor (ceding commission, profit commission and management fees); and clean wind-up provisions at the end of the contract.
UK sidecars are regulated under the Risk Transformation Regulations 2017 [1] as insurance special purpose vehicles, with PRA fast-track authorisation. Bermuda sidecars are regulated by the Bermuda Monetary Authority under the Insurance Act 1978 (Bermuda). The reinsurance contracts are documented under the Market Reform Contract or class-specific equivalents.
Sidecars first appeared at scale following Hurricane Katrina (2005) and have since become a regular feature of major renewal cycles. Sponsors include all the major Bermuda reinsurers and many large continental and Lloyd’s reinsurers; investors include the hedge fund sponsors active in ILS (Stone Ridge, Nephila, RenaissanceRe DaVinci Re), large pension funds and sovereign wealth funds.
For sponsoring reinsurers, sidecars provide: leveraged capacity (enabling the sponsor to write more business than its own capital would support); fee income that flatters return on equity; and capital relief under Solvency II or equivalent frameworks. For investors, sidecars provide non-correlated returns and access to insurance underwriting profitability without the operational burden of running a reinsurer.
An illustrative example: a major Bermuda reinsurer raises $400m of sidecar capital from a consortium of hedge funds and pension funds for the 2025 underwriting year. The sidecar takes a 25 per cent quota share of the sponsor’s property catastrophe book (estimated $1.6bn of subject premium), with the sponsor receiving a 25 per cent ceding commission, 15 per cent profit commission on a multi-year basis and an annual management fee of 1.5 per cent.
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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