The Cayman Islands, a domicile known for attracting captive insurers and hedge funds, is now being eyed as a potential commercial insurance market, its regulator said this week.

Mary Lou Gallegos, head of insurance supervision at the Cayman Islands Monetary Authority, said the growing interest comes on the the heels of the island licensing its first major reinsurer last December.

Industry interest in the months since is ?in the early, informal stages?, she said. And so far there has been no second licence application, something she said was likely because the sector wants to see how the island?s first major reinsurer fares.

Greenlight Reinsurance Ltd., a $250 million reinsurer formed to sell property and casualty policies to insurers around the world, set up on Cayman last year.

Some in the industry have doubted Greenlight?s prospects both because it has less capital than most of its peers and because it isn?t in an established market.

Like nine other new reinsurers, Greenlight formed to take advantage of an expected rise in property reinsurance rates after last year?s hurricane season. All the others formed on Bermuda ? a large, established reinsurance market.

Insurers are expected to sustain $57 million in losses from last year?s hurricanes, Advisen Ltd., a firm that provides data to the insurance industry, said in a report issued on Tuesday. But the record loss may not push rates as high as the new reinsurers hope, Advisen said. US property rates rose 6.9 percent in the first quarter, largely driven by rate increases in hurricane-prone areas, according to the report. And the firm didn?t expect higher rates to last through the end of the year.

While the Cayman Islands lags behind Bermuda as an insurance market it incorporates more hedge funds than any other jurisdiction.

Hedge funds, private investment pools that now command more than $1 trillion from investors, have in recent years stepped up their sponsorship of reinsurance companies and insurance-linked investments.

Greenlight is an example of the growing convergence having been formed by hedge fund Greenlight Capital. At least two other hedge fund firms, Citadel Group LLC and West End Capital, formed Bermuda reinsurers after Hurricane Katrina.