On March 1, 2009, the Cayman Islands Legislative Assembly implemented a new insolvency regime applicable to, among others, hedge funds organized there.  Market participants surveyed by the Hedge Fund Law Report agree that the new regime does not dramatically change the insolvency regime applicable to hedge funds, but may empower liquidators and courts to pursue claims by insolvent companies of fraudulent pre-petition trading.  This article reviews the mechanics of the new insolvency regime that are relevant to hedge funds (including providing statutory language); the new regime’s effect on the powers of liquidators and courts; whether the outcome in the case In the Matter of Strategic Turnaround Master Partnership Limited (12 December 2008) would have been different had the new regime been in effect in December 2008, when the case was decided; the “cash flow” definition of insolvency in the Cayman Islands; when a Cayman Islands hedge fund investor becomes a creditor of the hedge fund from which the investor has redeemed; the anticipated impact of the legal changes on the number of hedge funds domiciled in the Caymans; the effect of the law on in-kind redemptions; and the likelihood that the Caymans will impose an income or capital gains tax on hedge funds or their managers to make up a budget shortfall.