Little attention has been given to the possibility that CDS transactions might be construed as insurance contracts in English law. This article challenges the widespread “"Potts opinion”", which states that CDSs are not insurance, because they do not require the protection buyer to sustain a loss or to have an insurable interest in the subject matter. CDSs often do provide protection against loss that the buyer is exposed to; loss indemnity is not a necessary characterisation of an insurance contract; insurable interest does not form part of the definition of insurance, but is an additional requirement of valid insurance; and what matters is the substance not the form of the contract. The situation in the US and Australia is also briefly considered. It is normally thought that credit default swaps (CDSs) are not insurance contracts, but careful analysis reveals major weaknesses in this position. Whether or not CDSs are insurance is an issue of significant implications. If a court would answer that question in the affirmative, many outstanding CDS contracts might be null and void, and possibly illegal.1 There would also be other implications such as those concerning accounting rules, taxation, reserves regulation and the doctrine of utmost good faith. This article challenges the well-known “"Potts opinion”", which says that CDSs are not insurance in English law. London is a leading centre of CDS contracting activity and a large part of the business is documented under English law. Much of the analysis can be applied to other jurisdictions too, but there are also differences. The article does not discuss the broader question of whether or not CDS contracts should be defined and regulated as insurance by way of specific legislation; nor does it investigate the extent to which the same analysis can be applied to other types of credit derivatives.