Disaster risk governance is concerned with how institutions change in response to perturbations or, conversely, are able to remain static for long periods of time. In Montserrat, the volcanic eruption in 1995 produced unprecedented challenges for both local government authorities and the UK Government. The sharp and sustained rise in the level of volcanic risk combined with an inadequate response from UK and local authorities prompted a shift in governance arrangements, and when levels of risk declined these new configurations did not go back to their pre-crisis state. This paper focuses on one aspect of this governance transition: the relationship between the local Montserratian government and the UK government. Before the eruption Montserrat enjoyed high levels of political and fiscal independence from the UK in disaster risk management and other investment decisions, but the volcanic crisis highlighted low levels of capacity and the inherent instability in this system. A new co-governance regime was established after the crisis, characterised by greater UK intervention in local investment decisions and some loss of political sovereignty. On the other hand, Montserrat has become more integrated in regional and international disaster risk governance systems, and today the division of local and central responsibilities for different aspects of disaster risk management is much clearer than before the volcanic crisis. This paper demonstrates how disasters can create spaces for existing risk governance systems to be questioned and modified. The volcanic crisis led to a reconsideration of responsibilities and risk management practices by both Montserratian and UK authorities, and initiated a process of transformation in land-use and development planning that has substantially reduced levels of volcanic risk on the island. However, these benefits have to be weighed against loss of livelihoods for a significant proportion of the population and considerable social upheaval. Critical to the success of this new development model is the need for vertical coherence and dialogue between different stakeholders. Montserrat and UK risk governance systems are more integrated now, but unless communities are engaged in risk management decisions, Montserrat's low-risk development model could come unstuck. Small islands with large risks can learn a lot from the Montserrat experience.