In accordance with the teachings of the present invention, a system and method for forming an annular isolator between production tubing and a borehole wall is provided. A section of expandable tubing is installed in a borehole, and a sleeve disposed around a surface of the tubing cooperates with the tubing to form a fluid chamber. The sleeve includes a first portion that is predisposed to expand outwardly under fluid pressure from the fluid chamber, and a second portion that is configured such that, when expanded due to fluid pressure, the second portion stores energy that is biased to sustain the fluid pressure within the chamber, in response to a change in fluid volume. The tubing may be expanded using a tool disposed within the tubing.