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The Impact of Insurance on the Litigation Finance Market

The Impact of Insurance on the Litigation Finance Market

The widespread adoption of insurance products within the litigation finance space has been one of the hot topics recently, as it opens the door to a range of opportunities for funders and LPs. IMN’s panel discussion on insurance explored how funders can use these products to lower their rates and hedge investments, the solutions available to de-risk and monetize litigation and arbitration, what is covered and how much coverage is needed, and more. The panel consisted of Brandon Deme, Co-Founder and Director at Factor Risk Management, Sarah Lieber, Managing Director and Co-Head of the Litigation Finance Group at Stifel, Megan Easley, Vice President of Contingent Risk Solutions at CAC Specialty, and Jason Bertoldi, Head of Contingent Risk Solutions at Willis Tower Watson. The panel was moderated by Stephen Davidson, Managing Director and Head of Litigation and Contingent Risk at Aon. The discussion began with the products on offer. Those include judgement preservation insurance (JPI), where a judgement has been reached and the client is looking to insure the core value of that judgement.  Insurers can also protect portfolios of judgements, or even pre-judgement, for example if there is a substantial amount of IP that is expected to generate value, that can also be insured. On the defense-side, clients can use products to insulate them from liability and ring-fence their exposure and damages. ATE is one of the earliest products available in the market—going on 20-25 years now. This applies to adverse costs regimes, which is a huge risk to third-party funders who have to assume that risk, given that they put up the capital. As a result, many funders are approaching insurers looking for ATE insurance.  Some less well-known reasons for procuring insurance include enabling one firm to purchase another firm’s docket, which makes the transaction more attractive to the purchasing party. There is also the opportunity to insure against the risk of a specific motion—in one example, Sarah Lieber of Stifel pointed to a case where the likelihood of a certain motion being adverse to the claimant was less than 1%, but the client wanted a ‘sleep well at night’ type of insurance. The insurer was thrilled to write it, obviously, and from the claimant’s perspective, it was a minimal capital output which protected against a low probability event that would have a devastating outcome if it came to fruition. The good news is that these policies are intended to be very straightforward. For example, JPI is supposed to be a math problem: at final adjudication of a case, you’re supposed to have X. If you don’t, insurance will cover a portion of the rest. Portfolio insurance will include a duration element, but it’s still relatively straightforward. This is not mortgage insurance—these agreements are 10 pages long. The policies are designed to be simple. Typically, the only exclusion is for fraud, as that is what insurers are most concerned about. Perhaps that is one reason they are so popular. Speaking on the London ATE market specifically, Brandon Deme, of Factor Risk Management noted, “The insurance market is expanding. We’ve got insurers that can go up to $25MM in one single investment. When you put that together with the six to seven insurers who are active in the space, you can insure over $100MM. And that wasn’t possible just a few years ago.” The discussion then turned to how we can engender more cooperation between insurers and litigation funders, given that the two parties are at odds on issues relating to disclosure and regulatory requirements. Jason Bertoldi of Willis Tower Watson noted that almost every carrier who offers this product will have some sort of interaction with funders, either directly or indirectly. And while there is opposition to litigation funding from insurers around frivolous litigation and ethical concerns, there are similarly concerns amongst insurers around adverse selection and information asymmetry. So the insurance industry has to get more comfortable with litigation finance, and vice versa. “The funders that we’ve worked with that have looked to insure their investments directly, they’ve been succeeded because by being very transparent in what they provide,” said Bertoldi. “And they’ve dedicated a lot of time to getting insurance done, making sure all litigation counsel is involved on the underwriting side. Doing that, and making sure all information is on a level playing field makes the process go a lot better.” Sarah Lieber took this opportunity to highlight the importance of treating an insurer as a valuable partner, rather than as a means of shifting risk. “We use insurance for financial structuring and accounting, more so than shifting risk,” Lieber noted, “because shifting risk—you’ll do that once, and you’ll never be a participant again in this market. Insurers aren’t stupid, if you give them a pile of crap, they’ll remember you for it.” Megan Easley CAC Specialty pointed out that capacity is a challenge on some risks right now.  The market caps out around $300-$400MM. And while it is very unlikely that there will be total loss risk, insurance in general is very conservative, so there is a gradual shift towards the idea of a total loss. Brandon Deme added that it’s about having the right capacity as well.  You want your insurer to pay the client if everything goes wrong. Some insurers go broke, so having the right capacity is key. One final point from Jason Bertoldi highlighted what he felt is the “most important, and perhaps most unexamined phenomenon happening in our industry,” which he believes is contingent risk. “A lot of carriers are dabbling in contingent risk, who aren’t super active in the space, and they are really trying to get involved,” Bertoldi explained. “Many carriers are hiring dedicated personnel to do contingent risk, because they have the appetite but not the expertise to handle that. That will change over the course of the year as new underwriters come into the space with a litigation background.” In the end, these are two markets—insurance and litigation finance—that must grow comfortable with one another. Insurers are looking for funders who want cheaper capital, or are looking to offload concentration risk, and must be assured that funders aren’t simply shifting the riskiest cases in their investment portfolio over to the insurance side of the equation. For more on insurance and litigation funding, register for our complimentary digital event: Litigation Finance and Legal Insurance. This hour-long, audio-only event will be held on Wednesday, June 14th at 11am ET, and will feature key stakeholders across the insurance space who will discuss the interplay of insurance and legal claims in greater detail. All registrants will receive a recording of the event as well.   *Editor’s Note: A previous version of this article suggested that Brandon Deme’s comment on the size of the Legal Insurance market was in relation to the US market, where there is over $750m in available insurance capacity across two to three dozen insurers.  Mr. Deme was speaking specifically to the London ATE market. That correction has been made. We regret the error. 
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Merricks Calls for Ban on Secret Arbitrations in Funded Claims

By John Freund |

Walter Merricks, the class representative behind the landmark Mastercard case, has publicly criticized the use of confidential arbitration clauses in litigation funding agreements tied to collective proceedings.

According to Legal Futures, Merricks spoke at an event where he argued that such clauses can leave class representatives exposed and unsupported, particularly when disputes arise with funders. He emphasized that disagreements between funders and class representatives should be heard in open proceedings before the Competition Appeal Tribunal (CAT), not behind closed doors.

His comments come in the wake of the £200 million settlement in the Mastercard claim—significantly lower than the original £14 billion figure cited in early filings. During the settlement process, Merricks became the target of an arbitration initiated by his funder, Innsworth Capital. The arbitration named him personally, prompting Mastercard to offer an indemnity of up to £10 million to shield him from personal financial risk.

Merricks warned that the confidentiality of arbitration allows funders to exert undue pressure on class representatives, who often lack institutional backing or leverage. He called on the CAT to scrutinize and reject funding agreements that designate arbitration as the sole forum for dispute resolution. In his view, transparency and public accountability are vital in collective actions, especially when funders and claimants diverge on strategy or settlement terms.

His remarks highlight a growing debate in the legal funding industry over the proper governance of funder-representative relationships. If regulators move to curtail arbitration clauses, it could force funders to navigate public scrutiny and recalibrate their contractual protections in UK group litigation.

Innsworth Backs £1 Billion Claim Against Rightmove

By John Freund |

Rightmove is facing a landmark £1 billion collective action in the UK Competition Appeal Tribunal, targeting the online property platform’s fee structure and alleged abuse of market dominance. The case is being brought on behalf of thousands of estate agents, who claim Rightmove’s listing fees were “excessive and unfair,” potentially violating UK competition law.

An article in Reuters outlines the case, which is being spearheaded by Jeremy Newman, a former panel member of the UK’s competition regulator. The legal action is structured as an opt-out class-style suit, meaning any eligible estate agent in the UK is automatically included unless they choose otherwise. The claim is being funded by Innsworth Capital, one of Europe’s largest litigation funders, and the legal team includes Scott + Scott UK and Kieron Beal KC of Blackstone Chambers.

Rightmove has responded to the legal filing by stating it believes the claim is “without merit” and emphasized the “value we provide to our partners.” However, news of the action caused a sharp drop in its share price, falling as much as 3.4% on the day of the announcement. The suit comes at a sensitive time for Rightmove, which has already warned of slower profit growth ahead due to increased investment spending and a softening housing market.

The case underscores the potential of collective actions to challenge entrenched market practices, particularly in digital platform sectors where power imbalances with small business users are pronounced. For litigation funders, this marks another high-profile entry into platform-related disputes, with significant financial upside if successful. It may also signal a growing appetite for funding large opt-out claims targeting dominant firms in other concentrated markets.

Nera Capital Launches $50M Fund to Target Secondary Litigation Market

By John Freund |

Dublin-based litigation funder Nera Capital has unveiled a new $50 million fund aimed squarely at secondary market transactions, signaling the firm’s strategic expansion beyond primary litigation funding. With more than $160 million already returned to investors over its 15-year track record, Nera’s latest move underscores its ambition to capitalize on the growing appetite for mature legal assets.

A press release from Nera Capital details how the fund will be used to acquire and sell existing funded positions, enabling Nera to work closely with other funders, claimants, and institutional investors across the U.S. and Europe. This formal entry into the secondary market marks a significant milestone in Nera’s evolution, with the firm positioning itself as both a buyer and seller of litigation claims—leveraging its underwriting expertise to identify opportunities for swift resolution and collaborative portfolio growth.

Director Aisling Byrne noted that the shift reflects not only the increasing sophistication of the litigation finance space, but also a desire to inject flexibility and value into the ecosystem. The secondary market, she said, complements Nera’s core business by allowing strategic co-investment and fostering greater efficiency among experienced funders. Importantly, the fund also opens the door for outside investors seeking litigation finance exposure without the complexities of case origination.

Backed by what the firm describes as “sophisticated investors,” the fund will support ongoing transactions and new deals throughout the UK and Europe over the next 12 months.

The move highlights an emerging trend in litigation finance: the maturation of the secondary market as a credible, liquid, and increasingly vital component of the funding landscape. As more funders diversify into this space, questions remain about valuation methodologies, transparency, and the long-term implications of a robust secondary trading environment.