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Allianz: Five Liability Loss Trends for Businesses in the Face of the Coronavirus Pandemic

Allianz: Five Liability Loss Trends for Businesses in the Face of the Coronavirus Pandemic

Liability exposures for companies around the world are increasing. Factors such as rising litigation, collective redress and large court verdicts, costly and frequent recalls in the automotive and food sectors, the disruptive impact of civil unrest and riots in a growing number of countries, and environmental concerns such as indoor air quality and higher fines and remediation standards will likely impact businesses and their insurers in the future – all in the face of a challenging global pandemic, according to a new report from Allianz Global Corporate & Specialty (AGCS) which highlights five trends for the sector. “Pricing in the liability insurance market may have turned in recent months, however social inflation trends and large court verdicts continue in the United States. This combined with expanded exposures for non-US companies doing business in the US and an increase in automotive part recalls are putting pressure on liability insurers,” says Ciara Brady, Global Head of Liability at AGCS. “Overlay this with the uncertain economic outlook, political instability and unknown impacts from coronavirus and this is creating a challenging market for clients, brokers and insurers alike. While we have to react to new loss trends in underwriting, AGCS remains committed to supporting our clients with solid risk transfer solutions and capacity to address today’s liability exposures.” Social inflation in the US and rise of collective redress globally Social inflation is a phenomenon especially prevalent in the US, driven by the growing emergence of litigation funders, higher jury awards, more liberal workers’ compensation claims, as well as new tort and negligence concepts. The median settlement amount of the top 50 US verdicts from 2014 to 2018 nearly doubled from $28mn to $54mn. Litigation funding is not only on the rise in the US, but also in Europe and elsewhere around the world, contributing to a growing trend of collective redress as hurdles for consumers are lowered to embark on class actions. Countries that may not be historically associated with this development, such as Saudi Arabia and South Africa, are classified as being “medium risk” that a company may face a collective action in these jurisdictions, according to AGCS’ litigation funding country guide. Another factor influencing the size of settlements in the US is the increasing sophistication of the plaintiff’s bar with specialist consultants and psychologists being deployed to influence the jury’s decision. The legal system in the US has seen a deterioration in consumer confidence towards corporations. This lack of confidence is driving an anger by individuals or classes of individuals toward perceived “greedy corporates” that is resulting in so-called “nuclear” verdicts. According to AGCS experts, it’s too early to identify a reverse trend, but court closures due to the Covid-19 pandemic may slow down social inflation as plaintiffs realize that it could take years before their case is tried before a jury and therefore may be more willing to settle outside court. Rising automotive repair and recall costs In recent years there has been a growing number of recalls in the automotive industry in both the US and Europe. In the US, there were 966 safety recalls affecting well over 50 million vehicles in 2019 – more than two every day. In many cases, components can be produced by one of a handful of suppliers that services the entire industry, which can make it prone to accumulation risks – as a result, recalls have become larger and more costly over time. For example, an airbag or an engine could be recalled due to a defect, affecting many companies and models. The increasing complexity of technology is another significant driver of industry losses, due to factors such as increased time and labor rates to make repairs, more specialized training for mechanics and other repairers, and the increasing price of parts. Costly food safety risks and recalls Food recalls are on the rise globally due to factors such as global manufacturing, fewer suppliers in complex supply chains, enhanced regulatory scrutiny, as well as improved technology which allows for better traceability and pathogen detection. Manufacturers need to recognize these factors and be diligent about who their suppliers are and conduct regular audits. The coronavirus pandemic could have a significant impact on – and pose special challenges for – food recalls in future: On one hand, hygiene standards have dramatically increased, which could reduce contamination risks which are a major cause of food and beverage recalls. On the other hand, with new operations, temporarily closed and restarted factories, remote workforces, decreases in regulatory visits and erratic supply chains, risk exposures could also swell moving forward. Riots and civil unrest threaten beyond physical damage The “yellow vest” protests in France, civil unrest in Chile, Hong Kong and Bolivia and most recently the racially-charged riots in the US are high-profile examples of the rise of civil unrest globally. Political violence increasingly causes property damage, disruption and loss of attraction and revenues to many businesses. For example, civil disorder in the wake of the death of George Floyd in many US cities is expected to have caused losses of more than $1bn. There are numerous insurance claims notified under strikes, riots and civil commotion or looting insurance coverages. According to AGCS experts, the coronavirus outbreak may have temporarily suppressed civil unrest in some countries, but the underlying social issues have not been solved, and further protests will likely occur in the near future. Indoor air quality after coronavirus Environmental pollution incidents can have damaging consequences for a business – two risks are particularly paramount: indoor air quality concerns with legionella and mold growth and, secondly the increasing risk of environmentally-driven prosecutions, fines and remedial actions, as public awareness for pollution and natural capital depletion grows. Mold and legionella risks have been exacerbated by the coronavirus shutdown of commercial buildings or hotels: When certain air quality systems or water installation systems are dormant for a while they are more susceptible to contamination by bacteria. On top of that, continued, undetected mold growth may result from real estate companies delaying planned maintenance or renovation activities. Major causes of liability claims and potential coronavirus impacts The report also analyzes some of the major causes of insurance industry liability claims over the past five years – defective product incidents account for half of the value of all claims –and looks at how the coronavirus outbreak is already impacting the insurance sector. With more people staying at home through the pandemic, and with the temporary closure of many shops, airports and businesses, notifications of slip and fall incidents, which are one of the major causes of liability claims, have slowed. However, the market could see claims brought by third-parties for injury or property damage due to failure to adequately protect against the coronavirus, as well as employee action against employers who did not appropriately protect them. Product liability and recall claims tend to follow economic activity, so there could be an impact in these areas with the economic downturn. Meanwhile, restarting production after periods of hibernation may give rise to human error incidents. About Allianz Global Corporate & Specialty SE Allianz Global Corporate & Specialty (AGCS) SE is a leading global corporate insurance carrier and a key business unit of Allianz Group. We provide risk consultancyProperty-Casualty insurance solutions and alternative risk transfer for a wide spectrum of commercial, corporate and specialty risks across 10 dedicated lines of business. Our customers are as diverse as business can be, ranging from Fortune Global 500 companies to small businesses, and private individuals. Among them are not only the world’s largest consumer brands, tech companies and the global aviation and shipping industry, but also wineries, satellite operators or Hollywood film productions. They all look to AGCS for smart answers to their largest and most complex risks in a dynamic, multinational business environment and trust us to deliver an outstanding claims experience. Worldwide, AGCS operates with its own teams in 32 countries and through the Allianz Group network and partners in over 200 countries and territories, employing over 4,450 people. As one of the largest Property-Casualty units of Allianz Group, we are backed by strong and stable financial ratings. In 2019, AGCS generated a total of €9.1 billion gross premium globally. www.agcs.allianz.com
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Harris Pogust Joins Bryant Park Capital as Senior Advisor

By John Freund |

Bryant Park Capital (“BPC”) a leading middle market investment bank and market leader in the litigation finance sector, is pleased to announce that Harris Pogust has joined the firm as a Senior Advisor.  Harris (Mr. Pogust) is one of the best known and prominent attorneys in the mass tort and class action fields, he was the founding partner and Chairman of Pogust Goodhead worldwide until early 2024 and is currently working with Trial Lawyers for a Better Tomorrow, a charity Harris founded, to help children reach their educational potential all over the world.  Harris’ life work has been to deliver justice for those who have been damaged or injured through the negligence or bad faith of others.

“We are thrilled to have Harris as part of our team.  His knowledge, experience and relationships in the litigation finance sector are of great value to Bryant Park and our clients.  As the litigation finance world becomes more competitive, complex and challenging, having an expert like Harris on our team is invaluable,” said Joel Magerman, Managing Partner of Bryant Park.

Harris’ efforts, in conjunction with Bryant Park will focus on assisting law firms and funders in developing strategies to more efficiently fund their operations and cases and assist them in establishing the right relationships for future growth.  Harris commented, “I have been fortunate to have been a practicing attorney and partner in law firms for over 35 years focused on building and growing a worldwide book of business in the class action/mass tort field.  That required significant capital and throughout my career I have raised over $1 billion for my firms.  I have learned what works and what doesn’t.  I have seen both the risks and rewards in this industry.  I look forward to being able to work with law firms and funders to assist them in putting the right strategies in place with Bryant Park and bringing capital and liquidity to help them grow and flourish.”

About Bryant Park Capital

Bryant Park Capital is an investment bank providing capital raising, M&A and corporate finance advisory services to emerging growth and middle market public and private companies. BPC has deep expertise and a diversified, well-founded breadth of experience in a number of sectors, including specialty finance & financial services. BPC has raised various forms of credit, growth equity, and assisted in mergers and acquisitions for its clients. Our professionals have completed more than 400 assignments representing an aggregate transaction value of over $30 billion.

For more information about Bryant Park Capital, please visit www.bryantparkcapital.com.

Therium Capital Advisors Launched to Provide Litigation Finance Advisory Services

By John Freund |

Therium Capital Advisors (TCA) announced today the launch of its independent advisory services business dedicated to helping claimants, law firms and corporates to source, structure and secure litigation finance. TCA offers end-to-end support including funding strategy, investor engagement, financial modelling, deal structuring, ongoing case management and secondary market advisory. Based in London, the firm is advising on deals in the UK, continental Europe and Australia.

Therium Capital Advisors is led by litigation funding pioneer Neil Purslow and co-founded by investment banker Harry Stockdale. Neil has over 16 years of experience in litigation finance, raising capital and investing worldwide across all forms of litigation finance from single cases funding through to portfolio, corporate and law firm funding arrangements. Harry was previously head of UK M&A at investment bank Haitong with twenty years of experience in investment banking, advising law firms and litigation funders on complex financial transactions.  

TCA is the first advisory firm to provide clients with advisory services that are backed by a deep understanding of litigation finance investing coupled with the financial and transactional expertise of investment banking. Therium Capital Advisors bridges the gap between claimants, law firms and corporates on the one side and existing and new sources of institutional capital on the other.  Through the combined expertise of its founders, TCA opens up the investor universe that is available to clients and drives quality in the investment propositions, efficiency in the funding process and competition in the funding market.

TCA exclusively advises claimants, law firms and corporates, ensuring that it remains conflict-free.  The firm advises across the full range of legal assets including single case and portfolio funding, law firm financing, financing options for corporates and existing portfolios of legal assets.   

Neil Purslow, co-founder and Managing Partner of Therium Capital Advisors said: “We are at a pivotal moment in the development of the legal finance industry, given the relative paucity of traditional funding capital available.  However, we are seeing a shift towards new categories of investors in legal assets who want exposure to this uncorrelated asset class. By leveraging our unrivalled experience across both litigation funding and investment banking, we are assisting our clients to navigate this landscape with confidence, speed and understanding, and we provide them with access to a broader set of funding options and to meet their funding needs efficiently and cost effectively.”

Harry Stockdale, co-founder and Partner of Therium Capital Advisors said: “We are bringing an investment banking mind set to the litigation funding world which has developed largely without the benefit of specialist advisors. This professionalisation of the funding process will make the sector more efficient and accessible to a wider audience of investors in addition to the traditional litigation funders. We are already seeing the benefit of this, for both clients and investors alike, and is part of the maturing of litigation finance as an asset class.”

Therium Capital Advisors provides the following services to claimants, law firms and corporates:

  • Deal Preparation: Preparing funding propositions to be investment-ready.
  • Capital Sourcing: Identifying and engaging with suitable funders and capital providers from across the spectrum of legal assets investors.
  • Financial Modelling and Analysis: Providing robust financial modelling and scenario analysis to evaluate deal structures and model returns.
  • Investor Materials and Outreach: Advising on the preparation of investor-facing materials and documentation, inserting rigour and discipline to ensure efficiency in the funding process.
  • Co-Funding: Advising on the identification and engagement of potential co-investors to optimise risk-sharing and capital raising.
  • Negotiating Funding Terms: Leading negotiations with investors to secure terms which balance commercial viability with the interests of the funded party.
  • Deal Structuring and Documentation: Advising on deal structures and overseeing the drafting and execution of all relevant documentation.
  • Post-Funding Case Management: Providing ongoing monitoring, reporting, and servicing support post-funding on behalf of the claimant, to manage risks and support positive case outcomes.
  • Secondary Market Advisory: Advising on secondary transactions of existing legal assets including sub-funding arrangements and exits.

More information can be found at: www.therium.com/theriumcapitaladvisors

Gryphon Law Launches as Contingency-Fee Firm for International Disputes

By John Freund |

A new player is entering the international disputes arena—this time with a distinct twist on legal funding. Gryphon Law has officially launched as the first law firm globally to specialize in contingency-fee representation for cross-border disputes.

Gryphon Law aims to offer an alternative to third-party litigation funding by shouldering the cost of legal claims in return for a share of the outcome. Based in New York and with plans to expand into London and Miami, the firm targets clients who might otherwise turn to traditional funders, offering instead to partner with them directly through performance-based fee structures.

The firm was founded by John Templeman, a seasoned international disputes attorney qualified in New York, England & Wales, and Australia, who previously held roles at leading global law firms. Templeman has assembled a multilingual team capable of handling the full lifecycle of international litigation and arbitration in English, Spanish, and French—from initiation to enforcement. Co-founding the venture is Daura Dutour, an 18-year disputes veteran with experience in the U.S., France, and Haiti, supported by three additional associates.

Templeman stated: "I believe there's a real opportunity in the market to provide clients with an appealing alternative to third party funding, particularly in the sub-US$30 million value range below where many of the funders operate. I've been fortunate to assemble a world-class team of disputes lawyers who share this vision – we're looking forward to contributing to this rapidly evolving field.”

Gryphon Law’s business model suggests a more vertically integrated approach to litigation finance—embedding the funder role within the law firm itself. For clients, this could mean greater alignment of interests, fewer intermediaries, and possibly reduced costs when compared to traditional third-party funding arrangements.