Trending Now

Operating Costs inherent in the Commercial Litigation Finance Asset Class (Part 2 of 2)

Operating Costs inherent in the Commercial Litigation Finance Asset Class (Part 2 of 2)

The following article is part of an ongoing column titled ‘Investor Insights.’  Brought to you by Ed Truant, founder and content manager of Slingshot Capital, ‘Investor Insights’ will provide thoughtful and engaging perspectives on all aspects of investing in litigation finance.  EXECUTIVE SUMMARY
  • Article draws comparisons between commercial litigation finance and private equity (leverage buy-out) asset classes
  • Similarities and differences exist between private equity and litigation finance operating costs, but there are some significant jurisdictional differences to consider
  • Value creation is front-end loaded in litigation finance vs. back-end loaded in private equity
  • Litigation finance can be a difficult investment to scale while ensuring the benefits of portfolio theory
INVESTOR INSIGHTS
  • The ‘2 and 20’ model is an appropriate baseline to apply to litigation finance, but investors need to understand the potential for misalignment of interests
  • As with most asset classes, scale plays an important role in fund operating costs
  • Deployment risk and tail risk are not insignificant in this asset class
  • Investor should be aware of potential differences in the reconciliation of gross case returns to net fund returns
  • Up-front management fees may have implications for long-term manager solvency
In Part 1 of this two-part series, I compared litigation finance to private equity (i.e. leveraged buy-out) and the deployment problem endemic to litigation finance and the impact it has on the effective cost of management fees. In Part 2, I drill deeper into the operating costs inherent in running a litigation finance strategy. Fees The “2 and 20” model in the private equity asset class was established early on in its development, and for the most part it has not materially changed since inception (after decades).  Sure, there are some managers that charge less of a management fee and more of a performance fee, but the industry generally operates from a compensation perspective, as it has since its inception.  There have been many reasonable arguments suggesting that as a fund scales and the manager’s Assets Under Management (“AUM”) increases, the management fee as a percentage of AUM should decrease because of (i) economies of scale, and (ii) the amortization of management costs over multiple funds being managed simultaneously.  Despite these well-reasoned arguments, limited partners (LPs) have not been overly successful in moving managers off of the compensation model other than those LPs who have been able to use their scale to their advantage by making large commitments in exchange for lower management fees.  In addition, some large PE fund managers recognize the scale inherent in investing billions of dollars, and have accepted lower levels of management fees accordingly, but this dynamic is not currently relevant given the scale of most fund managers in the litigation finance market. Why has fee compression been absent in private equity? Because the performance of private equity has justified the fee structure, although Ludovic Phalippou’s recent research entitled “An Inconvenient Fact: Private Equity Returns and the Billionaire Factory” may contribute to changing that sentiment.  Then again, private equity can always turn the page on institutional investors and ‘pivot’ to the trillions available in the 401(k) market, which has recently become more accessible. At present, I don’t see a compelling reason for the existing compensation models changing, as private equity is a much more management-intensive asset class than public equities, and does require some unique skill sets given the breadth and depth of issues inherent in managing a private business, even if only at the board level. And while the “2 and 20” model is also prevalent in litigation finance, there have been some marked exceptions.  First, let’s take a look at the publicly-listed fund managers who also run private partnerships. Publicly Listed Managers In the private equity world, there are a number of managers that are currently publicly-listed.  These managers typically became publicly-listed not out of business necessity, but more so out of a necessity to monetize their shareholders’ investments in their private equity firms for the benefit of departing partners who contributed to the success of their organizations over decades, and also as part of their succession strategy.  Alternatively, they may have floated once they created a certain level of scale in the private equity business, to justify attracting investor capital in the public markets in order to scale their already sizable organizations in a variety of different asset classes (credit, distressed, real estate, etc.).  However, one thing never changed – their fee structures.  I would argue that the reason their fee structures never changed is due to the fact that such structures were at the heart of their business models since inception – 2% management fee ‘keeps the lights on’, and the 20% performance fee creates wealth (if the manager performs).  Arguably, for those that have achieved scale, both the 2% and the 20% have contributed significantly to their wealth and continue to do so.  We are even at a point in time of the lifecycle of the PE asset class that fund managers have been able to monetize their excess management fees and performance fees by selling minority interests in their PE firms to the very same institutions that pay their excess management fees & performance fees to begin with – talk about double dipping! Conversely, the publicly-listed litigation finance managers did not always start off with a strong private partnership model, but were forced to look to the public markets for capital (see my recent article entitled “Investor Evolution in the Context of Litigation Finance” which explains why).  Instead, they ran a business off of their own balance sheets and they didn’t have to live within the confines of a 2% management fee model to finance their operations, as they could rely on funding from their balance sheets, although they ultimately had to deliver profits to their investors which forces a different type of discipline.  This had the benefit of allowing managers to expand more quickly than they could in a private partnership context, but perhaps did not have the same level of financial discipline, as the case outcome results were co-mingled with the expenses, and the investor could not necessarily bifurcate the results. More recently, certain publicly-listed litigation finance managers have decided to forego management fees in exchange for a bigger percentage of the contingent profit of the portfolio, which appears to be unique to this asset class.  When I originally contemplated publicly-listed managers raising money through private partnerships, my thought was that they would do so to ‘smooth out earnings’ by generating consistent and recurring management fees to offset their operating expenses, and thereby contribute to producing more consistent operating profits on which their equity would be valued with less inherent volatility.  In essence, their share price would appreciate solely due to the mitigation of earnings volatility.  However, given their openness to foregoing management fees, perhaps their philosophy is that having covered off the operating costs through the public balance sheet, they should ‘leverage’ their balance sheets by maximizing their performance fee and thereby enhance their return on equity for the benefit of public investors (i.e. forget the management fees, we prefer higher performance fees).  Both approaches are equally supportable, although I would tend to favour a strategy that promotes earnings stability in an asset class than can otherwise be relatively volatile, although I also recognizine that it would take a significant amount of AUM in order to generate sufficient fees to make a meaningful difference. As a private partnership investor, I would view the low/no management fee approach as quite attractive, because it’s almost as if the operations are being ‘subsidized’ by the public balance sheet, from which I would benefit. I am more than happy to give up some extra fees on the ‘back-end,’ as those fees are paid out of contingent profits as opposed to up-front principal, plus it selfishly helps my own cash-on-cash returns.  More recently, I have heard rumours that a private fund manager that runs multiple funds has taken the same approach – presumably the prior funds’ management fees are paying to ‘keep the lights on,’ and so they are more apt to forego current fees for a larger share of the back-end.  Of course, this might make prior fund investors wonder whether their management fees were too high if they can carry the subsequent fund’s operating expenses, in addition to covering the operations of the fund in which they invested. The issue that foregoing management fees for additional performance fees may present, is whether this affords the publicly-listed fund managers a competitive advantage from a fundraising perspective, since most of the private fund managers don’t have the luxury of being able to forego management fees, as they rely on them to ‘pay the bills’ while they invest. One could argue that the publicly-listed managers’ compensation systems distort the marketplace, but then again, they are obtaining a higher share of profits than a private fund manager would with a ‘2 and 20’ model, and so one could say that the difference is simply a trade-off between ongoing cashflow from management fees and deferred performance payments with incremental risk.  I think given the relatively early stage of industry development, there is enough room for multiple manager compensation models, and one will not necessarily compete with the other.  After all, the only basis on which performance should be measured is net returns.  However, we are at a stage of the industry’s development where many newer managers can’t show empirical results to prove out net fund returns to investors, which may ultimately result in term modifications to established compensation norms, in order to address the inherent risk of uncertainty associated with younger managers. Management Fee Logistics Not all management fees are created equal, and not all management fees are as transparent as a 2% annual fee, paid quarterly.  Some fund managers have decided to charge the plaintiffs an origination fee, which may ultimately get capitalized as part of the investment in the case, but is funded by the fund investors through a larger draw, as contrasted with the draw required without an origination fee. This origination fee construct comes with the benefit of providing the investor with a return on their origination fee, but arguably this is inherent in all management fees, as there is typically a hurdle return to investors for all capital called as part of the proceeds waterfall. The negative aspect of an origination fee is that the fee is charged and funded upfront, and so it represents an incremental ‘drag’ on Internal Rates of Return (“IRRs”).  Conversely, it may not show as an operating cost of the fund if the fee is capitalized as part of the investment, and thus may help with the J-curve effect in the early years of the fund’s performance.  However, the difference is rooted in ‘playing with numbers’. My one caution to investors on the topic of upfront origination fees is that the manager is effectively front-loading management fees that would otherwise be charged and earned over time by the fund manager.  The implication is that an investor needs to take a closer look at the long-term solvency of the fund manager when considering an investment in their fund offering, because if the manager’s returns fail to persist, they may not be able to generate sufficient fee income to run-off the remainder of the portfolio, which potentially leaves the investor in a precarious position.  Ideally, upfront fee income would be put into escrow and released to the manager over time to prevent future liquidity issues, although I have never seen this proposed (and this concept may cause “dry income” to the manager, which is taxable income for which there is no corresponding cashflow). Other Operating Costs: Different than some other asset classes, an investor in the litigation finance asset class has more than management fees to consider when assessing the returns inherent in the asset class, but these costs can be jurisdiction-specific. Adverse Costs Perhaps the most extensive cost is that of investing in jurisdictions that levy adverse costs (also known as “loser pays” rules) against plaintiffs who lose their case, which effectively makes the plaintiff responsible for the costs of the defendant’s litigation costs.  Adverse costs can be found in Australia, Canada and the UK among other jurisdictions, but they are not generally found in the US market.  These adverse costs can either be covered through an indemnity by the plaintiff, an indemnity from the litigation funder, or through the use of an After-The-Event (“ATE”) insurance policy.  It should also be noted that some judges have found the litigation funder to be ultimately responsible for adverse costs even if an indemnity for such costs was specifically excluded from the funding agreement (this is the ‘ability to bear’ principle at work, rightly or wrongly), so this should factor into your manager diligence. Some litigation funders will put in place individual insurance policies on a case-by-case basis, and others will put in place a blanket policy at the fund level to cover all adverse costs throughout the fund.  Depending on how these costs are accounted, they could represent an upfront cost (insurance premiums are generally paid upfront) at the fund level or on a case-by-case basis, or they could be capitalized to the individual investments which would be appropriate as they are in fact a benefit to the investment.  Regardless of the manager’s approach to ATE, they represent incremental costs, and since they are funded upfront, they represent a drag on IRRs and may contribute to a more substantial J-Curve effect for the fund in its initial years (assuming they are expensed currently).  While there are many financial differences between legal jurisdictions, this is certainly one significant cost that investors who invest globally should be aware of when assessing manager performance in different jurisdictions. I would also encourage fund managers who put in place blanket policies, to ensure the costs of such policies are being incorporated into the economics of the funding agreements and passed along to the plaintiff, as there is a significant cost and benefit attached to the existence of the policy which should be recognized as a pass-through benefit.  ATE policy protection is really a plaintiff benefit, as the funder typically considers it a defensive measure, knowing that the courts have sought adverse costs protections from the funder in cases where the plaintiff does not have the financial resources to indemnify. External Diligence Costs The other cost which does not vary jurisdictionally that investors should be cognizant of, is the extent to which a fund manager uses external parties to diligence their cases vs. internal resources and how these costs are accounted for – expensed or capitalized as part of their investment (the more typical treatment).  It would be unreasonable to expect a fund manager to be able to perform 100% of their diligence internally, as much of litigation is nuanced and requires the input of professionals (lawyers, experts, etc.) to obtain a realistic and informed opinion of the risk associated with a particular legal or technical issue.  Some managers employ an outsourced model, while others conduct most of their diligence in-house, and the costs associated with each can influence the operating costs of the fund. The larger litigation finance fund managers have economies of scale to their advantage, and are more likely to employ litigators and executives with specific expertise in a variety of areas, and so they are less likely to employ third parties to provide these services. With these managers, the diligence expertise is contained within their operations team, which is funded by their management fees (and may be funded by balance sheets for the publicly-listed funders). Smaller fund managers, lacking economies of scale, would be more apt to use external parties for diligence.  The question then is how are they accounting for these costs?   Are they being run through the operating expenses of the fund, are they being capitalized to the cost of the investment or are they applying a hybrid approach? The other issue is how are “broken deal costs” accounted for, and who is responsible for picking up the external costs of undertaking diligence, only to walk away from the investment (the General Partner or the limited partners or a combination of both), perhaps as a result of the insight gained from the external party.  These costs are typically included as part of operating expenses of the fund, but not exclusively. From this perspective, litigation finance is superior to private equity as an asset class, because PE firms tend to spend hundreds of thousands to millions of dollars in external deal costs, whereas litigation finance tends to limit these to the tens of thousands of dollars (although in either case they are directly influenced by the size of the investment), as much of their diligence expertise remains in-house. This dynamic could justify a relatively higher compensation model for litigation financiers, because those costs are effectively funded through the management fees, whereas the comparable costs in private equity are funded by the limited partners through fund operating expenses, or capitalized to the cost of the investment. Net-Net? When I assess a litigation finance manager for potential investment, my baseline is to look at their compensation system relative to a “2 and 20” model, with the devil being in the details in terms of how those items are defined.  For small managers, of which the majority of litigation finance managers would be classified, it is difficult to make anything other than “2 and 20” work from a cashflow perspective.  For most managers, I don’t believe there is a lot of excess profit inherent in the management fees found in a “2 and 20” model, but it should be sufficient enough to hire strong people and execute on the business plan, generate solid returns if done correctly, and if management pays proper attention to portfolio construction.  Compensation should also be predicated on the fund manager deploying a high percentage of its committed capital (85-100%). Where the manager does not meet its deployment targets, perhaps there should be a ‘claw back’ of management fees. The issue of excess compensation starts to become significant as any manager scales its operations into the hundreds of millions and billions of AUM.  This phenomenon is no different for litigation finance, but it is much more acute given the deployment issue highlighted previously. Also, relative to other asset classes, the litigation finance asset class suffers a bit from a lack of available data that would provide comfort to investors in the absence of having data to confirm that completed portfolios of litigation finance investments produce a level of return commensurate with the risk. I have been investing in the industry for the better part of five years, and I have yet to see more than a handful of examples of fully realized net fund returns globally, which forces investors to be cautious on fees to minimize the downside risk.  There is a sufficient amount of ‘tail risk’ inherent in any portfolio, and even more in litigation finance, and so the quicker the industry can produce and disseminate data on completed portfolios, the quicker this risk can be mitigated and the industry can be viewed as a true private equity asset class with perhaps less pressure on compensation models.  Conversely, this data will also provide fund managers with additional confidence to consider different compensation models so that they can put more of their own money at risk and benefit from enhanced performance fees, which is the approach that has been taken by some of the larger publicly-listed managers who have the benefit of realization data to justify putting their fees at risk. Investors should focus not only on management fees, but on the entire operational model, of which manager compensation may be one significant cost factor.  Certain jurisdictions and legal systems come with other costs that also need to be factored into the equation. Certain case types and strategies may also be more resource-intensive and need to be factored into the overall risk/reward characteristics of the investment (i.e. if you had to pay more people to generate a more diversified portfolio in order to reduce portfolio risk, perhaps the investor will be satisfied with a lower overall return which is reflective of the de-risked nature of the investment).  No different than litigation finance itself, investing is a form of risk-sharing.  Managers and investors who recognize the symbiotic relationship between investor and manager will soon come to appreciate the benefits of transparency and fairness that will serve as the foundation for a long-term business relationship. Investor Insights Any fund operating model needs to be designed taking into consideration all of the operating costs inherent in the manager’s operational model in the context of expected returns and timing thereof.  Investors care about being treated fairly, sharing risk and sharing the upside performance in order to foster long-term relationships that reflect positively on their organizations’ ability to perpetuate returns.  Professional investors rely on data to make decisions, and in the absence of data which might get them comfortable with a manager’s performance, they will default to mitigating risk. Tail risk in this asset class is not insignificant, which makes investing that much more difficult.  A performing manager that does a good job of sharing risk and reward with investors will have created a sustainable fund management business that will ultimately create equity value for its shareholders beyond the gains inherent in its performance fees.  Edward Truant is the founder of Slingshot Capital Inc., and an investor in the litigation finance industry (consumer and commercial).  Ed is currently designing a new fund focused on institutional investors who are seeking to make allocations to the commercial litigation finance asset class.
Secure Your Funding Sidebar

Commercial

View All

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.

20 Legal Firms and Groups Calling on UK Government for Urgent Legislation to Reverse PACCAR

Despite a government-commissioned independent review recommending priority standalone legislation to reverse PACCAR, the Government has failed to act, the letter to the Lord Chancellor says.

“As a highly respected member of the legal community, the Prime Minister rightly often speaks of ‘following the evidence’.

“The independent experts have provided the evidence that this issue needs fixing, yet this Government refuses to act, delaying justice for some and denying justice for future claimants.

“We call on the Government to act swiftly and legislate for the sake of claimants and the reputation of the UK’s justice system.”

The letter follows earlier calls on the Government from claimants to reverse PACCAR urgently, including from Sir Alan Bates , truck hauliers and the lead claimant in a mass action case against six water suppliers for alleged customer overcharging.

This comes amid a drop off in collective proceeding cases in the Competition Appeal Tribunal this year according to Solomonic, as reported in the Financial Times this morning (link). 

Neil Purslow, Chairman of the Executive Committee of ILFA, said:

“We’ve been warning successive governments for more than two years about the potential impact this uncertainty will have on consumers and small businesses’ ability to access justice.

“These figures show that stark reality. Meritorious claims are going unfunded, alleged wrongdoers are unchallenged and competition - one of the great drivers of growth - is not being enforced.

“The Government must act before this small trickle of cases dries up altogether.”

Martyn Day, co-founder of Leigh Day and co-president of the Collective Redress Lawyers Association (CORLA) which signed the letter, said: 

“This issue has created a great deal of uncertainty that is blocking access to justice for ordinary people taking on powerful corporations accused of wrongdoing. 

“The system simply cannot work without litigation funding, and this is a timely reminder to government to fix this issue, and urgently.”

In July 2023, the Supreme Court ruled in the PACCAR judgment that litigation finance agreements were unenforceable unless they met the requirements of Damages-Based Agreements, rendering many ongoing cases invalid and causing delays in the pursuit of justice for millions of claimants. 

The Civil Justice Council (CJC) concluded its comprehensive review of the funding sector four months ago, after the Government had promised to review what legislation might be needed to address PACCAR once the review was complete. The CJC’s review urged priority standalone legislation to reverse the damaging effects of PACCAR. Yet, despite earlier promises, the Government has said the review would merely “help to inform the approach to potential reforms” in “due course”. 

The letter highlights how the Government’s continued inaction contradicts the Prime Minister's own commitment to "following the evidence”.

The signatories, representing firms including Mishcon de Reya, Stewarts, Freeths, and Scott+Scott UK, highlight the “pivotal role” of group actions. They call on the Government to “act swiftly” to adopt the CJC’s recommendation to reverse PACCAR to protect the reputation of the UK’s justice system. The firms also include those who have provided legal representation for Sir Alan Bates, hauliers ripped off by truck manufacturers (link), and leaseholders fighting secret insurance charges (link).

Since the ruling, crucial investment into the UK economy is rapidly being lost. Litigation funders like Burford Capital are taking their funds elsewhere, with CEO Chris Bogart, stating his firm has begun ‘migrating some dispute resolution away from London’, following PACCAR. 

Litigation funding enables claimants with limited means to access justice, enabling landmark cases including those brought by the subpostmasters, retail workers, and small business owners, to hold multinational corporations accused of serious wrongdoing to account, while promoting fair, competitive markets and securing investment into the UK.

--

Below is the letter to the Lord Chancellor, in its entirety:

Rt Hon David Lammy MP
Lord Chancellor and Secretary of State for Justice
Ministry of Justice
102 Petty France
London
SW1H 9AJ

Dear Lord Chancellor,

Congratulations on your new role as Lord Chancellor and Justice Secretary. While we recognise the many challenges you'll face stepping into this role, we wanted to highlight a critical issue that is undermining access to justice and stifling investment in the UK's legal system. But it's an issue with a quick and simple fix.

Group actions in the UK play a pivotal role in enabling individuals to come together to bring claims against those accused of wrongdoing - often multinational corporations with significant resources. It has helped claimants like the subpostmasters, shopworkers, retail investors, and small business owners access justice.

The regime is underpinned by claimants’ abilities to access finance - often through litigation funding where funders provide financial backing for an agreed return of any settlement. However, as you know, the future of this mechanism and the regime is under threat thanks to the disruptive effects of the 2023 PACCAR judgment, and subsequent challenges to the enforceability of funding arrangements.

Claimants with limited means are struggling to access funding to bring their cases, and investment from funders is draining away from the UK legal system.

The Government promised to review what legislation might be needed to address PACCAR once the Civil Justice Council’s review had concluded. 

The CJC reported back 4 months ago with a thorough and nuanced perspective on the funding sector. As members of the legal community, we are sympathetic to sensible reforms and are reassured that the Government is considering these carefully. 

But one unequivocal and pressing recommendation from the CJC was for urgent standalone legislation to reverse the effects of PACCAR to end the uncertainty damaging access to justice. Disappointingly, the Government has so far failed to hear that call, saying only that the review would “help to inform the approach to potential reforms” in “due course”, despite its previous promises.

As a highly respected member of the legal community, the Prime Minister rightly often speaks of “following the evidence”. The independent experts have provided the evidence that this issue needs fixing, yet this Government refuses to act, delaying justice for some and denying justice for future claimants. 

We call on the Government to act swiftly and legislate for the sake of claimants and the reputation of the UK’s justice system.

Signed

The Collective Redress Lawyers Association (CORLA).
Stewarts
Group Actions & Competition, Stephenson Harwood
Scott+Scott UK LLP
Backhouse Jones
Freeths 
Humphries Kerstetter LLP
Mishcon de Reya LLP
Velitor Law
Milberg London LLP
Fladgate LLP
Geradin Partners
Harcus Parker
Tim Constable, Bates Wells
Phi Finney McDonald
Keidan Harrison LLP
Asserson
Leigh Day
Cooke, Young & Keidan LLP
KP Law

Shai Silverman Departs CAC Specialty, Joins Litica as U.S. Head of Underwriting

By John Freund |

After four years helping to build CAC Specialty’s contingent risk insurance practice from the ground up, Shai Silverman is departing the firm to join litigation risk insurer Litica as its Head of Underwriting – U.S.

In a LinkedIn post, Silverman reflected on his time at CAC, where he joined in the early days of the firm’s efforts to turn contingent risk insurance into a mainstream product. Alongside colleagues Andrew Mutter, Michael B. Wakefield, and David Barnes, Silverman helped develop insurance solutions for a wide array of legal risks, crafted bespoke products for hundreds of clients, and played a key role in launching the first-ever contingent risk insurance conference.

Silverman now moves to Litica, a UK-headquartered specialist insurer focused on litigation and contingent risks, to lead its U.S. underwriting function. His move signals not just a personal transition but also the growing transatlantic ambitions of insurers operating in this once-niche corner of legal risk.

Silverman’s departure marks a broader inflection point for contingent risk insurance—a sector now poised for significant expansion. As underwriting talent like Silverman shifts into leadership roles at specialist firms, questions emerge around how traditional insurers will respond, and whether contingent risk insurance will continue its trajectory toward becoming a standard risk-transfer tool for litigation and arbitration.