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Recent Developments in Litigation Finance (Part 2 of 2)

December 11, 2017

Recent Developments in Litigation Finance (Part 2 of 2)

By Mauritius Nagelmueller This article aims to provide an overview of the most significant recent developments in the litigation finance industry. Part 2 of this 2-part series discusses the rapid growth of litigation finance across the globe, as well as its multi-dimensional expansion into diverse markets. If you’d like to reference Part 1 of this series, you can find it here. Growth The most significant overall trend in litigation finance is simply put: growth – a vibrant and ongoing increase in the use and acceptance of the industry. Litigation finance has emerged from a promising niche into a mainstream alternative asset class. The use has multiplied in the recent years, and among many other characteristic features, investors are attracted by the chance to diversify their portfolios with uncorrelated assets. The demand in the legal world is still much higher than the supply of litigation finance – an indicator that normally only the best cases are receiving financing. By now, the business spans the financing of both plaintiffs and defendants, single cases and portfolios, at practically every stage of the dispute, for example also at the enforcement phase. As litigation finance has become a multi-billion-dollar business, surveys and reports by universities and journals, as well as financing providers point to its continued growth, with no signs of stopping any time soon. While detailed data grows increasingly available, it is hard for reporters or councils to keep pace with the industry, which continues to evolve before initial research can proffer valid conclusions. While this powerful forward movement promotes access to justice in the eyes of many, the impact on the civil justice system concerns others. Calls for more rules and regulation regarding inter alia, disclosure and conflicts of interest remain loud. Whichever side one chooses, the market for this service is growing, the demand enormous, and high-quality cases tend to find high-quality finance providers. Expansion For all the reasons stated above, as well as in the Part 1 of this series, 2017 has been the year of expansion for litigation finance firms. New offices in multiple jurisdictions, new funds that are larger or have innovative structures, and broader services providing the full spectrum of finance and risk management related to legal disputes. A wave of new office launches took place in multiple directions internationally. Litigation finance firms from the U.K. entered the U.S. market, and are eager to establish their business in New York City, Washington D.C., Philadelphia, California, and a number of other locales across the U.S. Strategic recruiting, e.g. of former U.S. judges and biglaw partners, builds strong teams in a constantly growing environment, and makes a career in litigation finance a more and more attractive option. Following the developments in Asia described previously, litigation finance firms have opened their first offices in Singapore. The market is also growing in Canada, where local courts have increasingly embraced litigation finance for the past 15 years. International litigation finance and insurance firms seem attracted, and have ventured into Canada this year. And funds are growing bigger accordingly. The largest players have billions of dollars committed to the legal market, able to invest hundreds of millions in a short period of time. The biggest single litigation investment fund in North America has been raised this year, at $500 million. An increase in size is not the only development, however, since crowdfunding and innovative online platforms play a progressively important role, opening the market to an even broader range of participants. Litigation finance has never been one-dimensional, but has included tailored financing concepts and related services like asset tracing for some time. The progress of portfolio financing shapes the market thoroughly. More recently, the range of available insurance options has developed in the U.S., bringing a new variety of sophisticated services, such as contingency fee insurance and attorney fee insurance solutions which can offer a cheaper hedge compared to financing. All in all, it will be fascinating to watch how things play out in the years ahead. Whatever the outcome, 2017 will certainly be remembered as a transformative year for the nascent industry of litigation finance.   Mauritius Nagelmueller has been involved in the litigation finance industry for more than 10 years. This 2-part article is for general information purposes only and does not purport to represent legal advice. The views and opinions expressed are those of the author and do not necessarily reflect the position of his employer. No reader should act or refrain from acting on the basis of any information related to this 2-part article without seeking the appropriate advice from a lawyer licensed in the recipient’s jurisdiction.
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Case Developments Commercial

Singapore Court Expands Scope for Legal Finance in Civil Cases

By John Freund |

In a pivotal decision likely to reshape Singapore’s litigation finance landscape, the country’s High Court has affirmed that third-party funding is permissible beyond its historically narrow confines. The judgment, delivered in DNQ v DNR (2025), broadens legal finance's potential use in civil cases unrelated to insolvency or arbitration, marking a significant milestone in the jurisdiction’s approach to access-to-justice tools.

An article on Burford Capital's blog notes that the case involved a claimant pursuing enforcement in Singapore of a £31 million UK family court award. Facing financial hardship, the claimant secured funding from a professional litigation financier. The defendant moved to strike out the case, arguing the arrangement violated public policy by being champertous. But the court disagreed.

Presiding Senior Judge Tan Siong Thye upheld the funding agreement, finding it did not offend the principles of justice or procedural fairness under the Vanguard test. Crucially, the judge ruled that statutory reforms to Singapore’s Civil Law Act did not negate common law exceptions that allow for such funding arrangements.

The court outlined three factors favoring the agreement: the claimant’s lack of resources absent funding, the reasonableness of the funder’s return (potentially up to 56%), and the claimant’s continued control over litigation strategy. The judgment also clarifies that litigation funding is not confined to the specific scenarios listed under section 5B of the Civil Law Act, such as insolvency or arbitration, thus opening the door to broader use in commercial disputes.

This decision signals increasing judicial acceptance of litigation finance in Singapore’s courts and is likely to embolden funders exploring opportunities in the region. As jurisdictions around the world re-evaluate the role of third-party funding, Singapore’s High Court appears poised to join a growing chorus endorsing its value in supporting equitable legal outcomes.

Commercial

EY Models Peg Litigation Funding’s Cost to Insurers at $25B–$50B

By John Freund |

An article in Carrier Management reveals that third-party litigation funding (TPLF) could impose up to $50 billion in direct and indirect costs on the U.S. casualty insurance industry over the next five years. The estimates come from a model developed by EY actuaries Mike McComis and Abbi Bruce, who presented the findings at the Casualty Actuarial Society’s recent reinsurance seminar. Their “top-down” model—built using funders’ reported returns, AUM growth, and case resolution timelines—pegs direct costs between $13 billion and $18 billion, with an upper-end projection of $25 billion. Including indirect impacts like prolonged litigation and increased advertising by law firms, the estimate swells to $50 billion.

The report startled even seasoned executives. Hartford CEO Christopher Swift, during a Q2 earnings call, bristled at a question about TPLF’s effects, lamenting how it has “turned our judicial system into a gambling system.” EY’s McComis was more measured but no less pointed, declaring TPLF “the most significant and measurable driver of social inflation.” He cited modeled trends showing TPLF’s rising burden on insurers—up to $3.5 billion in direct costs annually by 2028—and warned that actuaries should not ease off assumptions around escalating claim severity.

With litigation funders averaging annual returns of 25-30% and succeeding in 85-90% of cases, the capital influx is shifting settlement dynamics, increasing legal costs, and pressuring insurer loss ratios. EY’s analysis found the commercial liability industry could see a 4.5 to 7.8 point spike in loss ratios due to TPLF alone.

As disclosure mandates expand, insurers may need to develop internal models to track and respond to TPLF-backed cases more effectively. For legal funders, the report underscores the mounting attention—and scrutiny—coming from the actuarial and insurance sectors. If EY’s projections bear out, litigation funding’s influence on premium pricing and loss trends may soon be impossible to ignore.

Commercial Deals

Funders Target Gulf Disputes as Claims Surge

By John Freund |

A combination of court reforms and project delays is pulling more Gulf disputes into the third-party funding orbit, with global and regional players sharpening their focus on the UAE and Saudi Arabia.

An article in AGBI quotes Burford Capital’s Dubai-based team describing demand as having “risen sharply over the past two years,” and says the funder is now actively underwriting and funding more claims, especially in the UAE. Construction leads the pipeline—unsurprising given persistent schedule overruns and cost blowouts—while banks and other institutional claimants are increasingly tapping funding to preserve working capital or monetise awards.

Local entrant WinJustice reports a 60% jump in case assessments over the last year, with a sweet spot that starts around $1 million in onshore courts and $5 million in offshore forums; returns are typically a 30%–35% share of recoveries or a hybrid model. And LFJ just reported on UAE-based Lexolent's first successful investment conclusion.

The AGBI piece also flags a gradual easing of the region’s historic enforcement frictions, with Dubai courts recognising multiple foreign judgments in the past two years—an important de-risking signal for capital providers eyeing cross-border value recovery. The growing Gulf focus is consistent with funders’ search for scalable commercial matters backed by robust assets and clearer enforcement pathways.

For underwriting teams, the “construction-plus” mix—JV disputes, shareholder fall-outs, and complex debt recoveries—offers diversified routes to exit, particularly where arbitral awards can be recognised and enforced across jurisdictions. Pricing discipline will matter: as local awareness rises and new funders enter, competitive pressure could compress nominal returns even as deployment opportunities expand. For in-house teams in the region, dispute finance is evolving from last-resort cost cover to a balance-sheet tool—one that can hedge risk, front settlement leverage, and unlock liquidity tied up in slow-moving claims.

If enforcement keeps improving and banks continue to monetise judgments, expect more Gulf allocations, more bespoke structures (including potential Sharia-aligned variants), and a faster maturation of the MENA legal-finance market.