The growing adoption of insurance products in litigation finance was the focus of a recent article published by Litigation Finance Journal titled 'The Impact of Insurance on the Litigation Finance Market'. A panel of industry experts explored how funders can use insurance products to lower their rates and mitigate investment risks in litigation and arbitration.
Additionally, the article highlighted various available insurance options, such as judgment preservation insurance (JPI) and after-the-event (ATE) insurance, emphasising the need for cooperation between insurers and litigation funders to address disclosure and regulatory requirements issues.
Speaking about promoting cooperation between insurers and litigation funders, despite their conflicting views on disclosure and regulatory matters, Jason Bertoldi, Head of Contingent Risk Solutions at Willis Tower Watson, highlighted that carriers frequently interact with funders, underlining the need for the insurance industry and litigation finance to address concerns on both sides to foster a better relationship. This requires insurers to become more accepting of litigation funding while funders need to address issues like adverse selection and information imbalance.
"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, Managing Director and Co-Head of the Litigation Finance Group at Stifel, also pointed out the significance of regarding insurers as valuable partners rather than mere instruments for transferring 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.”
This article highlights that, ultimately, both the insurance and litigation finance sectors need to develop a mutual sense of ease and familiarity. With an extensive product suite and a solution-driven approach, Ignite is the ideal partner to help you navigate across the entire value chain of the Legal Expenses Insurance industry.
