Put your case in pole position: TheJudge closes a policy with over £30m of cover
With the rise in group litigations, in particular in the competition and securities sector, it’s natural that demand for adverse costs insurance policies with high limits of coverage has increased in recent times. However, few would have predicted quite how quickly that increase in demand has manifested.
Arguably, the main catalyst in this market was the RBS shareholder claims which represented one of the first FSMA s.90 claims to seek external funding and insurance, heralding a new era of securities claims in this jurisdiction. At the time, the eye-watering RBS defence budget compelled the various claimant groups to seek and acquire fairly substantial coverage – in the order of £10m to £20m for adverse costs. However, legal budgets have continued to soar in group (and now class) actions in England and Wales, with claimants often now seeking protection for £20m, £30m and even £40m+. This level of exposure on single cases presents significant risk to insurance carriers so syndication or co-insurance is commonplace.
There are many complications when dealing with multiple insurers including structuring the participation of the insurers; determining which insurers are in control; pricing and security for costs fortifications are all additional variables that require careful co-ordination. This is especially true after the recent decision in the Ingenious media litigation. Please click here for Matt Amey’s article on what it could mean going forward for funder backed group claims due to the judgement in the Ingenious media litigation.
In addition to the complexities of putting these deals together, there is an additional pressure point. Often there are multiple claimant groups, with law firms each rushing to book-build in the hope of being the lead group/firm. Securing the necessary adverse costs protection is a key component to meeting that objective and often more time critical than sourcing a litigation funder. Indeed, several funders will invest in multiple claims (accepting even here there can be conflict issues to carefully navigate), whereas the same is not necessarily the case for insurers. Insurers will often cite aggregation risk and thus will often limit themselves to only supporting a single group. After all, the insurers return on risk rarely matches that of a litigation funder’s return on investment and thus they don’t have the same incentive to potentially extend their exposure to multiple claims which could turn on the same factual outcome. As a consequence, the race to secure sufficient insurance capacity is very real. While law firms investigating new cases may initially think that reaching out to a litigation funder is the obvious first step, recent cases have demonstrated that it’s the insurance structure that potentially should take precedence or at least rank equally in importance.
At TheJudge, we have only a 20 years’ experience exclusive in this industry. We’ve seen the market evolve over this time, with a continuous stream of new insurer entrants and exits. Those who have worked with us on such cases in the past would (we hope) attest to our skill, not only in structuring solutions, but our strategic approach to securing the necessary capacity. We are always welcome being tested on our credentials and would be happy to discuss relevant prior case studies from the thousands of cases we’ve been involved in over the past 20 years.
Obtaining such large amounts of cover is not necessarily straightforward. The existence of conflicts (whether actual or commercial) can often slim down the pool of insurers willing to consider certain risks which may involve key customers or key market segments for other business lines. This could also prove to be a problem for several of the largest brokers too.
At TheJudge we work exclusively in litigation funding and insurance which means we are claimant orientated. Unlike the large brokers in the market we do not arrange professional indemnity insurance or liability cover for corporates or institutions who will face group actions. We are not subjected to the internal sensitivities that large multi-national brokers must show deference to because they involve entrenched relationships, as well as lucrative and renewable business lines. In a race against time to secure necessary capacity, we would argue that removal of potential conflict risks that might arise is a prudent step.
Getting you in the lead
If you’re working on a new case that will potentially require sizeable capacity, we recommend having an informal chat with one of our team. A quick call can potentially be the difference between manoeuvring yourself into pole position or being left scrabbling for leftover capacity