The last 6 months of 2016 has seen a surge in capacity in the ATE market from new insurer entrants. This surge has partly been due to softer market conditions in other traditional insurance lines, but also follows significant work undertaken by TheJudge and others in 2016 to ensure the litigation insurance market is more robust than ever to meet the expanding demands of claimants and law firms around the world.
Are you advising all clients about own-side legal fees insurance?
The litigation insurance market is often overlooked in the press in favour of third party finance stories, but the truth remains it often has far greater applicability across a much broader spectrum of cases. For corporate counsel, accustomed to paying their legal team on a billable hour basis, own side insurance potentially has greater relevance than third party finance. This is because risk management and budget certainty is often the client’s key driver rather than cash-flow.
Lawyers ought to be advising all corporate counsel, engaging on a fee paying basis, that they potentially have the ability to insure those fees against a negative outcome. This means if the case is lost or an award cannot be enforced, the insurer will reimburse the fees and expenses paid.
Furthermore, the cost of insuring the fees and expenses is often significantly lower than the cost of funding, meaning a greater net upside if the case succeeds.
With the addition of new entrants there really isn’t any restriction as the level of cover that can be arranged, which means even the largest of disputes requiring £40m+ of legal costs indemnities can be insured by large international carriers.
Helping lawyers meet their billing realisation targets
Lawyers are under constant pressure both to attract work to bid on and then to secure the engagement. But if the firm has restricted the ability of fee earners to offer alternative fees, succeeding in tenders can be problematic. Offering ever increasing discounts to the billable rate to corporate counsel may seem like a short-term fix, but it’s not a long term solution, either for the firm’s profitability or the fee earner’s ability to meet their realization target.
Why not turn the discussion with GCs to risk sharing with insurers? While they may feel your rate or budget is steep, that concern can be somewhat appeased by focusing on the potential options to share the risk with litigation insurers. Insurers’ indemnities for own side legal fees are typically on a full rate basis, which ought to be music to the lawyers’ ears.
£100s of millions of capacity to be written – Insurers seeking deals.
With hundreds of millions of pounds of capacity available, these insurers are looking to write large volumes of commercial cases, ranging from contract disputes, construction cases, insolvency disputes, commercial and international arbitration cases through to patent disputes.
The cost of insurance is typically less than a quarter of most third party finance deals. Because of these price metrics insurers need to write volume. Many of the big name funders will be satisfied financing low double digit volumes in any given year. Insurers on the other hand seek much higher volume. That means they need to be flexible, competitive, quick and (from a client’s perspective) generally a non-intrusive external stakeholder in the case.
Contingent premiums, big limits and quick turnaround times
At TheJudge we can arrange these large limit indemnities within weeks if necessary and potentially within days if all the necessary information is available.
While some insurers have a preference for partial upfront premiums, there are many who still elect to quote on a fully contingent basis. This means the client has no premium to pay upfront and no premium to pay if the case is unsuccessful.
If you have a case in need of litigation insurance (or third party funding) please contact:
Robert Warner, Head of Broking