Market Insights
How Is Litigation Insurance Underwritten?
Merits, quantum, costs, enforceability and counterparty — in that order.
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The short answer
Underwriters assess the merits (usually through counsel's opinion), the quantum, the proportionality of the costs budget, the opponent's ability to pay, the forum and the legal team. They then set a limit, premium and conditions that reflect the risk being transferred.
In brief
- Counsel's merits opinion is central.
- Budgets are tested against a realistic recovery.
- Recoverability matters as much as merits.
- Complete papers produce faster, firmer terms.
Background
Litigation underwriting borrows from both insurance and investment analysis.
How it works in practice
Screening, merits review, budget and quantum testing, recoverability, then structure and price.
Worked example
A claim with 65% prospects, a £2m budget and a solvent defendant is offered staged cover with a contingent premium.
Figures are invented to show the mechanics. They describe no real client, matter or outcome.
What underwriters look for
Candour about weaknesses, proportionate budgets and experienced counsel.
Jurisdiction notes
Forum costs rules decide which risks need cover.
The assessment sequence
- 01
An initial screen of the claim's size, forum and stage
- 02
A review of counsel's merits opinion
- 03
A test of quantum and budget
- 04
A look at recoverability
- 05
Finally pricing and structure
Weaknesses usually surface at the first two stages, which is why an early, candid outline saves time.
Information required
- Case summary
- Counsel's merits opinion
- Pleadings or letters before claim
- A phased costs budget for both sides
- The funding and fee arrangements
- Evidence of the opponent's assets
For portfolios, a schedule of cases and the selection criteria.
Common obstacles
- A merits opinion that is too brief or too optimistic
- A budget out of proportion to the likely recovery
- Doubts about whether the opponent can pay
- A legal team without relevant experience
- Unresolved conflicts of interest between funder, firm and client
Timelines
Straightforward risks with complete papers can move from submission to indicative terms in a few weeks; complex or high-limit risks take longer.
Urgent needs, such as a security application with a hearing date, can often be prioritised.
Related questions
What information is needed?
How long does it take? See the related guides below.
Frequently asked
What prospects of success do underwriters need?
There is no fixed threshold. Underwriters weigh prospects against the limit, the budget, the opponent's ability to pay and the premium structure, and they rely heavily on counsel's view.
How long does underwriting take?
Straightforward risks with complete papers can reach indicative terms in a few weeks; complex or high-limit risks take longer. Urgent deadlines, such as a security hearing, can often be prioritised.
What documents do underwriters need?
Usually a case summary, counsel's merits opinion, the key pleadings, a phased costs budget for both sides, the funding arrangements and information on the opponent's assets.
Why are litigation insurance applications declined?
Common reasons are thin merits evidence, a budget out of proportion to the likely recovery, doubts about recovering from the opponent, and an inexperienced legal team.
Does the insurer take control of the case?
No. The insured and its lawyers run the case, but the policy usually requires reporting, following reasonable legal advice and consulting the insurer on settlement.
General information only. This page is not legal, financial, investment or insurance advice. Any insurance is subject to underwriting and to the terms of the policy wording issued.