Litigation finance
Litigation Funding + Capital Protection
Protecting the capital a funder has committed to a case or a portfolio.
Illustrative. A teaching shape, not pricing. Funding pays for the case and takes a share of the upside; insurance caps the downside for a premium. Many matters use both.
How does capital protection work with litigation funding?
Capital protection insurance is arranged so that an agreed portion of a funder's deployed commitment is preserved if the case does not succeed. It changes the shape of the return distribution presented to a funder's own investors without changing the underlying funding agreement.
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Key points
- Cover attaches to deployed capital, not to the claim's upside.
- Can be arranged per case or across a portfolio.
- Frequently used in fund-raising and investment committee analysis.
- Terms depend on merits, quantum, duration and enforceability.
What is protected
The funder's deployed capital, or an agreed part of it, if the case or portfolio does not return it.
Single case vs portfolio
Single-case protection covers a concentrated position.
Portfolio protection nets wins against losses across a book before responding, which can make terms more efficient.
Investor considerations
Protection can support a fund's risk profile, lower its cost of capital or enable borrowing.
Investors and lenders will want to understand the wording, the attachment point and who controls claims under the policy.
Illustrative scenario
A fund deploys £30m across ten cases and insures £20m of principal at portfolio level. If aggregate recoveries fall below £20m, the policy pays the shortfall up to its limit.
Figures are invented to show the mechanics. They describe no real client, matter or outcome.
Frequently asked
What does capital protection add to a funding arrangement?
It protects the funder's invested capital, reducing its downside and potentially its price or leverage requirements.
Is capital protection visible to the claimant?
It is the funder's own arrangement, though it may affect the funding terms offered.
How is capital protection priced?
On the underlying cases or portfolio, the protected amount, the attachment point and the time at risk. Premiums are often contingent and paid from proceeds.
Can capital protection cover multiple funders on one case?
It can be structured for co-funding arrangements, though each funder's position and priority must be clear.
Does capital protection change the claimant's terms?
Indirectly, it can allow a funder to offer better terms because its downside is reduced.
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.