Litigation finance
Litigation Funding and Insurance
Capital and protection arranged together around one matter or one book.
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 are litigation funding and insurance combined?
Funding supplies the capital required to run a claim; insurance defines the downside for whoever is carrying the risk. Combined structures typically pair a funding commitment with adverse costs cover and, where capital is at stake, capital protection. Each element is underwritten separately.
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Key points
- Funding answers the cash question, insurance answers the downside question.
- Combined structures are common on substantial commercial claims.
- Cover can sit with the claimant, the funder or both.
- Each instrument is documented separately and priced separately.
Typical combined structures
- Funding for own costs plus ATE for adverse costs
- Funding plus capital protection for the funder
- A claimant using insurance to reduce the amount of funding needed
Who holds the policy
ATE is usually taken out by the claimant, though the funder may pay the premium or be named as a party with rights under the policy.
Capital protection is held by the funder or its investors.
Sequencing the two
Funders and insurers each want to see the other's commitment.
Running both processes in parallel, with shared case papers, avoids delay and lets the combined package be priced together.
Illustrative scenario
A £20m claim needs £3m of own costs and faces £2.5m of adverse costs risk. A funder commits £3m for a return from recoveries; the claimant buys ATE for £2.5m on a deferred premium; the funder protects £2m of its capital.
Figures are invented to show the mechanics. They describe no real client, matter or outcome.
Frequently asked
Do funders require ATE insurance?
Often, in loser-pays forums, so that neither the funder nor the claimant is left with an unpaid adverse costs order.
Who pays the ATE premium in a funded case?
It varies: the claimant, the funder, or a deferred premium paid from recoveries.
Why combine litigation funding with insurance?
Funding solves the cash problem and insurance caps the downside. Together they let a claimant pursue a claim without paying costs or carrying adverse costs risk.
Does insurance make funding cheaper?
It can: a funder facing less downside may accept a lower return, though the premium must be weighed against that saving.
Should funding or insurance be arranged first?
Usually in parallel, since each provider wants to see the other's commitment and terms.
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.