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After-the-event insurance is changing, and it is the smaller cases that will suffer the most, says James Delaney
The past 12 months in the litigation funding and insurance market has been overshadowed by the impending changes to the recoverability of conditional fee arrangements (CFAs), or success fees, and after-the-event (ATE) premiums. Although the debate continues, change seems inevitable.
Attention is now turning to the future and how commercial litigants will manage their legal cost exposure under the new regime, where ATE premiums and CFAs cannot be recovered from the losing party.
The likely impact will vary depending on the size of the case. For large-value cases, with costs of more than pound 1m, the impact will be minimal. Cases where the amounts in dispute are large have always been the 'sweet spot' for alternative litigation funding. Healthy margins between costs and damages mean that this is prime hunting ground for third-party litigation funders, while ATE insurers have now secured a firm foothold in this arena.
Just five years ago, insurers would struggle to write pound 2m of insurance cover for a given case, but in today's market indemnities are available in excess of pound 20m.
This sector of the market is now highly sophisticated, with insurers underwriting the insured's own solicitors' fees, which can be combined with lightly discounted, or no,...