Recent developments in the judgment insurance market have highlighted a series of significant challenges for the industry, particularly following the substantial loss faced by the law firm Quinn Emanuel. This comes amid a court decision on October 10 that significantly reduced Quinn Emanuel’s fee from $185 million to $92.4 million, placing insurers potentially on the hook for approximately $75 million due to the firm’s insurance policy that covered roughly 90% of the original fee. These losses add to a trend of heightened financial risk for insurers within this niche market segment.
Such incidents are causing a reassessment of risk appetite among insurers, as noted by Charles Agee, CEO of litigation funding advisory firm Westfleet Advisors. The costs of policies have risen steeply, with premiums now quoted at up to 20% of the insured award, compared to about 10% a year prior. Agee commented on the increasing difficulty of attaining risk insurance due to these substantial financial blows. In light of this, insurers and brokers are navigating a rapidly shifting landscape, with companies like HDI Global Specialty, Lockton, and Certum Group expanding their role in the broader $13.5 billion litigation funding industry. The market has also seen participation from brokers such as Aon, CAC Specialty, and Willis Towers Watson Plc.
The market impact of recent cases extends beyond the Quinn Emanuel incident. The reversal of a $564 million verdict against BMO Bank by the US Court of Appeals for the Eighth Circuit is expected to result in at least $80 million in insured losses. Furthermore, the insurance industry’s vulnerability was exposed earlier this year when insurers covered between $500 million and $750 million of a $1.6 billion judgment against IBM Corp. After this ruling, Liberty Mutual Insurance Co. withdrew from several litigation insurance opportunities, indicating a cautious approach among underwriters, as reported by Bloomberg Law.
Industry stakeholders like Byron Sumner, CEO of Ignite Specialty Risk, believe that while the market currently faces challenges, it may stabilize once profitability improves. “Insurers are responding, and attaining coverage is unlikely to ever be as easy as it was recently in the last 12 months,” said Sumner, hinting at future adjustments once the market realigns.
This evolving landscape underscores a critical period of evaluation and adjustment for insurers, as they weigh the financial viability of covering large, complex awards. The heightened premium costs and stricter underwriting guidelines serve as a reminder of the unpredictable nature of litigation outcomes, compelling insurers to tread carefully and strategically recalibrate their market involvement.
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