In our survey of law firms last month , respondents claimed new, insurance-backed funding products entering the market are the biggest risk to traditional funders. Such products aim to provide a lower cost of capital to law firms and plaintiffs compared to Burford and funders. Over the last month, we’ve spoken to various brokers, carriers, and lenders to understand how and why insurance-backed financing may be a risk to BUR. 

Insurance products have existed for decades in legal finance. Funders and law firms insure all types of risks across pre, post, or adverse judgment assets. There are broadly three types of insurance products in the market: 

1. Funders insuring single cases or portfolios 

2. Judgment Preservation Insurance (JPI) 

3. Pre-judgment insurance of single cases and portfolios for law firms and plaintiffs 

Funders insuring certain risks in their portfolio is the largest and most mature market with JPI the second largest. Pre-judgment insurance-backed financing are newer products launched within the last 2 years and seem to be the biggest potential risk to funders. This piece of research shares our learnings on how JPI and pre-judgment insurance works and the potential risk to BUR.