We knew we were important to the insurance industry—but we didn’t understand why. After this month’s Insurance Insider US Executive Business Club roundtable, it’s clear we are not alone in our confusion. Legal finance has become a lightning rod in insurance-industry conversations about social inflation and claims costs, yet the substance of what we do remains widely misunderstood. That lack of clarity is fueling insurance company calls for boycotts and regulatory proposals that do not track with reality.

Clarity—not confrontation—must define the conversation between two industries shaping the civil justice system.

As leaders of two major commercial legal finance providers, we joined the roundtable to help bridge that gap. Facilitated by II’s Director of Research, Amit Kumar, the discussion offered a rare opportunity for direct dialogue between litigation finance companies, insurance companies, and other property/casualty stakeholders. Our goal was simple: replace speculation with facts and start a conversation between principals instead of proxies.

The Current Debate

Some insurers argue that legal finance drives runaway verdicts and rising claims costs. Yet, as Amit wrote in June, there’s little evidence to support the link between legal finance and social inflation. Boycotts and legislative efforts nevertheless persist, driven by a coalition of insurance companies, the defense bar, big tech, and pharmaceutical interests.

What Legal Finance Really Is

Legal finance is not monolithic. It is best described as spanning three distinct segments, each of which has different users, different uses of capital, and different policy considerations:

• Commercial funding – Non-recourse capital for complex business-to-business disputes that are capital-intensive in nature, such as patent, antitrust, and trade secret litigation. These matters rarely involve insurance on either side of the dispute, as the underlying cases rarely involve conduct that is insurable. Notably, because commercial litigation finance is high quantum and non-recourse, funders are incented to fund only the most meritorious cases. Interestingly, claims of this type do in fact periodically intersect with contingent risk products such as judgment preservation and collateral protection insurance, in which case there is a symbiotic, rather than a confrontational, relationship between insurance and litigation funding. These products wrap recoveries in large commercial disputes and provide critical liquidity solutions to corporate litigants.
• Consumer funding – Small, non-recourse advances for living expenses in personal injury cases. Returns are interest-based, and because these claims typically involve insurable conduct, this segment is most relevant to insurers. Commercial litigation finance companies do not offer consumer funding.
• Law firm lending – Recourse loans for working capital, including marketing and case expenses, often supporting injury and mass tort practices.

Conflating these models is like confusing life insurance with property/casualty insurance. Both involve risk transfer, but they operate in fundamentally different ways, have different users and different investor bases, and involve different regulatory issues.

Themes That Emerged

Several critical points surfaced repeatedly during the roundtable, each of which undercuts the narrative that legal finance contributes to social inflation:

• Insurance Exposure – Commercial funders focus on capital-intensive B2B cases, not insured personal injury litigation.
• Impact on Verdicts – Injury litigation is typically self-financed or debt-financed by trial lawyers; the commercial market is separate.
• Industry Size – AUM is a misleading metric for market size. The U.S. commercial legal finance sector employs only a few hundred professionals; But even assuming current AUM metrics, commercial litigation finance is extremely small relative to nearly any other sector of the legal, insurance, or risk markets.
• Mass Torts and Personal Injury – These cases are financed through credit facilities, not equity investments; returns are interest-based.
• Settlement vs. Trial – Funders prefer settlement because trials and appeals add risk and delay.
• Control Over Litigation – Funders are passive investors both legally as a matter of contract and ethics, as well as practically, as they typically lack access to materials produced in discovery due to protective orders.
• Disclosure – Insurance policies and legal finance agreements are apples and oranges. Because the latter are “after the event,” agreements contain sensitive information held by courts to be irrelevant and/or work product.

Why Does the Insurance Industry Care?

One question was telling: If what you are saying is true, then why do Chubb and others care so much?

Three theories emerged:

• Mass Tort Liability – Chubb’s own mass tort exposure may explain its boycott stance. Chubb has stated publicly that it has exposure to asbestos, environmental and abuse/molestation claims, and it likely has exposure to other mass tort claims. Over the past few years, family offices and hedge funds have funded marketing and other aspects of locating victims of mass torts. That marketing has led to larger litigant groups in multi-district litigations (MDLs) involving mass torts. This is a structural issue with the MDL system, not legal finance.
• Opacity and Perception – The opacity of our market is a convenient excuse to blame legal finance for social inflation (an opaque concept itself). Insurers align with defense-oriented groups that lobby to de facto prohibit legal finance under the guise of transparency.
• Defense Interests – The U.S. Chamber of Commerce, itself the subject of no small amount of controversy, has made litigation finance one of its latest boogeymen. This has been at the behest and with the financial support of a small number of companies that are serial defendants in large litigations. Interestingly, most of those litigations are for meritorious claims that are wholly or partially uninsurable, and thus, claims where the insurance industry has little to no stake. Simply, those companies are using the Chamber of Commerce to try and maintain a resources advantage so otherwise liable companies can avoid liability for commercial harms.

An Optimistic Outlook—and a Call to Action

Facts matter. We were grateful to engage with such open-minded colleagues at the Roundtable to discuss facts about the legal finance industry. Legal finance and insurance are not and should not be adversaries. In fact, insurers should prefer parties backed by legal finance because we bring discipline, not chaos. Like insurers, we underwrite risk; we don’t gamble. And we back only the most meritorious of cases, few to none of which involve injury lawsuits. This roundtable was a meaningful first step, and we are optimistic that continued engagement will narrow the gap between perception and reality.

Both industries share a common objective: a fair and efficient civil justice system. Let’s build on this dialogue—together. Engage with us, ask questions, and challenge assumptions. The future of civil justice depends on collaboration, not confrontation.