Burford Capital has announced that it is to launch its own insurance company to provide adverse costs cover in high-value commercial litigation and arbitration claims where it is also providing third-party funding.
Burford Worldwide Insurance is designed to meet a need for “significant levels of adverse costs cover for major cases in costs-shifting jurisdictions around the world”, the company said.
It has received outline approval from the Guernsey Financial Services Commission and is awaiting final licensing.
A spokesman for Burford told Legal Futures that there would be no minimum cover limit “as we will only be insuring cases where we are also providing funding”.
Burford first entered the after-the-event (ATE) insurance market in 2011 with £10m acquisition of Firstassist. However, it closed the business in 2016 after Munich Re, its underwriter, announced that it was moving its business to a new platform.
The spokesman said: “That business focused on the middle market (with most policies providing less than £3m) and was built on a longstanding agency relationship with Munich Re.
“While demand for mid-market English adverse cost insurance has declined in light of regulatory changes, adverse costs risk remains a key issue for larger complex litigation and arbitration, Burford’s core business focus.
“Today, it is difficult to find a path forward on litigation claims once the adverse costs exposure approaches £20m as there is presently limited capacity for such claims in the insurance market.
“Moreover, adverse costs protection is often a prerequisite in large cases as individual defendants are typically unwilling to take on the kind of joint and several adverse costs exposure that can exist in such cases. There is also growing demand for such protection in large arbitration matters.”
The spokesman said Burford Worldwide Insurance would have “significant capital” available through Burford’s balance sheet and arrangements with reinsurers. Marsh Management Services Guernsey is to act as the new company’s insurance manager.
Christopher Bogart, chief executive of Burford, said: “We brought our prior business to an end as its agency structure and its increasing platform costs were undesirable, but we see considerable demand for adverse costs coverage in the large dollar claims in which we specialise, and it makes eminent sense for us to meet that demand through our own insurance provider.”
Craig Arnott, managing director of Burford Capital in London, added that the risk of adverse costs exposure had the potential to “dampen the ability of clients to pursue significant litigation”, particularly in high-cost areas such as competition.