Business Issues

By Kevin Cunningham

During a panel discussion at the American Property Casualty Insurance Association( APCIA) annual meeting held recently in Orlando, Florida, corporate executives who are leading civil justice reforms warned that, if unchecked, litigation funding could siphon tens of billions of dollars from insurers.

Policyholders would ultimately foot that bill at a time when the crane insurance marketplace faces the challenges of capacity shortage and rising costs.

As the previous Hot Line articles explained, litigation funding enables outside investors such as hedge funds, private equity firms and specialized financiers to fund lawsuits in exchange for a substantial portion of any settlement or award.

Although the practice is legal and increasingly common, data about its scale and outcomes is sparse.

Recent analysis of this dynamically growing matter by Ernst & Young estimates third-party litigation funding( TPLF) could impose up to $ 50 billion in additional costs on the U. S. insurance market over the next five years. That would be a 4 % to 5.2 % drag on annual loss ratios.

Ernst & Young’ s analysis treats TPLF as an asset class, analyzing capital commitments and expected deployment cycles.

The model showed that once a thirdparty investor commits capital to funding litigation, that money will be deployed for years, creating steady pressure on claim costs regardless of near-term reform efforts.

According to Ernst & Young,“ Roughly 20 % of assets under management get committed to new deals each year, and those deals deploy capital over their life cycles, which average about 3.5 years, so the money is already in the system, and Ermst & Young sees these pressures continuing at least into the near future without meaningful reform.”

Editor’ s Note: This is the third of three articles by insurance industry expert Kevin Cunningham that address the malady of rapidly rising insurance costs in the crane and heavy-haul industries. The previous two appeared in the September and October 2025 editions of Crane Hot Line.

Disclosure Alone is Not the Cure

Research reports in Insurance Business magazine say that momentum is building for greater oversight on third-party litigation funding.

Earlier this year, federal lawmakers introduced the Litigation Transparency Act of 2025( H. R. 1109), which would require disclosure of third-party funding arrangements in federal civil cases.

Several states are considering similar measures.

Transparency advocates have argued that if funding sources were visible, courts and juries could better understand the interests at stake and assess whether plaintiffs’ strategies are being driven by justice or by investors’ profit motives.

However, disclosure alone“ isn’ t a silver

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November 2025 • www. cranehotline. com