After-the-event (ATE) premiums in insolvency litigation will no longer be recoverable from the paying party from April, according to JLT Group.
This is likely to have a detrimental effect on how and, if at all, cases are pursued.
The group also claimed that it is imperative that practitioners consider their options now in order to unlock the full value of their portfolio in order to maximise creditor return, and have introduced a new service as a result.
Working closely with a litigation funder, JLT has decided to offer disbursement funding for insolvency cases.
The group stated: “Being that cases are reviewed by experienced solicitors and counsel at first instance it is possible to remove unnecessary delay and excessive due diligence from the process.”
JLT’s case assessment team, including two experienced underwriters and a practicing solicitor, will assess the case and then, subject to it meeting its criteria, can arrange swift access to funds without what it calls the “bureaucratic hindrances presented by additional underwriting layers”.
Under the current rules for insolvency cases pursued in England and Wales, the premium for ATE insurance is still a recoverable cost in litigation.
This means that if the case is successful, the insolvency practitioner can claim the cost of the insurance premium from the losing party as part of the legal costs, separately to the damages awarded.
This differs from other areas of litigation where the insurance premium is not recoverable for insurance policies taken out after 1 April 2013, and therefore typically falls to be paid out of any damages recovered.
Ed Brittain of JLT said: “Obviously, while there is still time left to secure cover before regulations change, in future it is going to become necessary for insolvency practitioners to look at alternative ways to enable mitigation of risk around the cases they pursue.”
“We at JLT are confident that our new proposition to the market will offer the most comprehensive solution which will also promote hassle free access to funds through close collaboration with clients we’ve been able to identify the key concerns posed by this change in the law and address them in order to create a well-honed product that is truly best in class”.
The recoverability of litigation insurance premiums in insolvency cases provides a significant benefit to insolvency practitioners and creditors, as it potentially avoids dilution of the damages recovered and therefore maximises the net recovery for creditors.
