Jackson's legacy on the insurance market

Today's ATE policies are now gold medal standard, helping clients properly resource and budget their cases, argues Steve Jones

Sitting down to write this during the Rio Olympics, my mind inevitably wanders back to 2012. What a glorious time that was. But I'm not talking about the London games; rather the halcyon days of after the event (ATE) insurance market pre-Jackson.

While there has been much talk of the 'London legacy', let's consider the legacy of Sir Rupert Jackson's reforms in respect of ATE and pinpoint the positive impacts for claimants and insurers alike.

First, let's get one thing straight: ATE is alive and well and was not destroyed by Jackson, far from it. Prior to April 2013, innovation was starved, premiums were high, and there was little variation between policies, which had seldom been tested. It was perceived as a 'no lose bet'. So why disturb the hornets' nest? Put frankly, if ATE was an Olympic sport, the policies back then would win a bronze medal at best.

Today, I'd argue the policies are gold medal standard, and this is helping clients properly resource and budget for their case. There is huge variation and creativity in the policy wordings that are now bespoke for each individual case, taking into account the specific nuances of the litigation. Gone are many of the ambiguous condition precedents and warranties that used to feature so heavily, and the trend for 'insured friendly' wording is set to continue further with the introduction of the Insurance Act 2015.

Premiums are arrived at on a case-by-case basis and carefully calculated in line with a client's tolerance and appetite for risk; staging and discounts for early settlement also mean that having ATE does not prejudice a claimant's ability to settle a claim in line with the advice of their lawyers. Various ways of paying the premium exist, including the 'no win, no fee' premium model, which is still prevalent and favoured by a number of insurers.

In summary, as lawyers are increasingly being asked for creative fee structures now that the recoverability of success fees has been scrapped, ATE insurers are prepared to do the same and design their policies to complement the lawyer's retainer, thus sharing the risk with them.

Furthermore, and unlike yesteryear, ATE insurance should not be considered exclusively as adverse costs protection. Own disbursements and an element of own solicitors' fees can also be insured on the right matter, meaning that increasingly ATE is being used as a form of 'budget capping'.

In other words, if a claimant's tolerance for a case is at a certain level, and the uncertainty of being able to keep within this budget is causing them to lose confidence in bringing a claim, then insurance can restore confidence by limiting exposure to costs to their pre-determined level, regardless of how those costs were incurred.

One other noticeable difference is the profile of cases that attract ATE. This has certainly changed in the last few years. A natural result of products moving from commoditised to bespoke is that the one-size-fits-all mantra no longer applies. In respect of ATE, it is the mid-value claims (where damages are less than £750,000) that seem to have made procuring ATE less viable. However, for impecunious or funded clients it remains the norm and in larger value claims it makes huge commercial sense, especially when the premium is deferred on success and paid out of the damages.

So what does this space look like sitting behind the insurer's desk? Seemingly pretty good, considering the new entrants and additional capacity coming into the market. No fewer than four new A-rated insurers will start writing legal expenses business in 2016 as lead insurers and through our own Gallagher global network, we have been able to place ATE with at least seven other follow markets, meaning that capacities of over £10m are still available for the right case.

True, Burford Capital has decided to leave the market, and we are sad to see them do so. However, I believe they are the exception rather than the rule and the direction of their business has focused more on funding than insurance for some time.

Without question the ATE market is developing; the underwriters are sophisticated and are generally litigators themselves by trade and training. Hunger exists for good quality cases and creative deals are achievable to enable claimants to strengthen their hand and increase confidence in their claim knowing that the downside risk is mitigated. We hope that by Tokyo 2020 many more claimants will make it to the winner's podium.

Steve Jones is director of the London-based dispute resolution practice at Arthur J. Gallagher @AJG_Intl