The Risky Business of ‘Captive Insurance’: Litigation Finance

Hello! I’m Emily Siegel, and I’m a senior reporter with Bloomberg Law. I’ve been covering litigation finance for more than 2 years now, and today marks the first time I’m taking the helm of this newsletter. You can find me on LinkedIn and Bluesky.

It’s been a busy few weeks in the sector, including buzz about new legislation from Senator Thom Tillis (R-NC) that would slap a 41% tax on litigation finance profits. I wrote about how funders are concerned about the bill and how Tillis is trying to include it in the tax package being negotiated in Congress. If you have thoughts about the legislation, reach out to me at [email protected].

I also attended the IMN Financing, Structuring & Investing in Litigation Finance conference in New York. I got the chance to submit a question to a panel of insurance pros, so I asked what they made of Chubb CEO Evan Greenberg’s reported threat to sever ties with brokers who work with litigation funders. The room got quiet.

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Risky Business

Insurance has become an important part of the litigation finance space, with funders looking to reduce risks.

This week, I dug into a dispute between some prominent litigation funders and insurance company Oxford Risk Management Group. The fight offers an unusual window into the complex mechanisms funders use to protect their investments and the ways experimental structures might go awry.

At least three lawsuits are pending over Oxford’s “captive insurance” offering, a niche product that funders can use to pool risk. The suits entangle some major players, including VLSI (a private equity portfolio company of Fortress Investment Group managed funds), Gramercy, and MSP Recovery.

Oxford put out policies for about 20 different funding arrangements, pledging to back them with $1.3 billion in policy limits. When credit rating company AM Best warned Oxford in 2024 that it could be overextended, the company moved the policies offshore to Bermuda. It also lowered the reinsurance limit to $170 million without telling the policyholders, effectively erasing more than $1 billion in promised coverage, according to a complaint filed in February.

At least two more lawsuits have followed. In early May, North Carolina regulators rejected Oxford’s attempt to move the policies offshore and, according to people familiar with the matter, Oxford will now unwind the structure. Read More

What I’m Reading

The Wall Street Journal ran an editorial in support of the Tillis legislation, calling on the Senate “to ensure that the tax code doesn’t give the Abu Dhabi wealth fund a tax break for funding lawsuits that harm America.” The editorial referenced some of my reporting on litigation financing.

Signal Peak Partners, co-founded by two former trial lawyers with litigation funding experience, has formed in Texas. The company, which will focus on commercial and patent litigation and offer “customized litigation financing,” takes it name from the state’s highest natural point.

Apple’s effort to get access to Hapatic’s communications with its litigation funder was rejected. A judge ruled the documents are protected work product and disclosure parties didn’t waive privilege.

Also in the News

Nine big law firms that promised President Donald Trump $940 million in free legal services are changing little to meet their commitments, a strategy enabled by the deals’ vagueness and judges striking down orders punishing three competitors.

Paul Weiss leader Brad Karp spent more than a decade building his firm’s deals practice to an elite level matching its litigation work. A deal he struck with President Donald Trump threatens the balance between the two.

John A. Squires, President Donald Trump’s nominee to run the US Patent and Trademark Office, was voted out of the Senate Judiciary Committee by a 20-2 vote.

Insights

Holland & Knight’s Paul Bond and Madeline Schonberger write that the Supreme Court has left open a critical question about whether courts can certify classes with members that don’t have injuries.

With the rule of law under attack, lawyers must step up to defend the legal needs of everyday Americans, writes Kathleen Rubenstein, former executive director of the Skadden Foundation.