Slice of recovery pie proves attractive, but financing may not take off

Litigation funding in the U.S. will increase, although it may not become as widely used as it is elsewhere in the world.

A study released in March by the European Parliamentary Research Service estimated the European Union litigation services market represented almost €39 billion ($46.55 billion) in 2019 and has had an annual 3.5% growth rate since 2008. It projects the market could reach more than €48 billion by 2025.

Litigation funding will likely grow as law firms look for additional funding and investors in financing firms seek increased returns on their investments, said Jennifer Marshall, a director in the property/casualty ratings department at A.M. Best Co. in Oldwick, New Jersey. 

Tim McCarthy, Jersey City, New Jersey-based actuarial product director for commercial liability at data analytics and risk assessment company Verisk Analytics Inc., said litigation funding “will continue to grow in use to the extent the financial returns to the people investing in it exceeds their cost of capital.”

However, Kevin LaCroix, executive vice president in Beachwood, Ohio, for RT ProExec, a division of R-T Specialty LLC, said he does not believe litigation funding will make significant inroads in the United States.

He said the U.S. has two things most other countries do not — contingency fees and “a very sophisticated plaintiffs bar that does not necessarily need litigation financing.”