Third-party litigation funding, or TPLF, has become a booming business onto its own.
An estimated $17 billion was invested into litigation funding globally in the year 2020, with the U.S. taking more than half of it.
In return, these hedge funds, family offices and other litigation funding companies receive a cut of the potential jury awards.
This behavior, according to recent findings from Swiss Re, is likely driving up social inflation, as well as insurance premiums, liability availability and more.
‘We find TPLF contributes to social inflation by incentivizing litigants to initiate and prolong lawsuits. Higher claims costs drive up insurance premiums, can reduce availability of liability cover, and lead to higher uninsured legal liability risks for U.S. businesses,’ the report reads.