Litigation funding now a ‘permanent feature’ of civil justice landscape

The growing prevalence of litigation funding in UK lawsuits is reshaping the dynamics of the legal sector.

That is according to John Sorabji, associate professor of law at University College London, who said insurers must be acutely aware of such developments to successfully manage the changing risks.

Sorabji was speaking at a Clyde and Co webinar, hosted on 9 September 2026 and titled Litigation Funding under the spotlight – Global developments and Insurer strategies.

Sorabji explained that litigation funding – whereby a third-party entity invests money to finance a legal claim and receives a portion of the proceeds should the claim succeed – has, over recent years, become a multibillion pound global industry, financing claims ranging from major commercial disputes to consumer class action lawsuits involving millions of claimants.

The scale of activity is large and growing, with recent estimates putting the value of the litigation funding industry in England and Wales in the region of £1.5bn to £4.5bn annually.

Sorabji said: “For insurers, that growth matters, because litigation funding increasingly influences claim volume, litigation strategy and – importantly – settlement.”

And, while litigation funding has the potential to increase access to legal support and decrease the financial risk for claimants, many in the profession feel it encourages “weak or speculative” claims, complicates settlement incentives and leads disputes to be pursued for longer than they otherwise would.

Importantly, the practice also risks driving the development of a trend insurers are all to familiar with in other areas of the market – claims inflation.

Improved confidence

However, the government has sought to improve confidence in the practice of litigation funding, recently reversing the Supreme Court’s 2023 Paccar ruling – a decision which it felt created regulatory uncertainty around the legitimacy of funding opt-out collective class action lawsuits.

For Sorabji, the direction the sector is heading in is clear. An increasing number of legal jurisdictions appear willing to permit the development of litigation funding and the practice has become a “permanent feature of the civil justice landscape”.

“For insurers, the practical implication is this – funding is now an important part of litigation risk,” he concluded.

“Understanding who funds claims, under what conditions and within what regulatory framework is just as important as understanding the merits of the claims itself.”