Growth of class action litigation presents challenges and opportunities

As collective redress (i.e. class action) suits increasingly become part of the global legal landscape, the insurance industry needs to assess which economic sectors will likely be exposed to more litigation and explore opportunities to provide products and services to these sectors.
In its report, The Globalisation of Collective Redress, Swiss Re identifies both the challenges and opportunities that the spreading popularity of collective redress present to the insurance industry.
Among the challenges is increased pressure: will the wider introduction of collective redress encourage coercive settlements?
“Companies may be induced to settle unduly early, for example if media coverage raises the spectre of drawn-out collective action litigation,” the report says. “Such a public campaign may carry substantial reputational risks for the companies involved.”
The emergence of third-party litigation funding also represents a challenge.
“The trend is clear, and insurers must decide which position they will take, if any, and whether they want to actively participate in the litigation funding market.”
On the other hand, opportunities exist to provide products and services to clients in sectors most affected by collective redress, Swiss Re notes.
“Similarly, the further development of consumer protection will maintain pressure on producers to manage their liability risks by way of adequate insurance cover,” it continues.
“The insurance industry is well positioned to offer that risk-transfer, provided it is allowed to operate under market, regulatory and judicial conditions that enable risk-adjusted liability premiums.”