CPI Underwriting & Due Diligence | What Insurers Assess

What Insurers Assess

This page covers due diligence from the insurer's perspective — what a capital protection insurance underwriter examines before agreeing to cover a funder's downside. It is distinct from, but closely related to, two other reviews: the due diligence a litigation funder runs before committing capital, and the criteria set out in what funders look for in a case. The three overlap on the underlying evidence — merits, quantum, enforceability — but each asks a different question. The insurer asks whether the downside is insurable; the funder asks whether the upside justifies deploying capital.

Case Merit & Legal Opinion

Independent senior counsel's opinion on prospects of success is the foundation of the underwriting file. Insurers want a written, reasoned view addressing:

• Probability of success on the substantive issues
• Key legal and factual risks, including disclosure and witness risk
• Quantum range and recovery prospects against the defendant
• Procedural risks — limitation, jurisdiction challenges, security for costs

Legal Team Track Record

The quality of the instructed law firm and counsel is a primary risk factor. Insurers favour teams with demonstrable success in the relevant practice area and forum. Funder-side teams known to insurers — and with strong recovery histories — bind faster and at better rates.

Funder Case-Selection Methodology

Funders with a recognised, documented case-selection methodology — including merit scoring, quantum modelling, and post-mortem review of past cases — typically access better terms than ad-hoc underwriters. For institutional funders, the methodology itself becomes part of the underwriting story, particularly for portfolio-level placements.

Documents Insurers Typically Request

• Statements of case (claim form, particulars, defence, reply)
• Senior counsel's written opinion on merits and quantum
• Litigation budget and cost forecast through to trial
• Executed or near-final litigation funding agreement
• Existing ATE policy or indication of cover (where relevant)
• Funder's case-selection memorandum and merits scoring
• Defendant covenant and enforceability analysis

Jurisdiction & Enforcement Risk

Winning a case is only valuable if the award can be collected, so underwriters look hard at where the case will be heard and where any judgment or award will have to be enforced. Two matters with identical legal merits can price very differently if one defendant sits in a jurisdiction with reliable enforcement and the other does not.

Underwriters typically examine:

• The seat and governing law — how predictable the forum is, and whether procedural challenges (jurisdiction disputes, security for costs) are likely to add cost and delay.
• Defendant covenant — the financial strength of the defendant and whether it has assets that can actually satisfy an award.
• Cross-border enforcement — whether a judgment or arbitral award can be enforced where the defendant's assets are held, and the treaties or conventions that apply.
• Asset tracing risk — whether assets can be identified and reached, or are held through structures designed to frustrate recovery.

Enforcement risk is often the single biggest driver of pricing and exclusions on international matters. A strong claim against an insolvent or unreachable defendant may be uninsurable regardless of its legal merits — the same reason it may be difficult to fund. See our note on award enforcement funding for how this risk is managed on the funding side.

How CPI Underwriting Differs from Funder Due Diligence

Because a capital protection insurer and a litigation funder review much of the same material, funders and claimants sometimes assume the two processes are interchangeable. They are not. Understanding the difference helps a funder prepare a submission that satisfies both.

• The question being asked. The funder is underwriting the upside — whether the expected recovery justifies deploying capital at a target return. The insurer is underwriting the downside — the probability and size of a loss it may have to reimburse.
• Weight given to the legal team. Both care about the instructed team, but the insurer weights track record and forum experience especially heavily, because the team's competence directly affects the probability of the insured event.
• Role of the funder's own methodology. To an insurer, the funder's documented case-selection process is itself a risk signal: a disciplined funder with post-mortem review of past cases is a lower moral-hazard risk than an ad-hoc one.
• Treatment of what has already happened. Insurers price heavily on case stage — a matter can be insured mid-proceedings, but pricing and exclusions reflect events to date, whereas a funder assesses the case largely on its forward prospects.

In practice, a funder that has already run rigorous due diligence and can hand the insurer a clean, well-evidenced file will bind cover faster and at better rates. The two reviews reinforce each other rather than duplicate effort.

Underwriting Timeline

• Clean commercial cases: 2–4 weeks from broker submission to bind.
• Complex commercial / arbitration: 4–8 weeks, often with supplementary opinions.
• Collective / multi-jurisdiction matters: 8–12+ weeks, with phased binding possible.

Conclusion

Successful CPI placement is a function of preparation: clean documentation, a strong counsel's opinion, and a credible case-selection narrative. Funders that invest in their underwriting story access deeper capacity, better pricing, and more flexible structures. To begin a CPI placement, submit an enquiry or contact our team.