Transatlantic Trends in Corporate Liability:
A View From The Coverage Trenches
This month we take look at the latest data from the US and the shifting legal architecture in the UK and it is clear that on both sides of the Atlantic, the litigation risk for companies is shifting. For insurance and risk practitioners, the question is what does this mean for coverage, frequency and severity of claims in 2026 and beyond?
In addition to class actions, there continue, on both sides of the Atlantic, to be developments in the punishing companies for their ill-gotten gains where their people have acted unlawfully.
A big factor in the ability to bring class actions is funding. Funding in the UK has been in a flux since 2023, but might be clarified by new law this year.
US Update: Securities Filings
As we predicted in the October 2025 Newsletter, while the number of US Securities class actions had been rising for several years, 2025 was something of a mixed outcome – a slight reduction in the number of filings but a sharp increase in the amounts at stake, which will play through into bigger settlements over the next few years. The dominant categories of claim were Artificial Intelligence (AI), Special Purpose Acquisition Companies (SPACs) and Cryptocurrency. Covid-19 finally dropped off a cliff as one would expect five years after the start of the pandemic, and Cyber security remains a stubborn if not spectacular contributor of securities class actions.
Whilst it’s interesting that SPACs and Crypto continued to make the charts in 2025, they are on a downward curve. In terms of longer-term trend indicators, it’s the AI litigation footprint that’s notable: despite making up only 8% of filings by number, AI filings accounted for 57% of all amounts claimed and the direction of travel is up.
If the broader trends in the US class action environment provide the weather, the Cornerstone Research “2025 Year in Review: Securities Class Action Filings” gives us the precise barometric pressure. The number of filings may have dipped, but the severity metrics have grown very significantly, fundamentally altering the risk curve for D&O.
US securities class action filings fell from 226 in 2024 to 207 in 2025—an 8% decline. Core filings similarly dropped from 221 to 201. This would normally be good news for insurance and risk practitioners and their employers. But here’s the twist - frequency is down, but severity is at historic highs.
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Disclosure Dollar Loss (DDL) surged from US$429bn (2024) to US$694bn (2025), the highest ever recorded.
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Maximum Dollar Loss (MDL) leapt from US$1.639tn (2024) to US$2.862tn (2025) - a 75% increase.
(Readers of the October 2025 Newsletter will recall the DDL is the drop in value of a company’s shares immediately following a negative public announcement by a company and is the trigger for securities claims. The MDL is the total amount that sued companies’ share values dropped during the whole class window and as such tends to be a bigger number than the DDL and Plaintiffs’ starting point in terms of settlement.)
These aren’t marginal variances; they’re order of magnitude jumps that will move the dial in calculating exposures for insurance and risk practitioners.
Just to illustrate this, “megafilings” now dominate the landscape:
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MegaMDL filings (≥$10bn loss): 36 cases, up from 34.
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Total megaMDL quantum nearly doubled to $2.551tn.
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MegaDDL filings (≥$5bn loss): 25 cases, steady year on year, but total megaDDL climbed to $564bn
The message to insurance and risk practitioners goes like this:
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Lower frequency will not mean lower exposure.
Severity dominant years can be more damaging to capital than high frequency years, and we’re in for a few years of this. -
Retention points may no longer be appropriate.
Mega-cases means mega lawyers’ costs. Big cases are fought more vigorously and we will see legal fees surging still further. If you think you know how much defence costs will be to ‘motion to dismiss’ stage, have another think. -
Loss creep will become an actuarial headache.
With MDL and DDL rising this sharply, event driven exposures (ie cyber, ESG, AI risk) will test long tail reserving with higher severity and longer claim durations. -
Trend categories point to future UK exposure.
US litigation trends tend to show up across the pond albeit more subtly later. We have seen it with “greenwashing” and it seems inevitable we will see it with “AI washing”.
Finally, as I have speculated, this year we may see a bursting of the AI bubble so we could see a surge in “frequency” as well as “severity”. It’s hard to avoid the cliché of the Perfect Storm.
Corporate Ill-Gotten Gains: Transatlantic Developments
We are going to see more legal activity around companies who benefit from the wrongdoing of their people this year.
(1) The US Supreme Court to Rule on Disgorgement
Disgorgement is a financial remedy through which companies who profited from unlawful conduct of employees must return their "ill-gotten gains" to victims rather than retain the financial fruits of their wrongdoing. The ability to secure disgorgement has long been a powerful tool in the SEC's efforts to enforce US securities laws. This is now being challenged. The challenge is being made that disgorgement should only be awarded where victims have suffered loss.
In January this year the US Supreme Court agreed to hear cases relating to the proper measure and availability of disgorgement. The SEC says investors do not need to have suffered a loss for disgorgement to be available: the whole point of disgorgement is to recover ill-gotten gains not to compensate anyone, even though the amounts usually go to the “victims”. It is therefore more akin to a punishment.
How does this debate affect coverage? SEC enforcement proceedings against companies are usually not covered under D&O policies – look at the definition of a Securities Claim. Even if classed as a Securities Claim, the disgorgement remedy is usually not covered for other reasons: see the Loss definition and/or the Conduct Exclusion. The rationale being, repayment of money the Insured should never have had in the first place is not, strictly speaking, a loss. However, civil fines and penalties are often covered, if they can be lawfully insured. As the US disgorgement remedy is a civil remedy, it might be classable as a penalty, so could we see arguments for coverage in principle here? Conversely, if the Supreme Court rules that the investors must suffer a loss for the remedy to be available could it be seen as compensatory and therefore coverable as a matter of principle?
The US Supreme Court’s final decision on the issue remains some way off but whichever way it goes, it might just be the start of further arguing: this time at the coverage level. Watch this space again later in the year!
(2) Ill-Gotten Gains and the UK ECCTA Angle
Readers will remember we covered the UK’s new Economic Crime and Corporate Transparency Act (ECCTA) in our March 2025 Newsletter.
Under ECCTA, the “failure to prevent fraud” corporate offence punishes companies who benefitted from the criminal conduct of their people, via the criminal route, just as the SEC “punishes” companies via disgorgement under US civil law. The main difference is that the proceeds go to the UK government and are very unlikely to be insurable under public policy because they are criminal fines. However, the defence costs may well be covered under insurance – Corporate Legal Liability (“CLL”) for instance.
We have yet to see a successful prosecution but it’s early days. Via parallel routes, the UK and US are travelling in the same direction: companies who gain from failing to prevent the bad behaviour of their employees will be punished, but the coverage consequences could still be different depending on which side of the Atlantic you’re on.
UK Class Actions: the UK Supreme Court Speaks
Anti-competitive behaviour by companies (via the unlawful conduct of their people), going forwards, might be punishable under the new ECCTA regime where fraud and ill-gotten gains are involved. In the UK, civil competition claims hold a unique position: they are in reality the only type of claim in which the law actively supports “opt-out” class actions as a form of redress.
The “opt-out” class action is of course the weapon of choice in US securities claims and is a hugely powerful device for bringing – and settling – huge claims (as we are currently seeing and have commented on above). Its power comes from the fact that alleged victims are automatically part of the class unless they specifically opt-out. It makes bringing claims on behalf of large numbers of people much easier and cheaper. Conversely, the “opt-in” class action requires claimants to actively join in, which inevitably leads to a much lower take-up.
“Opt-out” proceedings are permitted in claims brought before the Competition Appeal Tribunal (“CAT”). However, the CAT has a broad discretion to decide whether a claim should be allowed to proceed on an “opt-out” basis, in order to prevent abuse of the machinery. It also has the power to strike out weak claims and to prescribe the claim should proceed on an “opt-in” basis instead. The UK Supreme Court recently ruled on this discretion in Evans v Barclays Bank (and Others). In this case, the CAT had only allowed a claim to proceed on an “opt-in” basis (despite “opt-out” being sought) because it was weak on the merits. The key takeaways from the Supreme Court were:
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The CAT’s discretion is broad and so courts should not usually interfere.
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The merits of the claim was a factor in whether to allow claims on an “opt-out” basis, with stronger claims having a better chance. In this case the claim was weak (although apparently not weak enough to be struck out).
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Access to justice (namely, an “opt-out” class action would allow many smaller claimants to be included who wouldn’t otherwise bring claims) was a factor but this could not over-ride the weak merits.
The CAT was therefore correct to refuse the “opt-out” basis for the class action. So, whilst “opt-out” class actions are fully permissible in the competition arena the bar is still relatively high. This is consistent with UK courts’ cautious approach generally when it comes to collective redress. Nevertheless, there has been speculation that the remedy could be broadened beyond competition claims. Read on!
The UK Litigation Funding Review: A quiet revolution?
Litigation funding in the UK has been in legal “no man’s land” since the Supreme Court ruled in 2023 that litigation funding agreements were caught by the Damages Based Agreements Regulations 2013 and if they were not in compliance were unenforceable. Most litigation funding agreements were not in compliance for various reasons including because they permitted the funder to collect a higher percentage of the proceeds than the regulations permitted.
This hiatus has affected the viability of “opt-out” class actions in the CAT. If the funding agreements are unenforceable funders will not help claimants pursue them.
The UK government ordered a review of the issues: allowing “opt-out” class actions in the CAT is unlikely to make any impact if funding arrangements don’t work. The Civil Justice Council’s (CJC) Final Report on Litigation Funding was published in mid 2025 and is now moving toward policy formation, representing potentially the most consequential structural change to UK group litigation in a generation.
The CJC recommended the need for a new form of light touch statutory regulation, restoring enforceability for agreements based on a share of damages. In an announcement published in December 2025, the UK government has confirmed it plans to act and intends to ensure that litigation funding agreements are fair and transparent, so that third-party litigation funding actually works for all those involved. It has been vague on how it will implement the regulations or when parliamentary time will allow it to do so. I feel sure we will see action this year though: potentially a bill being rushed onto the list of “Key Bills to Watch” that we highlighted in our December 2025 Newsletter.
For insurance and risk practitioners, the implications could be far reaching:
(a) More funding = more economically viable claims
A better capitalised claimant bar—with enforceable damages based funding mechanisms—will inevitably increase the volume of claims. This especially affects:
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Financial institutions insurance, where systemic liability issues are never very far away;
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D&O and CLL, where funded shareholder and insolvency claims become more viable;
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Cyber insurance: claimant firms already operate in data breach actions on funding heavy economics.
(b) Will CFA and DBA regimes be rewritten?
A longstanding question - now resurfacing - is whether this review will ultimately lead to changes in Contingent Fee Agreements and Damages Based Agreements. It is very likely that once you start pulling at the funding thread, the whole tapestry of permitted fee structures is up for reconsideration
(c) Will “opt-out” class actions be permitted beyond the CAT’s jurisdiction?
Funders have speculated that the “quid pro quo” of accepting new regulation of litigation funding should be to permit “opt-out” class actions beyond those under the CAT jurisdiction. Could this be the “carrot” balancing out the “stick”? The UK Government has said nothing about this so we will see. However, one of the main objectives of allowing “opt-out” class actions in the CAT was to promote better access to justice for claimants. Why shouldn’t this apply in principle to other potential claims – particularly given the cost of litigating against powerful corporates is already prohibitive for most.
(d) Insurance structural implications: limits, deductibles, and blended products
The funding review inevitably interacts with group litigation economics. If more action types become fundable, early stage defence costs will rise, and insurance and risk practitioners will need to reassess:
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Whether limits should be rescaled, particularly on aggregated exposures;
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Whether higher deductibles or coinsurance features should be considered;
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How standalone vs. blended products respond - for example, whether CLL should continue sitting inside D&O towers, or whether standalone CLL programmes are more future proof;
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What happens to event driven litigation risk, especially where claimants leverage US style damages theories (including restitutionary angles) in UK forums;
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Is there a growing case for more “Operational Risk” products that react to events covering Insureds for a range of possible consequences, sitting alongside traditional annual insurance programmes?
Conclusion: A Convergence Moment
If you have made it to this point in the Newsletter you might be wondering whether there is a convergence going on, with the Atlantic Ocean getting just a little narrower. For insurance and risk practitioners - especially those involved with financial institutions, D&O, CLL, Cyber, FI and PI - the message is clear: the nature of remedies and the architecture of mass litigation is shifting, and the risk models and the products on offer must surely follow.