MALVERN, PA — More than 20 states have enacted laws regulating third-party litigation funding disclosures, reflecting growing legislative scrutiny of outside investment in lawsuits as insurers raise concerns about its potential effect on legal costs and insurance premiums, according to a new report from the Insurance Information Institute.
The insurance industry research organization, known as Triple-I, outlined the regulatory developments in a members-only report examining litigation finance, a practice in which outside investors provide capital to support legal claims in exchange for a financial return.
The report identifies North Carolina as taking one of the most restrictive approaches. Its HB 315 prohibits litigation investment and authorizes civil penalties of up to $50,000 per violation, according to Triple-I.
Ohio, Mississippi, Tennessee and Utah also enacted legislation in 2026 addressing litigation funding through measures that include disclosure or registration requirements, restrictions on foreign investors and limits on funders’ influence over litigation.
The state actions come as federal policymakers consider whether courts should require broader disclosure of third-party financial interests in lawsuits.
The Litigation Funding Transparency Act was introduced in Congress in February 2026 but has not advanced, according to the report.
In March, the U.S. Chamber Institute for Legal Reform and Lawyers for Civil Justice petitioned the Federal Civil Rules Advisory Committee to establish a uniform disclosure requirement.
The proposal received support from more than 200 major U.S. companies, including dozens of insurers. It was awaiting potential consideration at the committee’s October 21 meeting, the report stated.
Federal courts have also begun addressing the issue independently.
The U.S. District Court for the Western District of Louisiana implemented a standing order in September requiring litigation funding disclosures, while other federal judges continue to evaluate disclosure questions individually.
Triple-I argues that greater transparency is necessary to determine whether outside investors influence litigation decisions and settlement outcomes.
“When courts, defendants and the public can’t identify who is financing a lawsuit, it is difficult to understand how that money influences outcomes, and ultimately what consumers pay for insurance,” said Sean Kevelighan, Triple-I’s chief executive officer.
The organization’s concerns are tied to broader increases in litigation costs, particularly large jury awards.
According to figures from Marathon Strategies cited in the report, jury awards exceeding $10 million reached a combined $25.6 billion across 190 cases in 2025.
A separate analysis by Triple-I and the Casualty Actuarial Society estimated that trends the organizations classify as legal system abuse, including litigation funding, contributed between $231.6 billion and $281.2 billion in additional liability insurance losses over the past decade.
Those estimates address a broader collection of litigation-related factors and do not isolate the financial impact of third-party funding.
The litigation finance industry has also expanded internationally. Swiss Re estimated the global market at approximately $17 billion, with annual investments projected to reach $31 billion by 2028.
Triple-I pointed to Florida as an example of how changes to the legal system can coincide with improved insurance cost trends.
Following reforms enacted in 2022 and 2023, average property insurance rate changes in Florida stood at negative 1.7% through June 30, 2026, according to the report.
Average premiums declined in 51 of the state’s 67 counties during the first half of 2026.
Homeowners insurers’ defense costs also fell from 8.4% of premiums in 2022 to 1.9% in 2025.
Florida has not enacted the third-party litigation funding legislation discussed in the report, however, and those insurance developments followed broader legal reforms rather than specific restrictions on litigation finance.
“Florida shows addressing legal system abuse can deliver real results for policyholders,” Kevelighan said.
The report presents litigation funding disclosure as a growing regulatory priority for insurers and business groups, although its findings do not establish how much of the increase in litigation expenses is directly attributable to outside financing.
With states adopting different requirements and a federal disclosure standard still unresolved, litigation funders, insurers and corporate defendants face an increasingly fragmented regulatory framework.
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