More than 20 US states have enacted laws regulating third-party litigation funding (TPLF) disclosure, according to a new Issues Brief from the Insurance Information Institute (Triple-I). This legislative push aims to address concerns that opaque funding structures drive up insurance costs for consumers.

Sean Kevelighan, CEO of Triple-I, stated that litigation funding has operated in the shadows for too long. He argued that when courts, defendants, and the public cannot identify who finances a lawsuit, it is difficult to understand how that money influences outcomes and ultimately impacts insurance premiums.

State-level regulatory actions

North Carolina’s HB 315 bans litigation investment outright and authorizes civil penalties of up to $50,000 per violation, making it the first state to take this decisive action. Other states have implemented laws requiring funder registration or disclosure, restricting foreign-entity funding, and limiting funder control of litigation.

Federal and judicial developments

At the federal level, the Litigation Funding Transparency Act was introduced in Congress in February 2026 but has not moved forward. In March, the U.S. Chamber Institute for Legal Reform and Lawyers for Civil Justice petitioned the Federal Civil Rules Advisory Committee for a uniform disclosure standard. This proposal is backed by more than 200 major US companies, including dozens of insurers, and awaits potential deliberation at the committee’s October 21 meeting.

In the judiciary, the Western District of Louisiana instituted a standing disclosure order in September 2026 regarding litigation funding. However, most federal judges continue to decide the issue on a case-by-case basis.

Economic impact and market size

The brief highlights significant economic implications for the insurance sector. Awards exceeding $10 million reached a record $25.6 billion across 190 cases in 2025, according to Marathon Strategies. Furthermore, a Triple-I and Casualty Actuarial Society analysis estimated that legal system abuse trends, including litigation funding, added $231.6 billion to $281.2 billion to liability insurance losses over the past decade.

Swiss Re estimated the global TPLF market at roughly $17 billion, with annual investments projected to reach $31 billion by 2028.

What the numbers show

Florida’s experience provides a factual case study on the correlation between legal reforms and insurance costs. After property insurance reforms in 2022 and 2023, rate changes averaged -1.7% through June 30, 2026. Notably, homeowners insurer defense costs in the state fell from 8.4% of premium in 2022 to 1.9% in 2025. Despite these results, the Florida legislature has not moved forward on proposed TPLF legislation, suggesting a divergence between demonstrated cost savings and current legislative priorities in that state.

Kevelighan noted that Florida shows addressing legal system abuse can deliver real results for policyholders. He described transparency in litigation funding as the logical next step for states aiming to keep litigation fair and predictable.

U.S. cyber-related losses reached nearly $21 billion in 2025, a significant increase from approximately $16 billion in 2024. This surge in financial impact coincides with a persistent protection gap, as small and mid-sized businesses continue to underinsure against escalating digital threats.

The Insurance Information Institute (Triple-I) highlighted these trends in its new issues brief, Commercial Cyber Insurance: State of the Risk. The report notes that while the commercial cyber insurance market remains strong, claim severity is rising sharply even as overall claim frequency declines for large enterprises. Sean Kevelighan, CEO of Triple-I, emphasized that cyber threats are evolving faster than many businesses can adapt, creating substantial operational challenges.

Rising Severity and AI-Driven Threats

Data from Chubb indicates that average cyber claim severity among large U.S. businesses more than doubled to over $4.4 million in 2025. Paradoxically, claim frequency for this segment declined by 34%. This divergence suggests that while fewer large companies may be experiencing breaches, those that do are facing far more catastrophic costs.

Artificial intelligence has emerged as a critical driver of this sophistication. The FBI reported nearly $893 million in losses associated with AI-driven incidents in 2025. AI-powered phishing and social engineering schemes are making attacks more accessible to criminals, increasing the complexity of defense strategies required by insurers and businesses alike.

Market Dynamics and Adoption Gaps

Despite the rising risk profile, cyber insurance rates have declined for four consecutive years. Rates fell approximately 5% year-to-date in 2026, following a 13% decline in 2025. However, lower prices have not translated into widespread adoption among smaller firms. According to Swiss Re, market penetration among small and mid-sized businesses remains estimated at just 10% to 20%.

Global cyber insurance premiums have grown at an annual rate of approximately 5% since 2022. Projections indicate premiums will reach $16.4 billion in 2026 and $17.1 billion in 2027, with North America accounting for roughly two-thirds of the market.

What the Numbers Show

A critical divergence exists between cost mitigation efforts and residual risk exposure. IBM data reveals that organizations using security AI and automation experienced average breach costs of $4 million, compared with $5.93 million for those without such capabilities. This $1.93 million difference underscores the tangible value of technological investment. Yet, with ransomware involved in 48% of data breaches examined in Verizon’s 2026 report, and supply-chain compromises accounting for 15% of breaches at an average cost of $5 million, the baseline threat level remains high regardless of defensive maturity.

Furthermore, the low adoption rate among SMBs despite falling premiums suggests that affordability is not the primary barrier. Misunderstandings about coverage options and benefits likely contribute to this gap, leaving a significant portion of the economy vulnerable to increasingly severe attacks.