The development of litigation funders in the New Zealand market will put insurers “on the receiving end of funded claims,” according to one expert.

Insurance lawyer with Duncan Cotterrill’s Wellington office Jonathan Scragg, in an interview with LawFuel, claims there is some nervousness in the insurance market, where there could be a perception that some funders are simply out there looking for and potentially stirring up litigation to fund, as an investment opportunity.

However, Scragg reportedly highlighted that funders have a role to play in the market. Funders, he suggests, identify potential class actions, which, without third-party funding, may not otherwise find their way to Court.

“I now think we are seeing a perfect storm for the insurance market in New Zealand: the potential for a significant increase in the number of litigated claims, and the size of those claims, due to the presence of litigation funders and people being more prepared to take action in the Courts to pursue their rights, including through class actions,” he told the publication.

In the report, Scragg also pointed out a hardening professional indemnity insurance market as more insurers “take a more risk-averse approach” to PI risks. In the case of New Zealand, most insureds were reportedly experiencing increasing premiums.

Scragg, a retired president of the New Zealand Insurance Law Association, recently became the first Kiwi to sit on the global association of insurance law groups, Association Internationale de Droit des Assurances (AIDA).