Underwriting the Operator, Not the Case: A Different Approach to Litigation Funding
Litigation funding is often described as a single strategy. In reality, there are different approaches within the market, and the distinction matters. One of the key differences is what is actually being underwritten.
In traditional litigation funding, the focus is on the legal case. Funders assess the merits of a claim, the likely damages, and the probability of success. Repayment is usually tied to the outcome of that case.
Fenchurch Legal takes a different approach. We provide secured lending to law firms and claims management companies through structured facilities. These facilities fund portfolios of high-volume, small-value consumer claims.
This is a lending model. The facilities are structured on a recourse basis, meaning repayment is required regardless of whether individual cases succeed or fail. Rather than underwriting individual cases, we underwrite the business managing those claims. This includes its track record, financial position, systems, and ability to operate at scale.
Two Approaches To Litigation Funding
Traditional funders often focus on single cases or a small number of large claims. Their analysis centres on legal merits, often supported by external counsel. Outcomes are closely linked to the success of those specific cases.
By contrast, high-volume litigation finance is a structured lending model. Capital is deployed across portfolios of claims rather than a single case, with repayments made from those portfolios regardless of individual case outcomes.
Importantly, this is structured as a loan, not a case investment. The borrower is required to repay the facility in line with agreed terms, regardless of individual case outcomes. This shifts the focus from legal opinion to credit quality and operational performance.
Why The Operator Matters
A claim can be well established in law and still underperform if it is not managed properly.
Housing disrepair claims are a good example. They are supported by clear legal precedent and are widely understood. On paper, they represent a solid and repeatable claim type.
But performance depends on execution.
If a firm has weak onboarding, poor case management, or limited oversight, problems can build quickly. Cases may stall, costs can increase, and some claims may drop out altogether. Across a large portfolio, this can materially affect outcomes.
Even strong claims can underperform in the wrong hands.
In high-volume consumer claims, success is not just about legal merit. It is about running a process properly and consistently.
High Volume Changes The Risk Profile
Funding a single case is very different from funding a portfolio of claims.
In a high-volume model, thousands of claims are progressing at different stages at the same time. This creates diversification, but it also introduces operational demands.
Firms need systems to track cases, manage timelines, control costs, and maintain quality across the entire portfolio. Small inefficiencies, when repeated across large volumes, can have a meaningful impact.
This is why the operator is central to the underwriting process. The focus is on whether the business can manage scale, not just whether the claims themselves are valid.
From Case Assessment To Business Due Diligence
Legal merit still matters. Fenchurch Legal focuses on claim types with established precedent and a history of consistent outcomes.
But that is only part of the assessment.
Equal weight is given to the borrower. This includes reviewing financials, governance, regulatory status, operational systems, and experience in the claim type. It also involves understanding how cases are sourced, managed, and reported.
This is particularly important in a recourse lending model. While repayment is not dependent on a single case outcome, it still depends on the overall performance of the borrower’s business and its ability to manage claims effectively.
For that reason, strong operators with proven track records remain essential. A facility may benefit from protections such as insurance, but that does not replace the need for disciplined case selection and consistent execution.
These are standard credit considerations. They help determine whether a borrower can use a facility effectively and repay it as agreed.
A Structured Lending Approach
The difference in underwriting is reflected in how the funding is structured.
Traditional litigation funding is often outcome-driven. A facility-based model is structured as lending, with defined terms and security.
At Fenchurch Legal, facilities are linked to portfolios of claims and supported by a broader security framework. Capital is deployed in a controlled way and monitored over time, not just at the outset.
This reflects a lending approach where repayment is expected, and where both the borrower and the underlying claims are monitored throughout the life of the facility.
A Different Way To Think About Risk
For investors, this leads to a different perspective.
Instead of focusing on whether a single case will succeed, the focus is on whether the operator can manage a portfolio of claims effectively over time and meet its repayment obligations.
Risk sits across several areas. These include the claim type, the borrower, the structure of the facility, and ongoing monitoring.
In a high-volume model, consistency of execution matters more than any individual case outcome.
Conclusion
Litigation funding includes a range of approaches. Some focus on individual cases. Others, like Fenchurch Legal, focus on the businesses managing portfolios of claims.
Underwriting the operator reflects a simple point. Strong claims alone are not enough.
This is a lending model, where repayment is required regardless of individual case outcomes. That makes the quality of the borrower critical.
In high-volume consumer claims, outcomes depend on how those claims are managed day to day. By focusing on the operator as well as the claims, a structured lending approach provides a more controlled and disciplined way to deploy capital within this asset class.
