Beyond ATE: Why Performance Guarantee (PG) Bonds Matter in Litigation Finance

In litigation finance, risk is often framed in terms of case outcomes. Will a claim succeed? What happens if it fails? How are adverse costs managed? 

These are important considerations. But they are not the only ones that matter. 

For litigation finance operators funding high-volume consumer claims strategies, time risk – specifically the risk of case delay – can be just as relevant as case failure. While After-the-Event (ATE) insurance protects against unsuccessful claims, it does not address what happens when cases take materially longer than expected to conclude. 

At Fenchurch Legal, this is where Performance Guarantee (PG) bonds form an important part of our overall security framework. They are designed to strengthen the structure at the funder level, which in turn supports investor capital. 

Case Duration Risk

High-volume, low-value litigation funding is built around scale, process efficiency, and established legal precedent. Claims such as housing disrepair or financial mis-selling follow consistent pathways and are supported by structured workflows and disciplined underwriting. 

However, even well-managed claims can experience delay due to: 

  • Court backlogs 
  • Defendant tactics 
  • Procedural adjournments 
  • Settlement timing 
  • Regulatory developments in mass-claim environments 

When cases extend beyond their expected lifecycle, capital remains deployed for longer than forecast.  

For funders, this can slow portfolio turnover, delay capital recycling and reduce predictability of inflows. 

Importantly, a case does not need to fail to create pressure within a funding model. Delay alone can affect capital efficiency and repayment timing, which is why duration risk must be actively managed. 

What ATE Insurance Covers – And Its Limits 

ATE insurance is a well-established tool within litigation finance. It covers adverse costs and disbursements if a claim is unsuccessful. Cover is issued on a case-by-case basis, and funders take assignment of each ATE policy together with the right to claim proceeds. 

This structure is designed to mitigate case failure risk. 

However, ATE protection is triggered by outcome. If a case remains unresolved for an extended period, there is no trigger event. Capital remains outstanding until the claim concludes. 

For a litigation funder operating a high-volume model, prolonged duration can have portfolio-wide implications even when the underlying claims remain legally sound. 

The Role of the Performance Guarantee (PG) Bond

The Performance Guarantee bond is designed to address extended case duration. 

Unlike ATE, which responds to case failure, the PG responds to delay. 

Within Fenchurch’s model, the PG: 

  • Is triggered if a claim remains unresolved after 24 months 
  • Covers principal loan capital  
  • Pays directly to the assigned SPV 
  • Is underwritten by a specialist reinsurer 
  • Is enforceable via a Collateral Deed 

The PG is a contractual instrument structured for the benefit of an SPV. 

It does not replace ATE protection. ATE addresses adverse costs and disbursements if a claim fails. The PG addresses repayment exposure if a claim remains unresolved beyond its expected timeframe. 

Each tool is designed to manage a different type of risk: 

  • Case failure 
  • Delay and repayment timing 

Together, they strengthen the overall protection around deployed capital. 

For Fenchurch as funder, this helps manage duration exposure across the loan book. 

For investors, it provides an additional layer of protection designed to support capital preservation and improve clarity over recovery timelines. 

Why Duration Risk Matters 

The UK legal system continues to face court backlogs and increased scrutiny across certain mass consumer claim types. As a result, case durations can extend beyond historical norms. 

For a litigation funder, longer timelines can affect capital recycling and portfolio pacing. 

For investors, this influences cashflow timing, distribution visibility and capital efficiency. 

Performance Guarantees are one mechanism Fenchurch uses to manage that exposure. 

They do not remove risk. Secured litigation finance remains a specialist private credit strategy involving operational and counterparty considerations. However, deliberate protection against extended duration strengthens the overall capital framework. 

Security in Practice 

In litigation finance, conversations often centre on returns. However, disciplined capital allocation begins with security and risk management. 

Protection should address not only whether a case succeeds, but how capital is deployed, how long it remains exposed and how it is recovered. 

By incorporating Performance Guarantees alongside ATE protection, Fenchurch Legal’s funding model is designed to address both case failure and extended duration within a high-volume consumer claims portfolio. 

As litigation finance continues to develop as a specialist private credit strategy, understanding how a funder manages timing and recovery risk is as important as understanding how it selects and underwrites claims. 

Claim Spotlight: Housing Disrepair

Housing disrepair claims have become an established part of the UK’s consumer litigation landscape, driven by landlords’ legal responsibilities to maintain safe and habitable homes. For law firms and claims management companies operating in this area, the claim type offers significant volume potential but also requires strong operational processes to manage cases effectively. In this Claim Spotlight, we explore housing disrepair claims from a litigation funding perspective, looking at how the market has developed, what characteristics make these claims suitable for funding, and the operational factors that influence portfolio performance.

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