Five reasons why ATE cover is essential for Insolvency Litigation

ATE (After the Event) insurance plays an important role in ensuring Trustees and Liquidators can pursue litigation without the fear of any personal liability.

The main advantages of ATE insurance for insolvency litigation, especially in relation to insolvency practitioners, is explained here by Paul Webster, head of underwriting for ATE at Markel:

1. Reduces financial exposure for IPs

Insolvency litigation often involves complex and high‑value disputes against directors, third parties or counterparties. Without ATE, if the claim is unsuccessful, Trustees and Liquidators (the Claimant) are liable for both disbursements and the defendant’s costs.

In addition, the Claimant can face security for costs applications. ATE eliminates this risk as we can provide a suitable policy to meet this security.

2. Opens the way for litigation

ATE insurance allows the Claimant to pursue litigation that otherwise may not be possible or considered too financially risky. In most cases, the estate lacks the liquidity to fund proceedings or absorb risk.

3. Strengthens an IP’s hand in negotiations

ATE cover strengthens the Claimant’s negotiation position, which can support the prospects of successful recovery for clients. With defendants aware that an ATE policy is in place, the Claimant can negotiate from a position of strength.

4. Complementary to other funding options

Alternative funding options are often seen where claims will potentially involve unusually high levels of disbursements or costs.

However, even when this has been agreed in principle, typically the funder will also insist on an ATE policy being in place. The two products perform different roles: litigation funding typically covers the claimant’s own costs and disbursements, while ATE insurance, on the other hand, protects against adverse costs if the case is lost. Together, they create a balanced risk management strategy with each addressing a different financial exposure.

Many funders insist on ATE precisely for this reason. It gives them security and ensures the case is protected from end to end. It also helps avoid conflicts of interest. Funders may push for quick settlements or reduced fees to secure the return they need and get more involved in case strategy decisions. ATE providers won’t interfere with strategy or settlement decisions, which gives liquidators more autonomy to pursue the best possible outcome for creditors.

In practice, a combination of ATE and funding often offers the most flexibility and protection, especially in high-value or complex insolvency litigation.

5. Adds credibility to the claim

The fact that ATE cover has been secured indicates to defendants that the claim has undergone a degree of independent scrutiny by legal experts from the insurer. This helps to reinforce the litigation’s credibility and remove the idea that it may be speculative.

With courts sensitive to responsible insolvency litigation, a Trustee or Liquidator with ATE insurance from day one can immediately demonstrate due diligence and professionalism, helping to strengthen their position in bringing the proceedings.