ATE insurance is an insurance product used to manage the financial risk of litigation. It provides a party to a dispute with cover for their own and adverse costs exposure in exchange for payment of a premium.   

The policy is taken out after the dispute arises and responds if the policyholder loses its claim.  Insurers also provide security instruments to meet the security for costs requests of defendants.

As noted by international law firm, K&L Gates, “ATE insurance has the potential to provide a highly effective mechanism by which parties involved in litigation or arbitration can manage their financial risk.”  

ATE insurance is widely used in UK legal proceedings (in both commercial litigation and class actions) and has been for the last 20 years or so.  

The Solicitors Regulation Authority imposes a regulatory obligation on UK solicitors to “ensure [clients] are in a position to make informed decisions about the services they need, how their matter will be handled and the options available to them”.  

In the context of litigation, numerous legal commentators believe this requires solicitors to advise clients on the availability of ATE insurance.  

Indeed, negligence claims have been advanced by litigants in the UK against their advisors on the basis that they were not so advised. 

In Adris v Royal Bank of Scotland Plc [2010] EWHC 941 (QB) it was found the solicitor committed a “gross breach” of duty when he failed to advise his client on its position regarding ATE insurance.

Until recently, ATE insurance has not been widely available in Australia.   Its use was largely confined to a limited number of offshore insurers providing cover to litigation funders in respect of class actions.   

Consequently, many litigators operating outside the class action sector have simply not been aware of the product, or that it was available for their matters.

Unlike their UK counterparts, Australian litigators have therefore not been expected to advise clients on the availability of ATE insurance.

However, the use of ATE insurance in Australia has been on the rise in recent years, following increased awareness of, and demand for, the product.

This trend is expected to continue, following the Labour Government’s policy to unwind the Coalition’s controversial regulation of the class action industry, which saw the amount of filed class actions in 2021/2022 drop to the lowest level since 2017/2018.

The rise in demand has seen an inflow of ATE insurance capacity in the region.  Earlier this year, Litica, a leading ATE insurer in the UK, launched its Australian based operation, Litica Australia, which is backed by A-rated, APRA authorised insurers.   

Given the burgeoning demand for the product, stable common law jurisdiction and quality of legal practitioners Australia offers, other insurers are likely to follow suit.  Such was the case with the litigation funding industry in recent years – once dominated by one or two local players, numerous overseas funders now have local operations.  

The growing accessibility of ATE insurance for Australian litigants begs the question: should Australian litigators, like their UK colleagues, be advising clients on the availability of the product? 

As detailed above, until recently, the product has not been readily available in Australia so litigators could not be expected to discuss the product with clients.  

However, with established insurers such as Litica providing cover for the full spectrum of Australian litigation – from insolvency claims to class actions – that position has now changed.

If regulatory and client expectations in the UK are anything to go by, there is a growing argument that, where appropriate, Australian litigators should be engaging with clients on the availability of the product. 

It is difficult to see how the interests of both client and solicitor are not benefitted in doing so.  

Philip Lomax is the Managing Director of, Litica Australia. Litica is a leading provider of ATE insurance with offices in London and Sydney.  For more information on Litica Australia and ATE insurance visit http://litica.au/