From reviewing state insurance legislation databases across all 50 states each quarter, we can track how quickly the litigation funding disclosure movement has accelerated. No other P&C legislative trend in 2026 matches this pace. Eight states have now enacted third-party litigation funding (TPLF) disclosure requirements since 2024, a federal bill is advancing through the Senate Judiciary Committee, and at least three more states have pending legislation that could pass before year-end.
The timing is not coincidental. U.S. P&C insurers added $16 billion to prior-year liability loss estimates during 2024 reserve reviews (Swiss Re), while casualty-specific adverse prior-year development reached $15.8 billion, the highest on record (Milliman). The CAS and Triple-I quantified the cumulative damage: legal system abuse contributed $231.6 billion to $281.2 billion in increased liability insurance losses over the past decade. Third-party litigation funding sits at the center of this deterioration, and the legislative response is now reaching critical mass.
This article maps the full state-by-state landscape, examines how the federal Litigation Funding Transparency Act (S. 3826) would reshape mass tort and class action economics, explains the actuarial reserving implications of disclosure adoption across jurisdictions, and identifies what practicing casualty actuaries should monitor as these laws take effect.
The State-by-State Disclosure Landscape
The eight states that have enacted TPLF disclosure requirements represent a geographic and political cross-section that makes the trend difficult to dismiss as regional. Georgia, Kansas, Indiana, Louisiana, Montana, West Virginia, Wisconsin, and New York have all passed legislation since 2024, each taking a distinct approach to transparency.
| State | Key Provision | Regulatory Model |
|---|---|---|
| Georgia | Courts Access and Consumer Protection Act; funders must register with Dept. of Banking and Finance; failure to register is a felony (up to 5 years, $10,000 fine); agreements over $25,000 subject to discovery | Registration + automatic disclosure |
| New York | Consumer Litigation Funding Act (signed Dec. 22, 2025); 25% fee cap on funder’s share of gross recovery; 10-business-day right to cancel; state registration; annual reporting; funders barred from influencing settlement decisions | Registration + fee cap + control prohibition |
| Montana | Automatic disclosure requirement; restricts funders from providing legal advice; prohibits funder decision-making on case strategy and resolution; limits percentage of recovery | Automatic disclosure + control prohibition |
| Indiana | Limits funder authority over filing and prosecution of legal claims | Control prohibition |
| Louisiana | Limits funder authority over filing and prosecution; prohibits funder control of case decisions | Control prohibition |
| Kansas | Requires parties to disclose whether a funder has approval rights for settlement and case resolution | Settlement approval disclosure |
| West Virginia | Limits funder authority over filing and prosecution of legal claims | Control prohibition |
| Wisconsin | Specifies that funding arrangements are within the scope of discovery if requested | Discovery scope |
The momentum continues to build. Mississippi signed the Transparency in Consumer Legal Funding Act (SB 2747, effective July 1, 2026), requiring funders to disclose citizenship or country of incorporation of any “foreign entity of concern” within 30 days. Utah passed comparable restrictions in March 2026. Arizona’s Supreme Court has a pending amendment to Rule 8 of its Rules of Civil Procedure that would require any party receiving TPLF to file a standardized certificate at case outset or within seven days of receiving funding. Colorado adopted its own rules effective August 2025.
Florida, which has been a focal point for litigation funding reform for years, advanced SB 1396 through the Senate Judiciary Committee with an 8-2 vote in January 2026. The Florida bill would prohibit funders from directing legal proceedings, selecting attorneys, or choosing expert witnesses, and it would prevent financiers from claiming a larger settlement share than plaintiffs. The proposed effective date is July 1, 2026.
Three Regulatory Models for Disclosure
Patterns across these laws reveal three distinct approaches that states are taking, each with different implications for how funded litigation plays out in practice.
Automatic disclosure states (Montana, Georgia) require funders to disclose funding arrangements proactively, without waiting for the opposing party to request the information through discovery. This model provides the most immediate transparency, since judges and defense counsel know about funder involvement from the start of litigation. Georgia goes further by requiring funder registration with the Department of Banking and Finance, including ownership information and criminal history, with the failure-to-register penalty classified as a felony.
Discovery-scope states (Wisconsin, Oklahoma) take a lighter approach. They specify that funding arrangements are within the scope of discovery if requested, but do not require proactive disclosure. Defense teams must know enough to ask for the information, and judges must allow the discovery request. This model provides transparency only when the opposing party actively seeks it.
Control-prohibition states (Indiana, Louisiana, West Virginia, Montana) focus less on disclosure mechanics and more on restricting what funders can do. By limiting funder authority over the filing, prosecution, and resolution of claims, these laws aim to preserve the plaintiff’s autonomy over litigation strategy. The theory is that if funders cannot direct case decisions, the misalignment between funder financial interests and plaintiff interests becomes less consequential.
New York’s Consumer Litigation Funding Act combines elements of all three models, making it the most comprehensive state-level framework to date. The 25% fee cap on a funder’s share of gross recovery is particularly significant. Consumer TPLF interest rates have ranged from 15% to 124% according to the NAIC, and New York’s cap would constrain the economics that make high-risk, long-duration litigation attractive to funders. The 10-business-day cancellation window and annual reporting obligations add consumer protection dimensions that earlier state laws lack.
The Federal Push: S. 3826 and the Litigation Funding Transparency Act
While state-level action has been significant, the federal Litigation Funding Transparency Act of 2026 (S. 3826) would establish the first nationwide disclosure framework. Introduced on February 11, 2026, by Senate Judiciary Committee Chairman Chuck Grassley (R-IA) along with Senators Thom Tillis (R-NC), John Kennedy (R-LA), and John Cornyn (R-TX), the bill targets the categories of litigation where TPLF has the largest financial footprint: class actions, multidistrict litigation (MDL) consolidated cases, and actions involving at least 100 individual cases.
The bill’s key provisions would:
- Mandate public disclosure of TPLF arrangements, including foreign funding sources, in qualifying cases
- Prohibit funders from influencing litigation strategy or settlement negotiations
- Block funders from obtaining or inspecting discovery materials protected under court orders
- Exempt nonprofit legal organizations providing services at no charge
Senator Grassley framed the rationale directly: “Transparency brings accountability. For too long, obscure third-party litigation funding agreements have secretly funneled money into our civil justice system without meaningful oversight.” Senator Kennedy highlighted the foreign funding dimension: “The American people deserve to know when corporations and foreign states pour money into class action lawsuits to influence outcomes.”
The foreign funding concern is not hypothetical. The Center for Strategic and International Studies (CSIS) documented cases of sovereign wealth fund affiliates financing aggressive patent litigation against U.S. technology companies, characterizing TPLF as a potential vehicle for “asymmetric warfare.” Mississippi’s recently signed law explicitly targets this dimension, requiring disclosure of any “foreign entity of concern” involved in funding arrangements.
The bill has drawn support from a broad coalition: the U.S. Chamber of Commerce, APCIA, the National Insurance Crime Bureau (NICB), the Consumer Technology Association, Google, the American Trucking Association, Uber, and the Software & Information Industry Association. Sam Whitfield, APCIA’s SVP of Federal Government Relations, called the legislation “a positive step forward” that would “facilitate critical litigation transparency to the legal system.”
S. 3826 is currently in the Senate Judiciary Committee. A companion House bill, HR 7015 (the Protecting TPLF From Abuse Act, introduced by Rep. Darrell Issa), was considered in markup on January 13, 2026, but faces an uncertain path forward. The Senate version is considered the more likely vehicle for eventual passage.
The Economics of Third-Party Litigation Funding
Understanding why disclosure matters requires understanding how litigation funding actually works and why it inflates claims costs. The global TPLF market reached an estimated $18 billion to $25.1 billion in 2025, with roughly half deployed in the United States. As of 2022, 44 active funders held $13.5 billion in assets under management collectively, and U.S. deployment reached $3.2 billion that year, a 16% increase over the prior year (CSIS).
The basic mechanics are straightforward. A litigation funder purchases a contingent right to receive a portion of the proceeds from a plaintiff’s legal claim. The funding is typically nonrecourse, meaning the plaintiff owes nothing if the case is lost. In exchange for bearing this risk, the funder receives a share of any recovery, with returns that can be substantial.
The actuarial problem emerges from how this structure changes plaintiff behavior and case economics. Without funding, a plaintiff facing mounting legal costs and personal financial pressure has a natural incentive to settle earlier and for less. The funder eliminates this pressure. Once a third party is absorbing the cost of litigation and profiting from larger awards, the plaintiff’s economic calculus shifts toward holding out for a larger verdict.
TransRe and Swiss Re data, drawn from a tort system analysis, quantified this dynamic. Plaintiffs with TPLF retained only 43% of compensation, compared to 55% without TPLF. This means a funded plaintiff needs a 27% higher award to receive the same net payment. Additionally, 38% of tort costs go to plaintiff legal expenses when TPLF is involved, versus 26% without. The funding structure does not just extend litigation; it structurally increases the total cost of resolving a claim.
EY’s research projected the five-year cost to the insurance industry at up to $50 billion in direct and indirect costs from TPLF. Average commercial claim costs have increased 10% to 11% per year since 2017, a trajectory that multiple actuarial studies have linked in part to the growth of litigation funding.
CSAA Insurance Group’s Executive Vice President and Chief Legal Officer Katie Evans provided the carrier perspective in February 2026, characterizing the year as a “turning point” in the industry’s response to litigation financing: “Their interest is purely financial, and their demand for higher returns on their investment in the litigation artificially drives up the amount of the claim without improving outcomes for individual claimants and to the detriment of insurance consumers.”
How Disclosure Alters Settlement Dynamics
The core thesis behind disclosure requirements is that information asymmetry currently benefits funded plaintiffs. When defense counsel and judges do not know that a funder is involved, they cannot factor funder economics into settlement negotiations or case management decisions. Disclosure eliminates this blind spot.
Consider the practical mechanics. In an undisclosed funding arrangement, defense counsel faces a plaintiff who appears willing to bear unlimited litigation costs. The rational defense response is to increase the settlement offer, since prolonged litigation against a well-funded adversary carries escalating costs and verdict risk. If the same defense team knows that a funder is involved, that the funder has a financial interest in maximizing the award, and that the funder may be influencing litigation strategy, the defense calculus changes. The plaintiff’s staying power is no longer ambiguous; it is explained by a known financial arrangement that defense counsel can address directly in settlement discussions.
Judges also gain important context. In class certification hearings, for example, knowing whether a third-party funder is backing the litigation and stands to profit from certification can be relevant to adequacy-of-representation determinations. Florida’s pending bill explicitly grants courts authority to consider financing agreements when evaluating class action adequacy.
The appellate courts are already moving in this direction. In Steven Lituma et al. v. Liberty Coca-Cola Beverages LLC (Case No. 2025-00995), New York’s First Department approved discovery into plaintiffs’ litigation funding as “material and necessary” to the defense. This ruling signals that even absent a legislative mandate, courts are recognizing the relevance of funding arrangements to case outcomes.
For actuaries, the settlement dynamics shift matters because it directly affects claim duration and severity distributions. If disclosure reduces the information asymmetry that enables funded plaintiffs to hold out for higher awards, the expected effect would be shorter claim duration and lower average severity in disclosure jurisdictions compared to non-disclosure jurisdictions, all else being equal.
The P&C Reserving Impact: Modeling Disclosure Adoption by Jurisdiction
The $15.8 billion in adverse casualty prior-year development that Milliman documented for 2024 did not emerge from a single cause, but litigation funding is widely cited as a significant contributing factor. Swiss Re’s broader tally of $62 billion in cumulative adverse development across commercial liability lines from 2015 to 2024 represents the insured cost equivalent of two major hurricanes. Reserve adequacy in liability lines has become a first-order concern for appointed actuaries, and TPLF disclosure laws introduce a new variable that reserving models need to accommodate.
The challenge for actuaries is straightforward in concept but complex in execution: disclosure laws should, over time, reduce claim severity and duration in jurisdictions that adopt them. But the magnitude of the effect is uncertain, the timeline for behavioral changes to manifest in claim data is unknown, and the geographic patchwork of disclosure versus non-disclosure states creates a segmentation problem that most aggregate reserving methods do not naturally address.
From tracking reserve development patterns across reporting cycles, we see several practical considerations for casualty reserving actuaries:
- Jurisdictional segmentation. Actuaries pricing or reserving books with multi-state exposure should begin tracking claim development metrics separately for disclosure-law states versus non-disclosure states. Even before the disclosure effect becomes statistically credible, establishing the baseline now will be essential for detecting changes later.
- Loss development factor sensitivity. If disclosure reduces claim duration, the effect will appear in loss development patterns as faster case closure and potentially lower late-development severity. Actuaries using Berquist-Sherman or similar adjustment techniques should consider whether to bifurcate their adjustment methodology by disclosure status.
- Social inflation overlay adjustments. Many carriers have adopted explicit social inflation trend adjustments on top of traditional development methods. As disclosure laws take effect, the social inflation overlay may need to vary by jurisdiction. A flat 7% social inflation trend applied uniformly across all states would overstate the inflation pressure in jurisdictions where disclosure is reducing TPLF-driven severity.
- Excess loss factor recalibration. TPLF disproportionately affects the severity tail, since funders target high-value cases where the expected recovery justifies the investment risk. If disclosure compresses the tail, increased limits factors and excess loss factors may need recalibration in disclosure states, with potential implications for excess casualty and umbrella pricing.
- ASOP 36 documentation. ASOP No. 36 requires actuaries to document material assumptions underlying reserve estimates. For casualty lines with significant TPLF exposure, the actuary’s assumptions about disclosure law effects (or the explicit decision not to adjust for them) should be documented in the reserve report. As more states adopt disclosure requirements, the absence of any acknowledgment becomes harder to justify.
The timing dimension is critical. Most disclosure laws enacted in 2024 and 2025 will begin affecting claim behavior in 2026 and 2027, but the actuarial signal will not appear in loss development triangles until those accident years mature. For accident years 2026 and later, appointed actuaries should consider whether to build in a prospective adjustment for disclosure effects, even if the initial assumption is modest.
Industry Coalition Strategy and the 2026 Legislative Calendar
APCIA has made litigation funding disclosure one of its top federal priorities for 2026, pledging to “aggressively fight for disclosure in secretive third-party litigation funding.” The coalition backing disclosure legislation extends well beyond the insurance industry. The U.S. Chamber of Commerce’s Institute for Legal Reform, whose president Stephen Waguespack stated that “outside financiers treat our court system like a casino,” has been a leading advocate.
NAMIC’s Jimi Grande, SVP of Federal and Political Affairs, connected litigation funding directly to consumer costs: “Undisclosed third-party investors using the court system as an investment scheme are a driving force behind the ‘tort tax.’” The National Insurance Crime Bureau has linked TPLF to insurance fraud facilitation, adding a law enforcement dimension to the disclosure argument.
The industry strategy operates on two tracks simultaneously. At the federal level, S. 3826 targets the highest-value litigation categories (class actions, MDL, and actions involving 100-plus plaintiffs) where funded litigation has the largest absolute dollar impact on insured losses. At the state level, the approach is more varied, with different states adopting different regulatory models based on local political dynamics and existing litigation environments.
Carriers are also investing in internal capabilities to identify and respond to funded litigation. Evans of CSAA described a strategy of coupling “data-driven defense analytics with policy-level transparency reforms,” including scrutiny of repeat plaintiff firms, medical providers with unusually high billing patterns, and cases where litigation funding appears to drive strategy rather than claimant interests. This combination of legislative reform and operational analytics represents a more coordinated response than the industry has previously mounted against social inflation drivers.
The 2026 legislative calendar still has several pending actions that could expand the disclosure map further. Florida’s SB 1396 awaits Senate Rules Committee action with a July 1, 2026 target date. Missouri has pending legislation. Mississippi’s SB 2747 takes effect July 1, 2026. At the federal level, S. 3826 faces the standard Senate Judiciary Committee process, with the timeline dependent on the committee’s 2026 legislative agenda.
Why This Matters for Actuaries
The litigation funding disclosure movement represents something unusual in the P&C regulatory landscape: a legislative trend that could directly and measurably reduce claims costs in specific lines of business. This contrasts with most regulatory developments, which add compliance costs without affecting loss experience.
For pricing actuaries, the immediate question is whether and how to reflect disclosure effects in rate filings. In states with enacted laws, the actuarial position is defensible: if disclosure compresses claim severity distributions, the rate indication should reflect that. The challenge is quantifying the effect with sufficient credibility to satisfy regulators, given that the laws are too new to have generated actuarial data.
For reserving actuaries, the segmentation challenge is more pressing. Books of business with multi-state exposure now span jurisdictions with materially different litigation funding environments. The 2021 through 2024 accident years that have already shown adverse development (Milliman’s $15.8 billion for casualty lines in 2024) predate the disclosure laws, meaning their development patterns reflect the undisclosed-funding environment. Future accident years in disclosure states should develop differently, but actuaries must decide how much credibility to assign to that expectation.
For appointed actuaries preparing statements of actuarial opinion, the documentation requirements under ASOP No. 36 make it increasingly important to address TPLF and disclosure law effects explicitly. As the legislative landscape changes, the materiality of this factor to reserve adequacy opinions grows.
Carriers deploying AI for litigation analytics, as covered in our analysis of carrier AI claims defense tools, should consider how disclosure data (when available) could enhance predictive models. Knowing that a specific claim involves third-party funding is a powerful feature for severity prediction and case management prioritization. In disclosure states, this data becomes available; in non-disclosure states, it remains an unobservable confounding variable.
The bottom line: eight states with enacted laws, a federal bill in committee, and at least five additional jurisdictions with pending legislation make TPLF disclosure a structural shift in the casualty claims environment, not a temporary trend. Actuaries who begin building jurisdictional segmentation into their reserving and pricing frameworks now will be better positioned as the data matures.
Further Reading
- Social Inflation and Litigation Trends 2026: The $529 Billion Challenge
- Schedule P Data Maps the Casualty Reserve Problem Across 2021-2024 Accident Years
- Reserve Adequacy in a Softening Market: The 2026 Playbook
- Carriers Deploy AI Against Social Inflation as Nuclear Verdicts Double
- Adjusting Casualty Loss Development Factors for Social Inflation
Sources
- Swiss Re Institute, “U.S. P&C Insurance Outlook,” April 2025 - swissre.com
- Milliman, “U.S. Casualty Insurance 2024 Financial Results,” 2025 - milliman.com
- CAS and Triple-I, “New Analysis Quantifies Impact of Legal System Abuse on Liability Insurance,” 2025 - casact.org
- U.S. Senate, S. 3826, Litigation Funding Transparency Act of 2026 - congress.gov
- Senate Judiciary Committee, “Grassley Proposes Third-Party Litigation Funding Reform,” February 2026 - judiciary.senate.gov
- Insurance Business Magazine, “2026 Marks Turning Point in War Against Litigation Financing,” February 2026 - insurancebusinessmag.com
- Insurance Journal, “APCIA Backs Federal Bill Requiring Disclosure of Third-Party Litigation Funding,” January 2026 - insurancejournal.com
- New York State Legislature, Consumer Litigation Funding Act (S1104A) - nysenate.gov
- Insurance Journal, “Florida Committees Approve Litigation Funding Restriction Bills,” January 2026 - insurancejournal.com
- CSIS, “Third-Party Litigation Financing: A National Security Problem,” 2023 - csis.org
- TransRe, “Claims Update: Third-Party Litigation Funding” - transre.com
- NAIC, “Social Inflation” Topic Page - naic.org
- Marshall Dennehey, “Georgia Permits Discovery of Litigation Funding,” 2025 - marshalldennehey.com
- Bloomberg Law, “Disclosure Tide Is Turning for Third-Party Litigation Funding,” 2025 - bloomberglaw.com
- Wilson Elser, “New York’s New Era of Litigation Financing Transparency,” 2025 - wilsonelser.com