A leading insurer has predicted that the Jackson reforms will encourage a flood of third-party litigation funders to enter the UK market. Peter Smith (pictured), managing director of after-the-event (ATE) insurance firm Firstassist, spoke this week after clinching the sale of the company by Equistone Partners (formerly Barclays Private Equity) to US dispute financier Burford Capital.

The £10.3m acquisition will create a one-stop shop for litigation funding requirements, offering both ATE insurance and third-party funding. Smith said the takeover had been accelerated by the Jackson reforms, which will restrict the ATE market and force law firms to seek alternative funding sources.

‘The third-party market is going to expand,’ he said. ‘There is £300m of funding available in the market - it’s growing already and the expansion will only get faster after the Jackson reforms.

‘We’ve been talking about this since last year and the Jackson proposals crystalised it. It was apparent that, as the first third-party funders came into the market, we had something to offer that they didn’t, particularly in risk assessment.’

Burford is a Guernsey-based financier listed on the London Stock Exchange, although its fund manager is based in the US, and most investors in the UK. In a statement to the stock exchange, the company said it intended to make an ‘aggressive push’ into third-party funding as an adjunct to, and hedge for, the ATE business.

It added: ‘The acquisition is expected to be significantly earnings-enhancing in 2012 and to produce the leading UK provider of litigation capital and insurance solutions.’

Firstassist has a book of more than 3,000 active cases and has capacity for £10m of cover per case. It has been providing ATE insurance for more than 15 years and will continue to have its underwriting capacity provided by Great Lakes Reinsurance plc, a wholly owned subsidiary of Munich Re.

The Burford deal is subject to FSA approval.