Marsh is now selling specialty insurance designed to help companies address the cost of class-action lawsuit settlements.

Class Action Managing General Agency created the coverage, which is known formally as class-action settlement insurance. It has a fairly wide reach, providing up to $100 million in coverage for the money portion of a client’s consumer class-action settlement. Marsh would only say that a “leading A-rated carrier” is underwriting the policy; a spokesperson declined to give Carrier Management the insurer’s name.

Specifically, the policy is designed to transfer a client’s known settlement exposure to the insurance market.

Marsh and its partners are betting the specialty coverage will have plenty of room to grow. Consumer class-action settlements doubled from 2010 to 2013, and total payouts ranged from $1.7 billion in 2010 to $9.7 million in 2012. About 75 percent of those class-action settlements involved monetary payments to plaintiffs who were part of the suit, according to statistics the insurance broker and risk manager cites from NERA Economic Consulting, a division of Oliver Wyman Group, a wholly-owned Marsh & McLennan subsidiary.

Here’s how it would work. A company would first establish a settlement fund and then pay a fixed premium. This allows it to shift the uncertainty and volatility of the final payout to the unnamed insurer, rather than having to face those final costs itself.

Targeted customers include companies facing consumer class-action litigation, companies that want to transfer the risk of loss or claims from a class-action settlement to a third-party insurer, and companies that want to limit their exposure by acquiring coverage against multimillion-dollar settlement liability, Marsh said in its product explanation.

According to NERA statistics cited by Marsh, the average value of class-action settlements between 2010 and 2013 hit $56.3 million, with a median value of $9 million.

Source: Marsh