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Reading time: 5 minutes

Welcome to the Pride,

Every Friday we distill 200+ insurance, legal, and risk-management articles into three signals your board should be briefed on next Monday morning.

Three developments caught our attention this week:

• The NAIC proposed its biggest investment regulation overhaul in 30+ years, targeting insurers' growing private asset portfolios. We explain what changes, when it could take effect, and issues for our carrier clients and partners.
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• Chubb and Marsh CEOs expose how litigation funders pay lower taxes than plaintiffs fueling a $529 billion annual tort tax. The insurance titans are drawing battle lines.
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• Nevada and Texas now offer D&O protections Delaware doesn't. The domicile chess match accelerates with major implications for director liability and coverage.

Three events we think you'll want to read about...

NAIC's Proposed Investment Portfolio Overhaul

Summary

The National Association of Insurance Commissioners proposed the most significant investment regulation redesign for insurance companies since the 1990s.

The structural changes run deep.

The June 6 proposal targets insurers' exploding portfolios of private credit, structured securities, and complex assets. New working groups will analyze complex investments and oversee credit rating providers. Risk-based capital requirements face recalibration. The era of "blind reliance" on external ratings ends.

Mandatory due diligence frameworks would take their place.

(source)

So what?

This overhaul signals a fundamental shift in how insurers can deploy capital. Carriers with heavy private asset exposure face higher scrutiny and capital charges. Those changes flow directly to capacity and pricing.

Early intelligence from recent renewals suggests carriers are already adjusting appetites. Programs with significant private credit exposure see tighter terms. Meanwhile, traditional investment portfolios command better pricing. The window for advantageous positioning narrows.

Smart buyers are evaluating carrier investment strategies now, before the rules finalize and market dynamics crystallize.

Insurance CEOs Call Out the $529 Billion Litigation Tax Loophole

Summary

Chubb CEO Evan Greenberg and John Doyle Marsh’s CEO just teamed up to go scorched earth on litigation funders, exposing the hidden tax arbitrage fueling runaway litigation.

In a Wall Street Journal op-ed this week, they revealed how tort costs impose a $529 billion annual tax on American business (about $4,207 per household) while litigation funders profit from preferential tax treatment.

The disparity is stark. Plaintiffs pay up to 37% on awards as ordinary income. U.S. litigation funders pay just 23.8% as capital gains.

Foreign funders often pay nothing at all. Meanwhile, awards exceeding $100 million have risen 400% in a decade.

The tort industry spent $2.5 billion on advertising in 2024 alone, fishing for cases. Behind the billboards stands a sophisticated funding machine. Hedge funds drive advertising, aggregate claims, and direct litigation strategy.

They enjoy investment-grade tax treatment while doing it.

(Source)

The LION Lens

What happened: The Senate considered taxing litigation funders at the same rate as plaintiffs, but the amendment died after fierce lobbying (source).

Why it matters: Two of insurance's most powerful CEOs publicly declared war on litigation funding, with both Chubb and Marsh refusing to work with these funders.

Practical implications: When industry giants draw battle lines, market dynamics shift. Expect more of the industry to join in the public scrutiny of litigation funders.

So what?

The CEOs paint a clear picture: tax arbitrage creates systematic incentives for excessive litigation. When funders keep 76.2 cents of every settlement dollar while plaintiffs keep 63 cents, the economics favor prolonged litigation over reasonable settlements.

Their firms already took action. Chubb examines relationships to avoid fueling the problem. Marsh refuses litigation insurance work with funders.

The message to the market: choose sides.

Industry coalitions secured disclosure requirements in 15+ jurisdictions and comprehensive tort reform in Florida and Georgia. Florida's reforms already stabilized rates and attracted carriers back—proving collective action works.

The LION POV

Here's how we're advising clients:

• Map your litigation exposure by jurisdiction. Nuclear verdict patterns cluster geographically, as the CEOs note.
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• Examine your carrier and broker relationships—some now refuse litigation funding involvement entirely.
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• Join industry tort reform coalitions—the CEOs emphasize this "will take concerted and sustained effort from the entire business community."

When insurance titans publicly challenge the litigation funding model, smart money follows their lead.

Why Nevada Now Beats Delaware for Director Protection

Summary

Delaware's corporate supremacy faces its first serious challenge in decades. Nevada and Texas emerged as alternatives, offering broader D&O protections and business-friendly courts. The movement accelerated after Delaware's Senate Bill 21 sparked controversy over controlling shareholder protections.

The protection gaps are striking. Delaware prohibits indemnifying derivative settlements. Companies cannot reimburse directors for shareholder lawsuits.

Nevada and Texas allow full indemnification, fundamentally changing personal liability exposure.

​(source)​

So what?

Redomestication decisions now carry insurance consequences. Directors gain personal asset protection in Nevada and Texas through broader indemnification. But they may lose Delaware's policyholder-friendly coverage precedents when disputes arise.

The calculus grows more complex. Where companies can indemnify derivative settlements, Side A insurance needs decrease. Premium savings could be substantial.

Yet coverage disputes outside Delaware face less favorable interpretation precedents.

Choice of incorporation increasingly becomes a risk management decision. What began as tax optimization now encompasses director liability, coverage certainty, and litigation strategy.

The Bottom Line

Investment regulation overhaul, litigation funding disparities, and domicile arbitrage have changed the game. Traditional insurance calculus no longer applies. Geography trumps risk management.

Tax codes drive claim frequency. Regulatory shifts reshape carrier economics.

That's why we created the D&O Contract Vigilance Blueprint.

It's a 5-day email course to help you:

• Secure better D&O insurance: Learn how to avoid common policy mistakes
• Protect your personal assets: Understand your potential liability

​>>> Get the D&O Contract Vigilance Blueprint​

Don't wait until a claim hits to find out your institution is under-protected.

Thank you for reading today's edition!

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Stay Covered,

Natasha & Mark

Co-Founders and Managing Partners

LION Specialty

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