
Central banks and financial supervisors have highlighted the potential for such litigation to be a potential risk to firm solvency and financial stability (PRA 2015). Historical cases demonstrate that claims from litigation can have a major financial impact, especially when new sources of claims emerge.
For example, asbestos claims still cost the property and casualty (P&C) re/insurance industry around $1.9 billion in additional losses per year. Translating the scientific causality underlying attribution studies into legal causality has been in principle demonstrated (Minnerop & Otto 2020).
If fiduciaries and company directors better understood these litigation risks, as well as the reputational risks associated with damages, this could drive significant behaviour change and FIs can play an important role through pricing risk and capital allocation.