Senators Chuck Grassley, Thom Tillis, John Kennedy, and John Cornyn introduced S.3826, the Litigation Funding Transparency Act of 2026, on February 11, 2026. The bill was read twice and referred to the Senate Committee on the Judiciary, where it sits with three cosponsors and no scheduled markup as of mid-April.
The bill would require disclosure of third-party litigation funding (TPLF), including foreign-sourced funding, in federal class actions and multi-district litigation (MDL) proceedings. Covered disclosures include funder identity, funding amount, and the underlying funding agreement. The bill also prohibits funders from controlling litigation strategy, settlement decisions, or protected discovery, with violations enforceable by contempt. Nonprofit legal organizations are exempt.
Who it affects
Self-insured defendants whose tail exposure collects into MDLs are the most exposed group. That means commercial auto programs with rideshare, logistics, or long-haul fleet operations; product liability programs at manufacturers and distributors; pharmaceutical and medical-device captives; and institutional liability programs that face serial sexual abuse or environmental claims. Single-occurrence risks that do not aggregate, such as most public-entity general liability or workers’ compensation, are not directly affected by the MDL scope.
The reserve mechanism
The primary reserve impact is on severity at the upper-percentile tail, not on frequency or development timing. TPLF disclosure does not create or eliminate claims; it changes the economics of how large claims settle. When a funder’s committed capital, hurdle rate, and claim on any recovery become visible to the defense, the settlement range narrows. The highest verdicts in commercial auto bodily injury triangles are disproportionately funded; compressing the financial leverage of those funders can pull average severity in the top decile of claims down.
The mechanism flows through two paths in a reserve analysis. First, case reserve adequacy on open severe claims tied to an MDL (or plausibly headed there) warrants review, because adjusters often build case reserves against a perceived funded-plaintiff negotiation floor. If that floor drops, case reserves set at the upper bound of a funded negotiation may be redundant. Second, the expected claim ratio (ECR) used in a Bornhuetter-Ferguson projection for accident year 2026 and forward should reflect whatever weight the actuary assigns to the bill’s probability of enactment, scope expansion at the state level, and the settlement-velocity effect. Most reserve reports written this spring will treat the bill as too early to credit; the question is whether that neutral stance is defensible once Georgia’s January 1, 2026 TPLF registration law begins producing state-level data.
Development pattern effects are secondary. If disclosure accelerates settlement on funded MDL claims, paid development could speed up at later maturities while reported development stays flat, which would compress paid-to-incurred ratios and warrant an adjustment in the tail. That effect is conditional on enactment and will not show up in triangles for at least two evaluations after any law takes effect.
What to ask your actuary
- What proportion of our open severe-claim inventory sits in a federal MDL or is plausibly consolidating into one, and has funder presence been reflected in case reserve adequacy at the claim level?
- If federal TPLF disclosure becomes law, what is the assumed reduction in average severity at the 90th and 95th percentiles of our BI claim distribution, and how does that flow into the ECR?
- How should our ceded reserves and per-occurrence retention change if settlement velocity on funded MDL claims increases, and does the assumption vary between our working and excess layers?
What to watch next
Senate Judiciary Committee action on S.3826 is the threshold signal; without a hearing or markup, the bill is unlikely to move this session. The more reliable near-term data point is the first registration release from the Georgia Department of Banking and Finance under that state’s January 2026 TPLF law, expected mid-2026. State-level registration data is the first quantitative look at funder concentration by case type and will inform how much weight to put on the severity-compression thesis before any federal action.