Chubb is calling for US legal system reform after an explosion in “meritless” class actions instigated by lawyers chasing a fees windfall.

The insurer’s Executive Vice-Chairman and COO John Keogh says the number of securities class action lawsuits has more than doubled in the past four years and this “rampant” trend is one reason the number of US public companies has halved in the past two decades.

An average of one in 12 public companies endured a securities class action last year. Among S&P 500 companies, the likelihood was one in 10, Chubb says, citing Cornerstone Research.

“We are not willing to accept this broken system,” Mr Keogh says in a report called From Nuisance to Menace: The Rising Tide of Securities Class Action Litigation.

“As a global leader in financial lines insurance, which includes directors’ and officers’ and errors and omissions coverage, Chubb has an informed perspective on this trend and on the full costs.”

Legal fees and settlement costs are an increasingly unavoidable tax on American business, the report says. In the past five years, half of the nearly $US23 billion ($33.27 billion) in securities suit costs have gone to lawyers. The figure is two-thirds in the case of merger-objection lawsuits.

In 85% of settled merger-objection cases, shareholders receive nothing.

“There is a growing cohort of lawyers filing meritless lawsuits in federal and state courts across the US every time a merger or acquisition is announced or a corporate misfortune impacts a company’s share price,” the report says.

“The financial rewards from these lawsuits are accruing not to harmed investors but to lawyers who are bringing cases of dubious merit in order to reap a windfall in legal fees.”

Chubb proposes a number of reforms, including requiring the disclosure of any relationship, requiring that lawyer fees be proportional, requiring plaintiff involvement, and allowing fast-track decisions.