Allens says class action risk may be easing from record levels seen in recent years after litigation filings declined “materially” in the first nine months of the year.

But it's too early to tell whether the pattern represents a “genuine shift”, according to an interim update from the law firm.

“2022 is shaping up as the year that bucks a number of long-running class action trends,” it says.

“It remains to be seen whether this represents a genuine shift in class action risk, or an anomaly driven by short-term uncertainties for litigation funders.”

Changes in the class action landscape will most probably shape directors’ and officers’ (D&O) premiums. D&O rates surged in excess of 100% in 2018 and 2019 as insurers reduced capacity and imposed strict clauses amid a sharp spike in shareholder lawsuits.

The D&O line is now showing signs of sustainability as rate rises have eased in recent quarters, but it may be short-lived.

Since winning the federal election in May, the Albanese Government has moved to reverse a key measure taken by the previous Coalition government to restrict class action funders and plaintiff lawyers.

Last month the Federal Government released draft regulations to reinstate a financial services licensing exemption for litigation funders. Assistant Treasurer Stephen Jones and Attorney General Mark Dreyfus said the regulations would “unwind the previous government’s unfair treatment of class action plaintiffs” and are drafted to facilitate access to justice.

“It remains to be seen whether the reduced regulatory burden (and increased certainty) for litigation funders under the current government will reignite entrepreneurial funding of a broader range of class actions,” the interim update says.

“There are, of course, a range of other factors at play, including the availability of contingency fees for lawyers in class actions in the Supreme Court of Victoria, important legal developments in shareholder class actions and emerging areas of risk (in particular, data privacy and climate change).”

The update says these factors have the potential to materially impact class action risk in the coming years.

According to the update, the decline in class action filings so far this year is an anomaly caused by a flurry of claims filed late last year as part of an attempt to get in ahead of proposed legislative reform which would adversely affect litigation funders.

“This resulted in claims being filed earlier than would have otherwise been the case, which artificially inflated 2021 filings and had a corresponding deflating effect on filings in the first half of 2022,” the update says.

Other likely reasons behind the drop in filings include “generalised uncertainty” in the litigation funding environment, with the change of government expected to bring more favourable conditions for funders.

And it also appears the pipeline of class actions filed against banks and other financial services providers after the Hayne royal commission hearings in 2018 “seems to be coming to the end,” the update says.

Click here for more from the interim update.