After-the-event (ATE) insurance and litigation funding solve two different problems and are often mistaken for the same thing. Litigation funding provides the actual capital needed to pursue a case, fees, experts, disbursements, in exchange for a share of any recovery. ATE insurance, by contrast, is not funding at all: it is an insurance policy, purchased after a dispute has already arisen, that protects a claimant against having to pay the opposing side's legal costs if the claim is lost.
The two are frequently used together, and in many markets a funder will require ATE insurance to be in place as a precondition of providing capital, with the funder named as an additional insured or otherwise indemnified if an adverse costs order is made. This layering is common in England and Wales in particular, where the "loser pays" costs rule makes adverse costs exposure a serious risk that funders want insured away before they commit capital.
The distinction matters for pricing and structure: ATE premiums are typically a one-time or staged cost tied to the size of the costs exposure being insured, while a funder's return is contingent and tied to the outcome and size of the claimant's own recovery, two separate cost lines that claimants and their counsel need to model separately when assessing the net economics of pursuing a funded claim.