Litigation risk & costs

Security for costs and insurance

Category: Litigation risk and costs · Reviewed by the Apex broking team · Last reviewed 2026-08-22 · ~5 min read

In short: Security for costs is an order requiring a claimant to put up money or acceptable security for the defendant’s costs. It matters to insurance because an after-the-event policy is the most common thing offered instead of cash, and whether it is accepted turns on whether the defendant can actually get at the proceeds if the claim fails.

Category: Litigation risk and costs
Also known as: security for costs application, ATE as security, costs protection
Related concepts: ATE insurance, declaratory judgment

Definition

Security for costs is an interim remedy: an order that a claimant provide security for the defendant’s costs of defending the claim, usually by payment into court, a bank guarantee, a deed of indemnity or an acceptable insurance policy. If the security is not provided, the claim is normally stayed and may in due course be struck out. It is a protection against the risk of a successful defendant holding a costs order it cannot enforce.

Where the rules sit after the 2025 restructure

Security for costs is dealt with in Section II of Part 25 of the Civil Procedure Rules. Part 25 was restructured, and in the current version of the rules the security for costs provisions are numbered 25.26 (applications), 25.27 (conditions to be satisfied), 25.28 (security for costs other than from the claimant) and 25.29 (security for costs of an appeal). Older authorities, textbooks and precedents refer to the same provisions by their previous numbers, 25.12 to 25.15, and both sets of numbers are still in circulation. When reading a case or a precedent, check which numbering it uses.

The conditions

Under rule 25.27 the court may make an order only if it is satisfied, having regard to all the circumstances of the case, that it is just to make such an order, and either an enactment permits the court to require security or one of the listed conditions applies. Those conditions include that the claimant is resident out of the jurisdiction (subject to the qualification about states to which the enforcement regimes apply); that the claimant is a company or other body and there is reason to believe it will be unable to pay the defendant’s costs if ordered to do so; that the claimant has changed address since the claim was started with a view to evading the consequences of the litigation; that the claimant failed to give an address in the claim form or gave an incorrect one; that the claimant is acting as a nominal claimant and there is reason to believe it will be unable to pay; and that the claimant has taken steps in relation to its assets that would make it difficult to enforce an order for costs. Meeting a condition is a gateway, not an entitlement: the just-in-all-the-circumstances test still has to be satisfied.

Where insurance comes in

The most common answer to a security application is an offer of an after-the-event policy in place of cash. The attraction is obvious: the claimant does not tie up working capital. The difficulty is equally obvious. An ATE policy is a contract between the claimant and its insurer, and the defendant is not a party to it. If the insurer avoids the policy, cancels it, or declines for breach of a condition — for example a failure to follow counsel’s advice or a non-disclosure at inception — the defendant is left with an unenforceable costs order and nothing behind it.

Making a policy adequate

The market response is to remove the defendant’s exposure to the claimant’s conduct. That is done by an anti-avoidance endorsement, under which the insurer agrees not to exercise avoidance, rescission or cancellation rights as against the defendant, or by a separate deed of indemnity given by the insurer directly in the defendant’s favour. Other points a defendant will test are the limit of indemnity against a realistic costs budget, whether the limit is eroded by the claimant’s own disbursements, the insurer’s financial standing and regulatory status, whether premium payment is a condition of cover, notice provisions on cancellation, and whether the policy responds to costs of enforcement and of any appeal.

Timing and tactics

Applications are usually made once the shape of the case and the costs budget are known, and delay can count against a defendant because security is not normally granted for costs already incurred without explanation. A claimant faced with an application should expect to have to explain its funding arrangements at least in outline. Where litigation funding is present, the defendant may look beyond the claimant altogether: rule 25.28 provides for security against a person other than the claimant in defined circumstances.

For insurers on the other side

Security for costs is also relevant to insurers as litigants. A subrogated recovery brought in the name of an impecunious insured, or a claim brought by a special purpose vehicle, can attract an application, and the funding behind the claim may come under scrutiny. Conversely, a liability insurer defending a claim will want to know early whether the claimant has any means, because a successful defence with an unenforceable costs order is an expensive win.

Why it matters

For a policyholder, security for costs is one of the few procedural steps that can stop a claim in its tracks for reasons unconnected with its merits. For anyone offering or accepting an ATE policy as security, the question is never whether a policy exists but whether the defendant can be paid out of it come what may. That is a drafting question, and it is answered by the endorsement or deed, not by the certificate.

Frequently asked questions

Which CPR rules govern security for costs?

Section II of CPR Part 25. After the restructure of Part 25 the provisions are numbered 25.26 to 25.29, with the conditions in rule 25.27. Older material refers to the same provisions as rules 25.12 to 25.15.

Will the court accept an ATE policy instead of a payment into court?

It can, but only if the policy gives the defendant real protection. Because the defendant is not a party to the policy, courts and defendants generally look for an anti-avoidance endorsement or a deed of indemnity in the defendant’s favour, together with an adequate limit and a solvent, regulated insurer.

Is being based outside the jurisdiction enough to get security?

No. Residence out of the jurisdiction is one of the gateway conditions in rule 25.27, but the court must also be satisfied, having regard to all the circumstances, that it is just to make the order. The gateway opens the discretion; it does not decide it.

Related entries

This entry is part of the Apex Insurance Wiki. Last reviewed 2026-08-22. Next review: 2027-02-22. It is insurance information, not legal advice, and it states the position as at August 2026.

Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority (FRN 724952). This page is general information, not advice on a specific policy.

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