BUZZ-Insurers slide after Selective Insurance sparks concern on reserve issue

Reuters07-20

** Shares of W.R. Berkley , AIG , Cincinnati Financial , Chubb and Everest Group fall between 3% and 8%

** Late Thursday, Selective Insurance posted a surprise Q2 loss hurt by unexpected unfavorable reserve development of $176 mln

** Reserves are a certain amount of funds set aside by insurers in order to meet any future claims they may have to pay

** SIGI said the significant reserve addition was due to higher severity that it attributes to social inflation

** Severity is the cost of a claim while social inflation refers to the trend of rising insurance costs due to increased litigation, plaintiff-friendly judgments and higher jury awards

** Piper Sandler analyst Paul Newsome says investors will be concerned that other insurers with reserve issues in Q1 will also have them in Q2, like SIGI

** Oppenheimer analysts say that while SIGI's results were a clear disappointment, they think the insurer is getting ahead of what it expects to be a widespread problem for the industry

(Reporting by Arasu Kannagi Basil in Bengaluru)

((ArasuKannagi.Basil@thomsonreuters.com;))

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