Consequently, the return on equity continues to fall below average US companies. However, overall returns differ largely between companies and between sectors. Investors and policyholders should carefully examine the performance of the underwriters when selecting an insurance company. There are few barriers to entry in the insurance industry, therefore, there is strong potential for expansion. Due to the intensity of domestic competition, profitability has declined making it necessary for companies to capitalize on factors that can provide competitive advantages such as, capital strength, management depth, technology, and shareholder focus.
Reinsurance is the fastest growing sector and offers great returns for the insurance industry.
On a global basis, especially in Japan, the insurance industry is in the development stages and competition is not as intense. Consequently, there is an abundance of international investment opportunity. As many countries begin to deregulate their insurance markets, domestic insurance companies have the ability to profit from efficiency, capital strength, and economies of scale. There are many sellers and buyers of insurance. Due to the requirements for insurance in some sectors, the demand for insurance policies will continue to exist.