Once shareholders and investors recognise that they will need to accept lower returns on their investments than during the boom years, the process of industry consolidation is likely to begin. Improved returns on investment will require greater efficiency, better standards of customer service, and new product innovation, all of which are more likely to be delivered by larger more diversified insurance firms.
In combination with high savings rates in East Asia, these policies generated large global imbalances and massive capital flows, creating the "conundrum" of very low long-term interest rates, which, in turn, fed the search for yield and excessive leverage.