The past year was dreadful for general insurers' shares as the sector fell behind the stock market as a whole.
Insurance specialists at Salomon Smith Barney said most leading insurance companies failed to retain 1997 and 1998 share price gains.
In fact, 1999 saw almost two-thirds of the sector fall behind the FT All Share Index average.
Among the poorly performing insurance stocks are Legal & General, Swiss Re, Royal and SunAlliance and CGU.
The better performing insurance shares are mainly European, such as Axa and Allianz, although the UK's Norwich Union is a notable exception.
Analysts attribute the insurance sector's poor performance to low returns from the international bond markets which in turn have weakened insurers' balance sheets. The markets this year are forecast to remain flat providing little consolation to insurers.
The bank's analysts predict 2000 will see a slowing down in merger and acquisition activity as a reaction to concerns about potential Y2K problems.
They said scope for further mergers has been reduced because most of the cheap and obvious transactions have already been completed.
But they suggest e-commerce, financial deregulation and market
segmentation have unleashed a
metamorphosis among insurers.
"The successful non-life insurers of the future will be those structured according to customers' needs."
And they end with a dire prediction: "Insurers that fail to react to the changing needs of their customers and merely rent out their balance sheet through third party distribution are, in our view, doomed."