But in recent years, as has been the case with myriad hedge funds and other financial operators, many insurers have reportedly taken on risk at prices that don't fully account for changes in economic and financial circumstances, such as a U.S. recession or a sharp rise in corporate loan defaults.

These investments include collateralized debt obligations, or CDOs, which are "pools" of often risky loans, and credit default swaps, which are derivatives that insure against significant deterioration in a company's credit standing. Many experts argue that these products are more vulnerable to loss than they appear, and Bear Stearns' (NYSE: BSC) recent woes involving subprime-backed CDOs seem to bear this out.

Like other financial services companies, insurers have also expanded into a range of potentially risky activities, like lending to individuals or businesses, either on an ad hoc basis or by setting up subsidiaries for that purpose. Some large insurance conglomerates, in fact, have become virtual "supermarkets," marketing an assortment of non-traditional products to their customers.

Insurers that underwrite property and casualty risk also face threats unique to their industry, of course. According to the NOAA Climate Prediction Center, the current hurricane season is expected to be above normal, which, if correct, could inflict considerable financial damage after a few years of relative calm.

Under the circumstances, the dramatic outperformance in insurance company shares since late last year may have gone too far. Indeed, technical analysis suggests as much. As the accompanying graph illustrates, the KBW Insurance Index is near its late-2005 highs relative to the KBW Bank Index, which marked a significant turning point last time around.

For insurance bulls, now may be the time for a rethink.