Stung by market-trailing returns, the insurance industry in the U.S. is reversing course after more than doubling its hedge fund allocation over five years, to $17.7 billion as of Dec. 31, according to data from the National Association of Insurance Commissioners. Just this month, American International Group Inc. said it submitted redemption notices for $4.1 billion, and MetLife Inc. announced a plan to exit most of its $1.8 billion hedge fund holdings. The shifts add to challenges for money managers who failed for years to match the returns of the S&P 500 and are facing investor withdrawals and criticism for...