Merger and acquisitions activity could make a comeback in the insurance sector this year after a sharp drop in the deal numbers and valuations in 2008, according to a Deloitte report. The increase in dealmaking would be driven by the fact that many large, struggling financial institutions and insurers may look to shed non-core insurance business as a way to raise capital. “This could fuel a new wave of acquisitions as more insurance companies may be available at attractive valuations,” the report says.

But the buyers may be foreign rather than local, according to Deloitte, including Chinese, Japanese, European and Bermudian companies that are “flush with foreign currency” and have avoided major investment losses. Even financially sound buyers will want to structure deals to avoid increased exposure to investment portfolio losses. As a result, some may simply acquire a company's underwriting teams rather than the whole firm — “a less risky, and less expensive, way of acquiring desired competencies.”