Nonetheless, Conning forecasts an increase in acquisition transaction values in the next 12-to-18 months, due to the continuing increase in surplus in the industry and private equity's increasing involvement in insurance.

Look for more transactions valued between $1 billion and $5 billion, with perhaps a few $10 billion or higher, Conning said.

“The ability of these firms to access large amounts of capital, and their ability to secure relatively inexpensive debt layers, means they can be part of transactions exceeding $10 billion,” Mr. Christiansen commented.

Severe price cuts have not yet emerged as standard conditions in most markets during the first two months of 2007. “The buildup of capital and expectations for lower but still profitable results appear to support an environment conducive to accelerated M&A activity compared to the prior five years,” Mr. Christiansen said.

The report notes a similarity in the M&A conditions between this year and 1996, two years preceding the peak of industry M&A activity.

“With more than $165 billion in total values from 565 transactions, 1998 was still more than three times larger than the $43 billion recorded in 2006 from 406 transactions,” the report notes.