Eager to grow, but realizing how difficult that is in a market downturn, M&A transactions proceeded with caution for fear they would not produce the “desired result.”

“Buyers looked long and hard at many prospects before inking a deal,” the report said.

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In 2010 there were 721 transactions at a reported value of more than $79 billion. By comparison, in 2009 there were 601 transactions at a reported value of $52 billion.

In the U.S. alone, there were 436 transactions with a total value of less than $47 billion, compared to 320 transactions valued at more than $14 billion in 2009. That translates into an increase of 36 percent in the number of transactions.

Conning said the principal drivers for this activity were a “more vibrant economy, more buoyant equity markets, stronger capital positions at insurers, soft market insurance conditions, and the release of pent-up demand to pursue acquisitions after low 2009 levels.”

Deals were fueled by increased valuations in companies that encouraged many stock-for-stock deals, the report said.

One of the consequences of the soft market is higher combined ratio as underwriting does not adequately cover the cost of claims. To combat this, some carriers seek out specialty insurers with “more attractive margins” in an effort to improve their overall combined ratio, the report noted.

The report notes that few U.S. insurers pursued acquisitions outside of the U.S. Globally, those insurers that did pursue foreign acquisitions turned to Asia and Latin America, considered fast-growing emerging markets.

Among agents and brokers in the U.S., the number of announced transactions rose 38 percent from 176 in 2009 to 243 in 2010. The value of these transactions jumped from $615 million in 2009 to $1.7 billion in 2010.

The report notes that the value for some of the largest transactions during the year were not announced, such as AmWINS acquisition of Colemont and Swett & Crawford's merger with Cooper Gay.

The major acquirers in 2010 were Brown & Brown, Arthur J. Gallagher, Hub, and Marsh & McLennan Agencies.

While private equity firms and brokers backed by private equity were more active, banks decreased their involvement in the insurance space, with many shedding operations, the report said. The same was true outside of the U.S., Conning noted.