U.S. insurance merger and acquisition activities in 2009 were the lowest since 2002. But a pickup is underway, fueled by pent-up demand, according to a new report.

Published by Conning & Co. unit Conning Research & Consulting, Hartford, the report reveals that global transaction values declined further from very low 2008 levels.

At the same time, merger activity in the insurance industry outside the U.S. increased significantly, primarily due to significantly larger transactions in the life/annuity and health sectors, Conning analysts say.

But, non-U.S. property and casualty insurance merger and acquisition activity declined for the second straight year.

“In the U.S., the value of insurance industry transactions was the lowest we have reported since 2002,” says Jerry Theodorou, a Conning analyst. “The property-casualty sector dropped 78% last year, while U.S. life-annuity marked its second year below $1 billion in M&A values. And health insurance also dipped below $1 billion.”

Insurance services posted the only increase in values year-over-year, representing more than half of the total transaction value for the industry, the report says.

The increase in non-U.S. M&A transaction values was 58%, according to the report.

“Looking forward, we are already seeing that pent-up demand is driving increased M&A activity in most sectors of the insurance market, as economic and credit conditions improve and valuations rise again to more normal levels,” says Conning Director of Research Stephan Christiansen.