Deep-pocketed sovereign wealth funds from Asia and the Middle East have made the headlines over the past year by snapping up stakes in stock exchanges, hedge funds, banks and private equity firms. Should they now set their sights on making acquisitions in the insurance sector?

That’s the thesis of a new research paper from accounting and consulting firm Deloitte.  Using a ‘don’t forget your own backyard’ type of argument, Deloitte points out that sovereign wealth funds have not spent much of the $3 trillion at their disposal on this sector — even though it could boost development of insurance services in their own regions, a critical area of need.

“If any of these cities or countries plans to become a world-class financial center in the range of New York or London, it must necessarily attract a large number of insurance and reinsurance companies,” according to the report, since as nations accumulate assets, they need more protection.

Insurance is a logical next step in developing the financial services industry of these emerging markets, said Deloitte.

“Insurance markets in the Middle East present high potential for growth, but are acutely underdeveloped, neglected and undercapitalized,” wrote the report’s author Priti Rajagopalan.  Even though the Middle East is one of the world’s wealthiest regions,  it accounts for less than 1 percent of global premiums, according to Deloitte.

A similar deficiency has emerged in China, albeit for different reasons. “China has a well-developed insurance industry, but it is state-owned with significant structural weaknesses. An investment in an insurance carrier would facilitate access to the best practices, modernized systems and infrastructure required to bring China’s insurance industry out from under the legacy of state ownership,” said the report.

Only time will tell if sovereign wealth funds see opportunity in insurance. But one thing is certain — insurers already see potential in these regions, and are actively exploring ways to tap into what could be key areas of growth in the not too distant future.

It couldn’t come at a better time as far as insurers are concerned. Insurance rates are softening in many other parts of the world, leaving the industry searching for new pockets of growth.

(Photo credit: This Reuters photo shows construction of  part of the Palm Jumeirah breakwater, a land reclamation project being undertaken by the government of Dubai.)

While credit problems plague private equity buyouts and other corners of the M&A world, we’ve seen plenty of strategic deals going through and the Biotech sector is starting to look downright buoyant. Roche’s $43.7 billion bid to buy out the remainder of Genentech is set to be the largest biotechnology acquisition ever and comes on the heels of a spate of big-ticket purchases. Industry analysts expect more to follow. “Just about every major drug company you talk to says they are devoting a much higher proportion of their own research and investment in stuff they are buying to biotech,” said Paul Diggle, an analyst at Nomura Code. “I suspect Amgen and Genzyme will be the two companies people think about next.” Big biotech deals over the recent past include Takeda Pharmaceutical’s agreement to buy Millennium Pharmaceuticals for $8.8 billion, AstraZeneca’s purchase of MedImmune last year for $15.6 billion, Novartis’s purchase of Speedel for about $880 million and GlaxoSmithKline’s record $3.3 billion insomnia drug licensing deal with Actelion.

Senior Goldman Sachs investment banker Ken Wilson will take a leave of absence to advise U.S. Treasury Secretary Henry Paulson on the nation’s banking crisis, people familiar with the matter said, while The Deal hinted the position may be less temporary. Wilson is a vice chairman of investment banking and chairman of financial institutions business at Goldman, where Paulson was CEO until 2006. Wilson has played a key role advising banks on capital raising and reorganizations. He is expected to help address the crisis gripping banks, Wall Street firms and mortgage lenders, the sources said. He is expected to serve without pay through January, when President George Bush’s second term ends.

Other deals of the day:

* British fund manager F&C Asset Management announced a tie-up that will create a UK-owned business with 8.5 billion pounds ($17 billion) of property assets under management.

* Singapore’s Neptune Orient Lines has formally expressed interest in buying German shipping company Hapag-Lloyd, estimated to be worth over $7 billion, sources briefed on the deal said.

* Japan’s Nippon Life Insurance plans to invest about 30 billion yen ($282 million) in Russell Investments and form a business alliance with the U.S. investment and index group, sources familiar with the matter said.

* Datacraft Asia said its South African parent Dimension Data plans to privatize Southeast Asia’s largest computer network builder by buying the remaining shares in it for $276 million.

* Private equity firm Segulah said it would make a cash offer worth 1.62 billion crowns ($272 million) for Swedish industry group Gunnebo Industrier.

* Roche Holding said it has acquired Mirus Bio Corp, a privately held U.S. company that focuses on RNAi or gene silencing as a way to fight disease, for $125 million.

* U.S. computer giant International Business Machines sold $77.3 million worth of shares in top Chinese PC maker Lenovo at the bottom of a range, a source said.

* British driving services firm Trafficmaster has agreed to acquire vehicle tracking company Tri-Mex Group for up to 4.75 million pounds ($9.49 million).

* Shares in China’s Semiconductor Manufacturing International Corp jumped as much as 16 percent on a news report that the Datang Telecom group may buy a 20 percent stake in SMIC, the nation’s biggest contract chip maker.

* A plan by Qatar Telecom to buy the remaining shares in Indonesia’s PT Indosat Tbk will be blocked by a regulation limiting foreign ownership to 49 percent, officials said.

* India’s Tata Capital and Mizuho Corporate Bank said they had signed a memorandum of understanding for a strategic alliance for a range of activities in the financial services sector.

* A unit of the Qatar Investment Authority, the sovereign wealth fund, said it was dropping a proposed offer for a stake in Monaco casino and hotel group Societe des Bains de Mer due to management opposition.