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.)