Munich Re has finalized an agreement to acquire NEXT Insurance, which will be integrated into ERGO, its primary insurance division. This move marks a major expansion into the U.S. small and medium-sized business (SMB) sector.

The U.S. is home to over 30 million small businesses across more than 1,000 industries, representing 99% of all companies and contributing 44% to the country’s Gross Domestic Product (GDP).

Despite their economic significance, many small businesses remain underinsured, with 75% lacking sufficient coverage.

The market for small business insurance is valued at approximately $175 billion. While highly fragmented, it offers significant growth potential.

Munich Re’s acquisition of NEXT Insurance is a strategic effort to harness its digital-first technology and innovative approach to address the coverage gap in this sector.

NEXT Insurance’s shares were valued at $2.6 billion, with the acquisition including 100% of the company’s stock.

Markus Rieß, CEO of ERGO Group, commented: “This deal marks the beginning of a new era for ERGO. By partnering with NEXT Insurance, we are entering a highly attractive overseas market, unlocking substantial growth opportunities while diversifying our portfolio.

“At the same time, we will work with NEXT Insurance to combine their advanced technology with our expertise, reinforcing our commitment to sustainable and profitable growth.”

Founded in 2016 and based in Palo Alto, California, NEXT Insurance is a technology-driven Property & Casualty insurer specializing in coverage tailored for U.S. small business owners.

The company utilizes its proprietary technology and digital underwriting platform to offer straightforward insurance solutions, including General Liability and Workers’ Compensation.

NEXT Insurance has experienced rapid growth, generating $548 million in revenue in 2024. The company currently serves over 600,000 customers and employs around 700 people.

Munich Re and ERGO have supported NEXT Insurance since 2017. Currently, ERGO Group AG owns approximately 29% of NEXT Insurance’s outstanding shares.

NEXT Insurance is expected to contribute mid-triple-digit million-dollar earnings to ERGO Group’s net results in the medium term, highlighting its strong financial potential within the group.

The transaction is expected to be finalized in the third quarter of 2025, pending regulatory approval.

NEXT Insurance CEO Guy Goldstein stated: “This is a milestone moment for NEXT Insurance, our customers, agents, and partners. Over the years, we have revolutionized small business insurance in the U.S. by providing a seamless, customized experience.

“This acquisition will accelerate our progress, allowing us to expand our technology-driven solutions and support even more small business owners. With ERGO and Munich Re’s industry expertise, we are well-positioned to redefine small business insurance in the U.S.”

Ardea Partners LP acted as the lead financial advisor, while Latham & Watkins LLP provided legal counsel to NEXT Insurance. Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC also served as financial advisors.

Kirkland & Ellis LLP, Barnea Jaffa Lande & Co., Bain & Company, Inc., and Morgan Stanley &Co. LLC advised ERGO / Munich Re.