German insurance giant ERGO Group has acquired NEXT Insurance, a company founded in Israel, in a $2.6 billion all-cash deal. This move marks ERGO’s entry into the U.S. insurance market as part of parent company Munich Re’s global expansion.
NEXT Insurance, which employs 700 workers with 200 located in Israel, was acquired at a 35% discount from its 2023 valuation.
Founded in 2016 by CEO Guy Goldstein, Nissim Tapiro, and Alon Huri, NEXT Insurance is headquartered in Palo Alto, California, with a research and development center in Kfar Saba, Israel. Huri left the company last year to join Team8.
NEXT Insurance focuses on the specialized insurance needs of small businesses in the United States. It offers fully digital and tailored products, such as general liability and worker’s compensation coverage, through its proprietary tech and pricing platform. The company has raised $1.1 billion to date, with its last funding round in November 2023 valuing the company at $4 billion.
NEXT Insurance has seen significant growth, reporting $548 million in revenue for 2024 and serving over 600,000 customers. Early and repeat investors include TLV Partners and tech investor Oren Zeev, along with Munich Re, Capital G, Battery Ventures, FinTLV, and Group 11.
The U.S. market, where NEXT operates, includes more than 30 million small businesses across 1,000 sectors. These businesses account for 99% of all American companies and 44% of U.S. GDP. Despite this, insurance penetration remains low, with 75% of small businesses considered underinsured. The fragmented market is estimated at $175 billion, offering major growth potential.
ERGO and Munich Re have been closely involved with NEXT Insurance since 2017, with ERGO currently holding a 29% stake. As part of the acquisition, NEXT is expected to contribute hundreds of millions of dollars to ERGO’s net profit in the medium term, with further growth potential projected. The company is becoming an active player in the international insurance market.
“This transaction marks the start of a new chapter for ERGO. Together with NEXT Insurance, we will tap into a highly attractive market overseas, unlocking significant growth opportunities while further diversifying our existing business portfolio,” said Markus Rieß, Chief Executive Officer of ERGO Group. “At the same time, we will work with NEXT Insurance to leverage their cutting-edge technology and our technical excellence, contributing to our commitment to sustainable, profitable growth.”
