NEXT Exit

The pending $2.6 billion acquisition of insurtech leader NEXT Insurance by longtime investor Munich Re marks a major milestone in the sector as well as a reaffirmation of the essential role that innovation plays in today’s insurance industry.

The acquisition of the digital-focused small business insurer by Munich Re’s ERGO division is scheduled to close later this year, assuming regulatory approval. It will represent the largest property and casualty acquisition to date for the insurtech sector. Munich Re began investing in NEXT soon after its founding in 2016, including a $250 million Series D round in 2019.

Munich Re Ventures said in an online case study that “The bar has been raised for market activity in the insurtech space, a welcome recognition of the value being generated by today’s insurtech innovators.”

The acquisition will provide ERGO, a major German and European insurer, with access to the U.S. insurance market and a nationwide digital distribution network for small and medium-size businesses that is expected to add midtriple-digit million-dollar earnings to the company’s results.

Palo Alto, Calif.-based NEXT, which generated top-line revenue of $548 million in 2024, says the deal will enable it to increase its market share among the more than 30 million U.S. small businesses, some 75% of which it says are underinsured. NEXT currently has more than 600,000 customers.

The deal reflects a shift in the insurtech sector from its more go-go, growth-at-any-cost early days to a focus on building sustainable and profitable businesses, or from insurtech 1.0 to 2.0.

“Insurtech is alive and well,” says Matthew Jones, head of ventures at MS Transverse, in written comments to Leader’s Edge. “This deal represents the continued shift from hype to maturity in insurtech. It also shows that digitalfirst insurers can achieve big outcomes. We continue to expect more strategic acquisitions as incumbents look to buy innovation rather than build it, although the vast majority will be deals at a smaller scale than this.”

The sector has already seen some significant deals involving old hands seeking technological prowess and digital distribution networks. Travelers acquired cyber insurance managing general underwriter Corvus Insurance in January 2024 for $435 million, saying the deal would accelerate its access to innovative cyber capabilities. In April 2023, Arch Insurance acquired Thimble, which built a following among small businesses and gig workers by offering on-demand and month-to-month coverage. American Family Insurance acquired insurtech Bold Penguin, which built a digital small business insurance exchange, in 2021 for undisclosed terms.

While most startups still fail, insurtechs that combine a technological edge with business discipline and insurance industry savvy can still build successful companies.

“It shows that strategic buyers still value innovation, especially in segments of the market that they know they will struggle to win in,” Jones says. “The deal rewards growth and proves there’s still a strong playbook for building and exiting in insurtech.”