In a week marked by a record-breaking $32 billion acquisition of Israeli cybersecurity firm Wiz by Google, the insurtech sector also saw significant movement with German insurance giant Munich Re acquiring Israeli-founded startup Next Insurance for $2.6 billion. This acquisition follows a tumultuous period for Next Insurance, which saw its valuation drop significantly from a peak of $4 billion in 2021 to $2.5 billion in late 2023.

Founded in 2016 by entrepreneurs Guy Goldstein, Alon Khoury, and Nissim Tapiro, Next Insurance specializes in digital insurance solutions tailored for small and medium-sized businesses in the United States. The company utilizes artificial intelligence and machine learning to streamline underwriting and policy approvals, offering coverage across 1,300 different insurance categories. With over 500,000 active customers, Next Insurance has positioned itself as a key player in the digital transformation of the insurance industry.

The acquisition marks a near-complete takeover by Munich Re, which has been investing in Next Insurance since 2017. Prior to the deal, the German reinsurer held a 29% stake in the company. Munich Re and its subsidiary, Argo, will acquire the remaining shares for $1.84 billion from existing investors. According to reports, Argo is expected to generate substantial net profits in the medium term as a result of the transaction.

Despite the acquisition’s positive outlook for Munich Re, not all investors fared equally well. Investors from the company’s 2021 funding round, including Battery Ventures and Israeli fund FinTLV, had backed Next Insurance at a $4 billion valuation. While the current sale represents a modest increase from its late 2023 valuation, it still reflects a 35% decline from its peak. However, sources indicate that 2021 investors had structured protections to minimize potential losses from valuation declines.

The deal also highlights the role of strategic investors in shaping Next Insurance’s trajectory. Previous backers included notable venture capital firms such as Zeev Ventures, Group 11, TLV Partners, and Redpoint, alongside large Israeli institutional investors like Bank Hapoalim, Migdal, and Psagot. Additionally, insurance giants Allianz X and Allstate played a strategic role in expanding Next Insurance’s market reach, particularly in real estate and auto insurance.

CEO and co-founder Guy Goldstein hailed the acquisition as a milestone for the company. “This transaction will accelerate our mission to provide an easy, efficient, and personalized insurance experience for small business owners. With the strength and expertise of ERGO and Munich Re, we will continue leading the small business insurance revolution in the U.S.,” Goldstein stated in a press release.

Image credit: The logo of reinsurance company Munich Re Group at their headquarters in Munich, Germany. REUTERS/Andreas Gebert