Munich Re said it has acquired Next Insurance, which will become part of the reinsurer’s major primary insurance business, Ergo.

The agreement in place values Next Insurance at $2.6 billion. Ergo already owned nearly 30 percent of the digital insurance company’s shares. Munich Re was an early investor in Next Insurance.

Closing is expected during the third quarter pending regulatory approvals.

“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 Düsseldorf, Germany-based Ergo, in a statement. “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.”

Munich Re has said it expects $23.1 billion in general insurance revenue from Ergo in 2025.

Next Insurance is expected to contribute mid triple-digit million dollar earnings to Ergo’s net result in the medium term, according to the statement. The companies said small businesses make up 44% of the US GDP but 75% are underinsured. The market is estimated to be $175 million, they said.

InsurTech Next has about 700 employees and serves 600,000 customers — small businesses — using a proprietary technology stack and digital underwriting platform to provide coverage including general liability, business owners policies, and workers’ compensation.

Guy Goldstein, CEO of Palo Alto, California-based Next, said the transaction will allow the company to “scale our technology-driven approach and empower even more small business owners with innovative insurance solutions.”

“With the strength and expertise of Ergo and Munich Re and their well-recognized reinsurance and insurance know-how, we are poised to lead the charge in reimagining small business insurance in the U.S.,” he added in a statement.

This article was previously published by Insurance Journal. Reporter Chad Hemenway is the National Editor of Insurance Journal.