What changed in this filing

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Item 1. Business

2021-03-10 compared with 2020-03-11 · 572 added, 971 removed, 168 unchanged (90% of the section changed)

dollar amounts, except per share amounts, are in thousands.

NI Holdings is a North Dakota business

corporation that is the stock holding company of Nodak Insurance Company and became such in connection with the conversion of Nodak

Mutual Insurance Company from a mutual to stock form of organization and the creation of a mutual holding company.

The conversion

was consummated on March 13, 2017.

Immediately following the conversion, all of the outstanding shares of common stock of Nodak

Insurance Company were issued to Nodak Mutual Group, which then contributed the shares to NI Holdings in exchange for 55% of the

outstanding shares of common stock of NI Holdings.

Nodak Insurance Company then became a wholly-owned stock subsidiary of NI Holdings.

All dollar amounts, except per share amounts, are in thousands.

NI Holdings is a North Dakota business corporation that is the stock holding company of Nodak Insurance and became such in connection with the conversion of Nodak Mutual from a mutual to stock form of organization and the creation of a mutual holding company.

The conversion was consummated on March 13, 2017.

Immediately following the conversion, all of the outstanding shares of common stock of Nodak Insurance were issued to Nodak Mutual Group, which then contributed the shares to NI Holdings in exchange for 55% of the outstanding shares of common stock of NI Holdings.

Nodak Insurance then became a wholly-owned stock subsidiary of NI Holdings.

Prior to completion of the conversion, NI Holdings conducted no business and had no assets or liabilities.

As a result of the conversion,

NI Holdings became the holding company for Nodak Insurance Company and its existing subsidiaries.

Nodak Insurance was formed in 1946 to

offer property and casualty insurance to members of the North Dakota Farm Bureau Federation (“North Dakota Farm Bureau”).

Nodak Insurance’s bylaws provide that a person must be a member and remain a member of the North Dakota Farm Bureau in order

to become and remain a policyholder of Nodak Insurance.

Nodak Insurance’s bylaws also require that four members of the Board

of Directors of Nodak Insurance must be members of the North Dakota Farm Bureau.

Similarly, one-third of the members of the Board

of Directors of Nodak Mutual Group must be persons designated by the North Dakota Farm Bureau.

The North Dakota Farm Bureau has granted

Nodak Insurance a nonexclusive, nontransferable license to use the name “Farm Bureau”

and the “FB”

and associated trademarks to market Nodak Insurance products, including insurance products.

Nodak Insurance has held this license

since the insurance company’s inception in 1946, and the current version of the license agreement has been in place since

The current license agreement between the North Dakota Farm Bureau and Nodak Insurance renewed on October 1, 2019, with an

expiration date of September 30, 2020.

The agreement has historically been renewed annually by a vote of the Nodak Insurance Board

of Directors.

Under the current license agreement, Nodak Insurance is required to pay to the North Dakota Farm Bureau an annual

royalty payment equal to 1.3% of Nodak Insurance’s written premiums (excluding multi-peril crop insurance premiums), subject

to a minimum annual payment of $900 and a maximum annual payment of $1,362.

The maximum royalty payment is adjusted annually based

upon the June index month for the Consumer Price Index.

Nodak Insurance’s subsidiaries

include American West Insurance Company (“American West”) and Primero Insurance Company (“Primero”).

Creek Mutual Insurance Company is an affiliate of Nodak Insurance.

Nodak Insurance and Battle Creek have been assigned “A”

ratings by A.M.

Best Company, Inc.

Best”), which is the third highest out of 15 possible ratings.

American West

is rated “A-”.

Primero is unrated.

On August 31, 2018, NI Holdings completed

the acquisition of 100% of the common stock of Direct Auto Insurance Company (“Direct Auto”) from private shareholders

and Direct Auto became a consolidated subsidiary of the Company.

The results of Direct Auto are included as part of the Company’s

non-standard auto business segment following the closing date.

Direct Auto is unrated by A.M.

The consolidated financial statements

of NI Holdings presented herein include the financial position and results of operations of NI Holdings, Direct Auto (after the

acquisition date of August 31, 2018), and Nodak Insurance, including Nodak Insurance’s subsidiaries American West and Primero,

and its affiliate Battle Creek.

Each of the five insurance companies is subject to examination and comprehensive regulation by

the insurance department of its state of domicile.

Acquisition of Westminster American

Insurance Company

On January 1, 2020, NI Holdings completed

the acquisition of 100% of the common stock of Westminster American Insurance Company (“Westminster American”) from

a private shareholder for $40,000, payable in installments over three years.

Westminster American became a consolidated subsidiary

of the Company on the closing date.

Financial information included herein does not include Westminster American, as the closing

date was subsequent to December 31, 2019.

Westminster American is a property and casualty insurance company specializing in commercial

multi-peril insurance in the Mid-Atlantic states, and will provide the Company with broader geographic and product line diversity.

Westminster American is rated “A-”

A chart of the corporate structure as

of December 31, 2019 and a more complete description of each of the NI Holdings subsidiaries is included below.

As a result of the conversion, NI Holdings became the holding company for Nodak Insurance and its existing subsidiaries.

Nodak Insurance was formed in 1946 to offer property and casualty insurance to members of the North Dakota Farm Bureau Federation (“North Dakota Farm Bureau”).

Nodak Insurance’s bylaws provide that a person must be a member and remain a member of the North Dakota Farm Bureau in order to become and remain a policyholder of Nodak Insurance.

Nodak Insurance’s bylaws also require that four members of the Board of Directors of Nodak Insurance must be members of the North Dakota Farm Bureau.

Similarly, one-third of the members of the Board of Directors of Nodak Mutual Group must be persons designated by the North Dakota Farm Bureau.

The North Dakota Farm Bureau has granted Nodak Insurance a nonexclusive, nontransferable license to use the name “Farm Bureau”

and the “FB”

logo and associated trademarks to market Nodak Insurance products, including insurance products.

Nodak Insurance has held this license since the insurance company’s inception in 1946, and the current version of the license agreement has been in place since 2002.

The current license agreement between the North Dakota Farm Bureau and Nodak Insurance renewed on October 1, 2020, with an expiration date of September 30, 2021.

The agreement has historically been renewed annually by a vote of the Nodak Insurance Board of Directors.

Under the current license agreement, Nodak Insurance is required to pay to the North Dakota Farm Bureau an annual royalty payment equal to 1.3% of Nodak Insurance’s written premiums (excluding multi-peril crop insurance premiums), subject to a minimum annual payment of $900 and a maximum annual payment of $1,370.

The maximum royalty payment is adjusted annually based upon the June index month for the Consumer Price Index.

Nodak Insurance’s subsidiaries include American West and Primero.

Battle Creek is an affiliate of Nodak Insurance.

On August 31, 2018, NI Holdings completed the acquisition of 100% of the common stock of Direct Auto from private shareholders and Direct Auto became a consolidated subsidiary of the Company.

The results of Direct Auto are included as part of the Company’s non-standard auto business segment following the closing date.

On January 1, 2020, NI Holdings completed the acquisition of 100% of the common stock of Westminster from the private shareholder of Westminster and Westminster became a consolidated subsidiary of the Company.

The results of Westminster are included as part of the Company’s commercial business segment following the closing date.

All insurance subsidiaries of NI Holdings are rated “A”

Best, which is the third highest out of a possible 15 ratings.

The consolidated financial statements of NI Holdings presented herein include the financial position and results of operations of NI Holdings, Direct Auto (after the acquisition date of August 31, 2018), Westminster (after the acquisition date of January 1, 2020), and Nodak Insurance, including Nodak Insurance’s subsidiaries American West and Primero, and its affiliate Battle Creek.

Each of the six insurance companies is subject to examination and comprehensive regulation by the insurance department of its state of domicile.

A chart of the corporate structure as of December 31, 2020 and a more complete description of each of the NI Holdings subsidiaries is included below.

NI HOLDINGS, INC.

2 unchanged sentences

NI Holdings, Inc.

Nodak Insurance Company

Direct Auto Insurance Company

Nodak Insurance Company

Westminster American Insurance Company

Nodak Agency, Inc.

American West Insurance Company

Battle Creek Mutual Insurance Company

Battle Creek Mutual

Insurance Company

Tri-State, Ltd

Primero Insurance Company

The following tables provide selected

amounts from the Company’s consolidated statements of operations and balance sheets.

Additional information is presented

throughout this annual report.

The following tables provide selected amounts from the Company’s consolidated statements of operations and balance sheets.

Additional information is presented throughout this Annual Report on Form 10-K.

Year Ended December 31,

2 unchanged sentences

Net income after non-controlling interest

The executive offices of NI Holdings

and Nodak Insurance are located at 1101 1 st Avenue North, Fargo, North Dakota 58102, and the main office phone number

is 701-298-4200.

NI Holdings’

As of December 31,

The executive offices of NI Holdings and Nodak Insurance are located at 1101 First Avenue North, Fargo, North Dakota 58102, and the main office phone number is 701-298-4200.

NI Holdings’

website address is www.niholdingsinc.com.

Information contained on such website is not

incorporated by reference into this Annual Report on Form 10-K, and such information should not be considered to be part of this

Annual Report on Form 10-K.

Nodak Insurance Company (“Nodak

Insurance”)

Nodak Insurance writes multi-peril crop,

crop hail, private passenger automobile, farmowners, homeowners, and commercial property and liability policies in North Dakota.

Only members of the North Dakota Farm Bureau can purchase insurance coverage from Nodak Insurance.

As of December 31, 2019, Nodak

Insurance distributed its insurance products through 80 exclusive agents appointed by Nodak Insurance.

Information contained on such website is not incorporated by reference into this Annual Report on Form 10-K, and such information should not be considered to be part of this Annual Report on Form 10-K.

Intercompany Reinsurance Pooling Arrangement

Effective January 1, 2020, all of our insurance subsidiary and affiliate companies entered into an intercompany reinsurance pooling agreement.

This agreement was finalized, approved, and implemented during the fourth quarter of 2020, retroactive to the January 1 effective date.

Nodak Insurance is the lead company of the pool, and assumes the net premiums, net losses, and underwriting expenses from each of the other five companies.

Nodak Insurance then retrocedes balances back to each company, while retaining its own share of the pool’s net underwriting results, based on individual pool percentages established in the respective pooling agreement.

This arrangement allows each insurance company to rely upon the capacity of the pool’s total statutory capital and surplus.

As a result, they are evaluated by A.M.

Best on a group basis and hold a single combined financial strength rating, long-term issuer credit rating, and financial size category.

In connection with the pooling arrangement, the quota share reinsurance agreement between Battle Creek and Nodak Insurance was cancelled.

As a result, the Company’s consolidated financial position and results of operations are impacted by the portion of Battle Creek’s underwriting results that are allocated to the policyholders of Battle Creek rather than the shareholders of NI Holdings.

For the year ended December 31, 2020, the pooling share percentages by insurance company subsidiary were:

Pool Percentage

Nodak Insurance Company

American West Insurance Company

(“American West”)

American West is licensed to write insurance

in eight states in the Midwest and Western regions of the United States, and currently issues policies primarily in South Dakota,

with a much lower level of writings in Minnesota and North Dakota.

American West currently writes multi-peril crop, crop hail,

farmowners, private passenger auto, and homeowners insurance policies.

American West distributes its products through independent

agents located in approximately 115 offices.

Battle Creek Mutual Insurance

Company (“Battle Creek”)

Battle Creek issues private passenger

automobile, homeowners, and farmowners policies in Nebraska.

Battle Creek distributes its policies through independent agents located

in approximately 290 offices.

Battle Creek became affiliated with Nodak Insurance in 2011, and Nodak Insurance provides underwriting,

claims management, policy administration, and other administrative services to Battle Creek.

Under a 100% quota-share reinsurance

agreement, Battle Creek cedes 100% of its net premiums to Nodak Insurance and Nodak Insurance fully reinsures all of Battle Creek’s

risk under its insurance policies.

In connection with entering into the affiliation agreement, Nodak Insurance purchased a $3.0

million surplus note issued by Battle Creek.

The surplus note bears interest at an annual rate of 1.0% and matures on December

Battle Creek must obtain the prior approval of the Nebraska Director of Insurance before making any payment of interest

or principal on the surplus note.

Pursuant to the affiliation agreement,

so long as the surplus note remains outstanding or the 100% quota-share reinsurance is in effect, Nodak Insurance is entitled to

appoint two-thirds of the Board of Directors of Battle Creek.

The affiliation agreement can be terminated by mutual written agreement

of Battle Creek and Nodak Insurance or by either party if there is a material breach of the agreement by the other party and such

breach is not cured within 15 days after written notice of such breach is given by the terminating party to the other party.

Battle Creek terminated the quota-share reinsurance agreement, it would not have sufficient capital to continue to operate.

Primero Insurance Company (“Primero”)

Primero primarily writes non-standard

automobile insurance in Nevada, Arizona, North Dakota, and South Dakota.

Primero was acquired by Nodak Insurance in 2014.

distributes its policies through independent agents located in approximately 345 offices in those four states.

Primero Insurance Company

Battle Creek Mutual Insurance Company

Direct Auto Insurance Company

(“Direct Auto”)

Direct Auto writes non-standard automobile

insurance in Illinois.

Westminster American Insurance Company

Insurance Subsidiary and Affiliate Companies

Nodak Insurance Company (“Nodak Insurance”)

Nodak Insurance writes private passenger automobile, farmowners, homeowners, multi-peril crop, crop hail, and commercial property and liability policies in North Dakota.

Only members of the North Dakota Farm Bureau can purchase insurance coverage from Nodak Insurance.

As of December 31, 2020, Nodak Insurance distributed its insurance products through 84 exclusive agents appointed by Nodak Insurance.

American West Insurance Company (“American West”)

American West is licensed to write insurance in eight states in the Midwest and Western regions of the United States, and currently issues policies primarily in South Dakota, with a much lower level of writings in Minnesota and North Dakota.

American West currently writes private passenger auto, homeowners, farmowners, multi-peril crop, and crop hail insurance policies.

American West distributes its products through independent agents located in approximately 120 offices.

Battle Creek Mutual Insurance Company (“Battle Creek”)

Battle Creek issues private passenger automobile, homeowners, and farmowners policies in Nebraska.

Battle Creek distributes its policies through independent agents located in approximately 286 offices.

Battle Creek became affiliated with Nodak Insurance in 2011, and Nodak Insurance provides underwriting, claims management, policy administration, and other administrative services to Battle Creek.

Effective January 1, 2020, all of our insurance company subsidiaries entered into an intercompany reinsurance pooling agreement.

In conjunction with this agreement, the 100% quota-share reinsurance agreement between Battle Creek and Nodak Insurance was terminated on a cut-off basis as of January 1, 2020.

Upon termination, Nodak Insurance transferred to Battle Creek all liabilities related to outstanding loss and loss adjustment expense reserves and all liabilities related to the adjusted unearned premium reserve.

In exchange, an intercompany cash payment was made to compensate Battle Creek for the transfer of these liabilities.

The $3.0 million surplus note originally issued by Battle Creek and purchased by Nodak Insurance in connection with their affiliation agreement remains in place.

It bears interest at an annual rate of 1.0% and matures on December 30, 2040.

Battle Creek must obtain the prior approval of the Nebraska Director of Insurance before making any payment of interest or principal on the surplus note.

Pursuant to the affiliation agreement, so long as the surplus note remains outstanding, Nodak Insurance is entitled to appoint two-thirds of the Board of Directors of Battle Creek.

The affiliation agreement can be terminated by mutual written agreement of

Battle Creek and Nodak Insurance or by either party if there is a material breach of the agreement by the other party and such breach is not cured within 15 days after written notice of such breach is given by the terminating party to the other party.

Primero Insurance Company (“Primero”)

Primero primarily writes non-standard automobile insurance in Nevada, Arizona, North Dakota, and South Dakota.

Primero was acquired by Nodak Insurance in 2014.

Primero distributes its policies through independent agents in approximately 335 contracted agencies in those four states.

Direct Auto Insurance Company (“Direct Auto”)

Direct Auto writes non-standard automobile insurance in Illinois.

Direct Auto was acquired by NI Holdings on August 31, 2018.

Direct Auto distributes its policies through

independent agents located in approximately 130 offices, concentrated primarily in the Chicago area.

Direct Auto distributes its policies through independent agents located in approximately 136 offices, concentrated primarily in the Chicago area.

Westminster American Insurance Company (“Westminster”)

Westminster writes commercial multi-peril insurance in Delaware, Georgia, Maryland, New Jersey, North Carolina, Pennsylvania, South Carolina, Virginia, West Virginia, and the District of Columbia.

Westminster was acquired by NI Holdings on January 1, 2020.

Westminster distributes its policies through independent agents in approximately 92 contracted agencies in those nine states and the District of Columbia.

Market Overview

We market our property and casualty products

in the upper Midwest states of North Dakota, South Dakota, Nebraska, and Minnesota.

We also offer non-standard auto insurance in

the states of Nevada, Arizona, North Dakota, South Dakota, and Illinois.

The following chart depicts our direct premiums written

during the last two years and our relative market share within each of our states during the year ended December 31, 2018.

December 31, 2019

We market our property and casualty products in the upper Midwest states of North Dakota, South Dakota, Nebraska, and Minnesota.

We offer non-standard auto insurance in the states of Nevada, Arizona, North Dakota, South Dakota, and Illinois.

We offer commercial multi-peril insurance in the states of New Jersey, Maryland, Pennsylvania, Virginia, Georgia, North Carolina, Delaware, South Carolina, and West Virginia, North Dakota, South Dakota, and the District of Columbia.

The following chart depicts our direct premiums written during the last two years and our relative market share within each of our states during the year ended December 31, 2019.

Year Ended December 31, 2020

Direct Premiums

Year Ended December 31, 2019

Direct Premiums Written

Rank in State

New Jersey (1)

Pennsylvania (1)

District of Columbia (1)

North Carolina (1)

South Carolina (1)

West Virginia (1)

Total direct premiums written

(1) Direct Auto’s full year 2018 direct written premiums were $44,497 for purposes of determining its market share in the state of Illinois.

For comparison purposes, Westminster’s pre-acquisition 2019 Direct Premiums Written are included in the table above.

Organic Growth Strategy

We believe we have many opportunities

to increase business in our primary markets organically.

We believe we have many opportunities to increase business in our primary markets organically.

Strategies we employ to grow organically include:

continued emphasis on our relationship with the North Dakota Farm Bureau, a key advocacy group for agricultural and rural interests

which enjoys a high and favorable profile throughout the state;

using the cost advantage created by our low expense ratio compared to peers (27.3% expense ratio in 2019 compared to an average

expense ratio of our peers of 34.2% in 2018) to selectively expand market share in our primary markets;

expansion and enhancement of agency relationships in Nebraska and South Dakota, including the use of technology such as mobile

apps, online quoting, and policy issuance initiatives to make it easy for independent agents and insureds to do business with us;

selective expansion of Primero in its core markets of Nevada and Arizona as well as expansion of the non-standard auto product

in our core upper Midwest market area;

strategic growth in our Direct Auto non-standard auto business;

continued emphasis on our relationship with the North Dakota Farm Bureau, a key advocacy group for agricultural and rural interests which enjoys a high and favorable profile throughout the state;  

using the cost advantage created by our low expense ratio compared to peers (30.0% expense ratio in 2020 compared to an average expense ratio of our peers of 33.3% in 2019) to selectively expand market share in our primary markets;  

leveraging the improved A.M.

Best financial strength rating and larger financial size category to strategically grow Westminster’s commercial business;  

expansion and enhancement of agency relationships in Nebraska and South Dakota, including the use of technology such as mobile apps, online quoting, and policy issuance initiatives to make it easy for independent agents and insureds to do business with us;  

selective expansion of Primero in its core markets of Nevada and Arizona as well as expansion of the non-standard auto product in our core upper Midwest market area;  

strategic growth in our Direct Auto non-standard auto business;  

excellent claims service for all insureds;

selective expansion of our insurance products in states where we currently operate and those states where we hold insurance

will continue to utilize these strategies and explore others where it makes business sense.

and  

selective expansion of our insurance products in states where we currently operate and those states where we hold insurance licenses.  

External Growth Strategy

We acquired Direct Auto in 2018 and integration

of this business into our operations is in progress.

The acquisition was the initial step in executing our growth strategy developed

at the time of our initial public offering.

Prior to the initial public offering, we successfully acquired Primero in 2014, acquired

control of Battle Creek in 2011, and acquired American West in 2001.

We acquired Westminster American in January

2020 with a portion of the additional capital we raised through our initial public offering.

The acquisition of Westminster continues

to execute our strategy to expand our commercial insurance business, diversify our weather-related insurance risks geographically,

and assist us in maintaining competitive expense levels.

The completion of our initial public

offering supplied the additional capital needed to support the acquisitions discussed above.

We will continue to look for opportunities

to deploy the remaining capital raised during the initial public offering, which may be directed towards assisting us in the execution

of both our organic and external growth strategies.

We acquired Direct Auto in 2018 with capital raised through our initial public offering.

The acquisition was the initial step in executing our growth strategy developed at the time of the initial public offering.

Prior to the initial public offering, we successfully acquired Primero in 2014, acquired control of Battle Creek in 2011, and acquired American West in 2001.

We also acquired Westminster in January 2020 with capital raised through this offering.

This acquisition has expanded our commercial insurance business, geographically diversified our spread of insurance risks, and provided additional expense efficiencies.

Going forward, we plan to consider other strategic investments and acquisitions that can enhance our businesses and achieve appropriate risk-adjusted returns over time.

Corporate Capital Strategy

Our philosophy is to deploy capital in a manner that provides long-term protection for our policyholders and creates long-term value for our shareholders.

This philosophy is supported by a number of underlying strategies implemented across the organization that are focused on preservation of capital, including:

prioritizing the use of data and modeling tools to help estimate the frequency and severity of risks within our insurance portfolio;  

maintaining a conservatively managed investment portfolio that supports our insurance operations under a wide range of operating and market conditions;  

ensuring our reinsurance program is designed to provide sufficient protection against material insurance exposures including, but not limited to, catastrophes caused by weather-related events;

and  

relying upon our Enterprise Risk Management framework to identify, quantify, and manage a broad range of risks across the organization.  

We view our capital position to consist of three layers, each of which has a specific size and purpose:

The first layer of capital, which we refer to as “regulatory capital”, is the amount of capital needed to satisfy state insurance regulatory requirements while supporting our growth objectives, and is held by each of our insurance company subsidiaries.  

The second layer of capital we call “contingency capital”.

While our regulatory capital is, by definition, a cushion for absorbing financial consequences of adverse events, such as loss reserve development, litigation, weather catastrophes, and investment market corrections, we view that as a base and hold additional capital for even more extreme operating conditions.

This capital is generally also held by each of our insurance company subsidiaries.  

The third layer of capital is classified as “excess capital”, and represents the excess of the sum of the first two layers.

This capital is available for deployment by NI Holdings in conjunction with our excess capital deployment priorities.  

Our excess capital deployment priorities are to (1) invest in existing businesses where we see opportunities for profitable growth, (2) make strategic investments and acquisitions that enhance our businesses and achieve appropriate risk-adjusted returns over time, and (3) return capital to shareholders through share repurchases or shareholder dividends.

Products and Services

Private Passenger Auto

Nodak Insurance, Battle Creek, and American

West each write private passenger auto insurance to provide protection against liability for bodily injury and property damage

arising from automobile accidents and protection against loss from damage to automobiles owned by the insured.

Private passenger

auto accounted for $73,224 (27.9%) of direct premiums written by the Company on a consolidated basis during 2019.

Nodak Insurance, Battle Creek, and American West each write private passenger auto insurance to provide protection against liability for bodily injury and property damage arising from automobile accidents and protection against loss from damage to automobiles owned by the insured.

Private passenger auto accounted for $75,341 (24.0%) of direct premiums written by the Company on a consolidated basis during 2020.

Non-standard Auto

Primero and Direct Auto write non-standard

auto insurance with a focus on minimum-limit auto liability coverage.

Direct premiums written on non-standard auto insurance were

$56,466 (21.6%) of direct premiums written by the Company on a consolidated basis during 2019.

Primero and Direct Auto write non-standard auto insurance with a focus on minimum-limit auto liability coverage.

Non-standard auto insurance accounted for $53,692 (17.1%) of direct premiums written by the Company on a consolidated basis during 2020.

Home and Farm

Nodak Insurance, Battle Creek, and American

West each write homeowners and farmowners policies to provide coverage for damage to buildings, equipment, and contents for a variety

of perils, including fire, lightning, wind, hail, and theft.

These policies also cover liability arising from injury to other persons

or their property while on the insured’s premises.

Home and farm accounted for $80,894 (30.9%) of direct premiums written

by the Company on a consolidated basis during 2019.

Crop hail and multi-peril crop insurance

policies are also offered by Nodak Insurance, American West, and Battle Creek.

Multi-peril crop insurance is a federal program

that protects against crop yield losses from all types of natural causes including drought, excessive moisture, freeze, and disease.

Crop hail insurance is a private insurance product designed to provide protection against losses to farmer’s crops due primarily

to hail damage.

Collectively, crop insurance accounted for $42,276 (16.1%) of direct premiums written by the Company on a consolidated

basis during 2019.

In addition to the products described

above, Nodak Insurance and American West write commercial multi-peril policies and excess liability coverages.

Collectively, these

other coverages accounted for $9,285 (3.5%) of the direct premiums written by the Company on a consolidated basis during 2019.

This segment also includes an assumed reinsurance block of business, with $3,849 of assumed premiums written on a consolidated

Nodak Insurance, Battle Creek, and American West each write homeowners and farmowners policies to provide coverage for damage to buildings, equipment, and contents for a variety of perils, including fire, lightning, wind, hail, and theft.

These policies also cover liability arising from injury to other persons or their property while on the insured’s premises.

Home and farm accounted for $83,393 (26.6%) of direct premiums written by the Company on a consolidated basis during 2020.

Crop hail and multi-peril crop insurance policies are also offered by Nodak Insurance, American West, and Battle Creek.

Multi-peril crop insurance is a federal program that protects against crop yield losses from all types of natural causes including drought, excessive moisture, freeze, and disease.

Crop hail insurance is a private insurance product designed to provide protection against losses to farmer’s crops due primarily to hail damage.

Collectively, crop insurance accounted for $39,893 (12.7%) of direct premiums written by the Company on a consolidated basis during 2020.

Nodak Insurance and Westminster write commercial multi-peril policies.

Collectively, commercial insurance accounted for $57,097 (18.2%) of the direct premiums written by the Company on a consolidated basis during 2020.

In addition to the products described above, Nodak Insurance and American West write excess liability coverages.

Collectively, these other coverages accounted for $4,771 (1.5%) of the direct premiums written by the Company on a consolidated

basis during 2020.

This segment also includes an assumed reinsurance block of business, with $4,693 of assumed premiums written on a consolidated basis during 2020.

Crop Insurance

Crop insurance is purchased by agricultural

producers, including farmers, ranchers, and others to protect themselves against either the loss of their crops (yield) due to

natural disasters, such as hail, drought, and floods, or the loss of revenue due to declines in the prices of agricultural products.

The two general categories of crop insurance are generally referred to as “crop-yield insurance”

and “crop-revenue

insurance”.

Crop-yield insurance protects against a reduction in the yield per acre from the historical average yield in

a specified area, such as a county or National Oceanic and Atmospheric Administration weather grid, while crop-revenue insurance

provides protection against declines in the price of the particular crop.

Most of the multi-peril crop insurance policies written

today combine both yield and revenue protection, with the revenue component providing the policyholder with the option to calculate

price-based losses on the higher of the prevailing price when the crop is planted or the price at harvest.

Crop insurance is purchased by agricultural producers, including farmers, ranchers, and others to protect themselves against either the loss of their crops (yield) due to natural disasters, such as hail, drought, and floods, or the loss of revenue due to declines in the prices of agricultural products.

The two general categories of crop insurance are generally referred to as “crop-yield insurance”

and “crop-revenue insurance”.

Crop-yield insurance protects against a reduction in the yield per acre from the historical average yield in a specified area, such as a county or National Oceanic and Atmospheric Administration weather grid, while crop-revenue insurance provides protection against declines in the price of the particular crop.

Most of the multi-peril crop insurance policies written today combine both yield and revenue protection, with the revenue component providing the policyholder with the option to calculate price-based losses on the higher of the prevailing price when the crop is planted or the price at harvest.

Beginning in 1980, the U.S.

expanded the federal crop insurance program to cover more crops and regions of the country.

More importantly, Congress permitted

private sector insurers to market and administer federal insurance policies in exchange for an opportunity to earn a profit while

bearing a portion of the insurance risk.

Congress also authorized a premium

subsidy for the farmers and ranchers.

there was a rapid increase in the acres insured from approximately 26 million acres in 1980 to 100 million acres in 1990.

Crop Insurance Reform Act of 1994 made participation in the crop insurance program mandatory for farmers to be eligible to participate

in other government support programs and provided a minimum level of free catastrophic risk coverage for insured and noninsured

The chart below illustrates the acres

insured through the federal multi-peril crop insurance program during the years 2017 through 2019:

Congress expanded the federal crop insurance program to cover more crops and regions of the country.

More importantly, Congress permitted private sector insurers to market and administer federal insurance policies in exchange for an opportunity to earn a profit while bearing a portion of the insurance risk.

Congress also authorized a premium subsidy for the farmers and ranchers.

As a result, there was a rapid increase in the acres insured from approximately 26 million acres in 1980 to 100 million acres in 1990.

The Federal Crop Insurance Reform Act of 1994 made participation in the crop insurance program mandatory for farmers to be eligible to participate in other government support programs and provided a minimum level of free catastrophic risk coverage for insured and noninsured crops.

The chart below illustrates the acres insured through the federal multi-peril crop insurance program during the years 2018 through 2020:

Year Ended December 31,

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Company crop acres insured:

The Company writes a very small amount

of multi-peril crop insurance in Nebraska.

American Farm Bureau Insurance Services

(“AFBIS”) underwrites all of the multi-peril crop and crop hail insurance policies written by Nodak Insurance, American

West, and Battle Creek, as well as several other state Farm Bureau-affiliated insurers.

AFBIS also processes and administers all

claims made by policyholders under such policies.

We reimburse AFBIS for its actual loss adjustment expense with respect to the

policies issued by us and pay AFBIS a percentage of the premiums we received with respect to such policies.

Nodak Insurance is

a shareholder of AFBIS, as is each of the other insurers for whom AFBIS provides such services.

AFBIS targets a three percent return

on capital and pays all remaining profits to Nodak Insurance and the other shareholders of AFBIS.

Nodak Insurance did not receive

any material distributions from AFBIS during the years ended December 31, 2017 through 2019.

The Company writes a very small amount of multi-peril crop insurance in Nebraska.

American Farm Bureau Insurance Services (“AFBIS”) underwrites all of the multi-peril crop and crop hail insurance policies written by Nodak Insurance, American West, and Battle Creek, as well as several other state Farm Bureau-affiliated insurers.

AFBIS also processes and administers all claims made by policyholders under such policies.

We reimburse AFBIS for its actual loss adjustment expense with respect to the policies issued by us and pay AFBIS a percentage of the premiums we received with respect to such policies.

Nodak Insurance is a shareholder of AFBIS, as is each of the other insurers for whom AFBIS provides such services.

AFBIS targets a three percent return on capital and pays all remaining profits to Nodak Insurance and the other shareholders of AFBIS.

Nodak Insurance did not receive any material distributions from AFBIS during the years ended December 31, 2018 through 2020.

Segment Financial Information

Note 21 to the Consolidated Financial Statements for the Company’s segment disclosures.

See Note 22 to the Consolidated Financial Statements for the Company’s segment disclosures.

Marketing and Distribution

Our marketing philosophy is to sell profitable

business in our core states, using a focused, cost-effective distribution system.

Nodak Insurance distributes its insurance products

through exclusive agents in North Dakota, while American West, Battle Creek, Primero, and Direct Auto rely on independent producers.

We view these independent producers as important partners because they are in a position to recommend either our insurance products

or those of a competitor to their customers.

Our marketing philosophy is to sell profitable business in our core states, using a focused, cost-effective distribution system.

Nodak Insurance distributes its insurance products through exclusive agents in North Dakota, while American West, Battle Creek, Primero, Direct Auto, and Westminster rely on independent producers.

We view these independent producers as important partners because they are in a position to recommend either our insurance products or those of a competitor to their customers.

We consider our relationships with these producers to be good.

We review our producers with respect

to both premium volume and profitability.

Our exclusive agents in Nodak Insurance are hired and trained by our sales staff in North

Dakota, while the independent producers in our other companies are appointed by the underwriting or marketing staff for each respective

We hold regular training sessions when we introduce new products or product changes, or we identify specific topics that

may help our producers more effectively market our products.

For the year ended December 31, 2019,

no individual producer was responsible for more than 5% of the Company’s direct premiums written by our insurance companies.

Producers are compensated through a fixed

base commission structure.

Agents receive commission as a percentage of premiums (generally 5% to 40%, with a wide variation by

product) as their primary compensation from us.

The Risk Management Agency of the United States Department of Agriculture (“RMA”)

establishes the maximum commission that can be paid to producers with respect to crop insurance policies.

Battle Creek and American

West pay profit sharing commissions to their agencies based on various annual agency premium thresholds and the difference between

the agency’s loss ratio and the loss ratio goal established by the insurance company.

The commission is paid with respect

to all property and casualty (non-crop) business earned within the calendar

Nodak Insurance pays a profit sharing commission

to its agents only with respect to farmowners business originated by such agents.

Our marketing efforts are further supported

by our claims philosophy, which is designed to provide prompt and efficient service and claims processing, resulting in a positive

experience for producers and policyholders.

We believe that these positive experiences result in higher policyholder retention

and new business opportunities when communicated by producers and policyholders to potential customers.

While we rely on our independent

agents for distribution and customer support, underwriting and claim handling responsibilities are retained by us.

agents have had direct relationships with us for a number of years.

Underwriting, Risk Assessment and

Our underwriting philosophy is aimed

at consistently generating profits through sound risk selection and pricing discipline.

Through our management and underwriting

staff, we regularly establish rates and rating classifications for our insureds based on loss and loss adjustment expense (“LAE”)

experience we have developed over the years.

We have various rating classifications based on location, type of business, and other

risk factors.

The nature of our business requires that

we remain sensitive to the marketplace and the pricing strategies of our competitors.

Using the market information as our background,

we normally set our prices based on our estimated future costs.

From time to time, we may reduce our discounts or apply a premium

surcharge to achieve an appropriate return.

Pricing flexibility allows us to provide a fair rate commensurate with the assumed

If our pricing strategy cannot yield sufficient premium to cover our costs on a particular type of risk, we may determine

not to underwrite that risk.

We review our producers with respect to both premium volume and profitability.

Our exclusive agents in Nodak Insurance are hired and trained by our sales staff in North Dakota, while the independent producers in our other companies are appointed by the underwriting or marketing staff for each respective company.

We hold regular training sessions when we introduce new products or product changes, and we identify specific topics that may help our producers more effectively market our products.

For the year ended December 31, 2020, no individual producer was responsible for more than 5% of the Company’s direct premiums written by our insurance companies.

Producers are compensated through a fixed base commission structure.

Agents receive commission as a percentage of premiums (generally 5% to 40%, with a wide variation by product) as their primary compensation from us.

The Risk Management Agency of the United States Department of Agriculture (“RMA”) establishes the maximum commission that can be paid to producers with respect to crop insurance policies.

Battle Creek and American West pay profit sharing commissions to their agencies based on various annual agency premium thresholds and the difference between the agency’s loss ratio and the loss ratio goal established by the insurance company.

The commission is paid with respect to all property and casualty (non-crop) business earned within the calendar year.

Nodak Insurance pays a profit sharing commission to its agents only with respect to farmowners business originated by such agents.

Westminster also pays profit sharing commissions to its agencies based on annual premium thresholds and profitability.

Our marketing efforts are further supported by our claims philosophy, which is designed to provide prompt and efficient service and claims processing, resulting in a positive experience for producers and policyholders.

We believe that these positive experiences result in higher policyholder retention and new business opportunities when communicated by producers and policyholders to potential customers.

While we rely on our independent agents for distribution and customer support, underwriting and claim handling responsibilities are retained by us.

Many of our agents have had direct relationships with us for a number of years.

Underwriting, Risk Assessment and Pricing

Our underwriting philosophy is aimed at consistently generating profits through sound risk selection and pricing discipline.

Through our management and underwriting staff, we regularly establish rates and rating classifications for our insureds based on loss and loss adjustment expense (“LAE”) experience we have developed over the years.

We have various rating classifications based on location, type of business, and other risk factors.

The nature of our business requires that we remain sensitive to the marketplace and the pricing strategies of our competitors.

Using the market information as our background, we normally set our prices based on our estimated future costs.

From time to time, we may reduce our discounts or apply a premium surcharge to achieve an appropriate return.

Pricing flexibility allows us to provide a fair rate commensurate with the assumed risk.

If our pricing strategy cannot yield sufficient premium to cover our costs on a particular type of risk, we may determine not to underwrite that risk.

It is our philosophy not to sacrifice profitability for premium growth.

Our competitive strategy in underwriting

is to provide very high quality service to our producers and insureds by responding quickly and effectively to information requests

and policy submissions.

We maintain information on all aspects of our business, which is regularly reviewed to determine both agency

and policyholder profitability.

Specific information regarding individual insureds is monitored to assist us in making decisions

about policy renewals or modifications.

Our underwriting staff includes 22 employees

with over 380 combined years of experience in property and casualty underwriting.

They are located primarily at our home office

in Fargo, North Dakota, as well as our office in Battle Creek, Nebraska, and underwrite coverage issued by Nodak Insurance, American

West and Battle Creek.

Primero employs an additional 3 underwriters and Direct Auto employs 4 underwriters in connection with their

non-standard auto insurance business.

All of our crop insurance is underwritten by AFBIS, as described in an earlier section.

We strive to be disciplined in our pricing

by pursuing rate increases to maintain or improve our underwriting profitability while still being able to attract and retain customers.

We utilize pricing reviews that we believe will help us price risks more accurately, improve account retention, and support the

production of profitable new business.

Our pricing reviews involve evaluating our claims experience and loss trends on a periodic

basis to identify changes in the frequency and severity of our claims.

We then consider whether our premium rates are adequate

relative to the level of underwriting risk as well as the sufficiency of our underwriting guidelines.

Our competitive strategy in underwriting is to provide very high quality service to our producers and insureds by responding quickly and effectively to information requests and policy submissions.

We maintain information on all aspects of our business, which is regularly reviewed to determine both agency and policyholder profitability.

Specific information regarding individual insureds is monitored to assist us in making decisions about policy renewals or modifications.

Our Nodak Insurance underwriting staff includes 20 employees with approximately 300 combined years of experience in property and casualty underwriting.

They are located primarily at our home office in Fargo, North Dakota, as well as our office in Battle Creek, Nebraska, and underwrite coverage issued by Nodak Insurance, American West and Battle Creek.

Primero and Direct Auto each employ 5 underwriters in connection with their non-standard auto insurance business.

Westminster has a staff of 8 in the underwriting area consisting of a Vice President, underwriters, and assistant underwriters in connection with its commercial insurance business.

All of our crop insurance is underwritten by AFBIS, as described above.

We strive to be disciplined in our pricing by pursuing rate increases to maintain or improve our underwriting profitability while still being able to attract and retain customers.

We utilize pricing reviews that we believe will help us price risks more accurately, improve account retention, and support the production of profitable new business.

Our pricing reviews involve evaluating

our claims experience and loss trends on a periodic basis to identify changes in the frequency and severity of our claims.

We then consider whether our premium rates are adequate relative to the level of underwriting risk as well as the sufficiency of our underwriting guidelines.

Claims and Litigation Management

Our claims management philosophy involves:

aggressive closure of claims through prompt and thorough investigation of the facts related to the claim;

equitable settlement of meritorious claims;

vigorous defense of unfounded claims as to coverage, liability, or the amount claimed.

Our claims team supports our underwriting

strategy by working to provide a timely, good faith claims handling response to our policyholders.

Claims excellence is achieved

by timely investigation and handling of claims, settlement of meritorious claims for equitable amounts, maintenance of adequate

case reserves, and control of claims loss adjustment expenses.

Claims on insurance policies are received

directly from the insured or through our producers.

Our claims department supports our producer relationship strategy by working

to provide a consistently responsive level of claim service to our policyholders.

Our claims staff is comprised of 46 employees

with over 810 years of combined experience in processing property and casualty insurance claims.

They are located primarily at

our home office in Fargo, North Dakota, but also throughout our coverage areas of North Dakota, South Dakota, and Nebraska.

also employs 12 claims personnel and Direct Auto employs 33 claims personnel in connection with the non-standard auto insurance

and  

vigorous defense of unfounded claims as to coverage, liability, or the amount claimed.  

Our claims team supports our underwriting strategy by working to provide a timely, good faith claims handling response to our policyholders.

Claims excellence is achieved by timely investigation and handling of claims, settlement of meritorious claims for equitable amounts, maintenance of adequate case reserves, and control of claims loss adjustment expenses.

Claims on insurance policies are received directly from the insured or through our producers.

Our claims department supports our producer relationship strategy by working to provide a consistently responsive level of claim service to our policyholders.

Our Nodak Insurance claims staff is comprised of 46 employees with over 856 years of combined experience in processing property and casualty insurance claims.

They are located primarily at our home office in Fargo, North Dakota, but also throughout our coverage areas of North Dakota, South Dakota, and Nebraska.

Primero employs 11 claims personnel and Direct Auto employs 27 claims personnel in connection with the non-standard auto insurance business.

Westminster employs 4 claims personnel in connection with its commercial insurance business.

All claims made under our multi-peril crop and crop hail insurance policies are processed and administered by AFBIS.

Our insurance operations rely on software

to provide the information management systems platform that runs our policy underwriting, policy issuance, claims processing, and

accounting functions.

Our insurance operations rely on software to provide the information management systems platform that runs our policy underwriting, policy issuance, claims processing, and accounting functions.

These systems permit us to integrate the accounting and reporting functions of all of our insurance operations.

We utilize offsite servers for our information systems with daily backup of data.

We have adopted a disaster recovery plan, and

other risk mitigation practices, tailored to meet our needs and geographic location.

We seek to invest continuously in new technology

to maximize our business opportunities while protecting our interests and those of our clients.

We have adopted a disaster recovery plan, and other risk mitigation practices, tailored to meet our needs and geographic location.

Our technology allows most employees with the capability to work remotely while maintaining desired service levels.

We seek to invest continuously in new technology to maximize our business opportunities while protecting our interests and those of our clients.

Enterprise Risk Management

Our Company is subject to significant

risks, in addition to the normal risks of a property and casualty insurance company.

These risks are discussed in more detail in

the “Item 1A.

Risk Factors”

Our Company is subject to significant risks, including the normal risks of a property and casualty insurance company.

These risks are discussed in more detail in the “Item 1A.

Risk Factors”

section of this Form 10-K.

We consider an enterprise-wide risk management

program to be an integral part of managing our business and a key element in our approach to corporate governance.

Our Enterprise

Risk Management Committee (the “ERMC”) is responsible for the alignment of operational risk management strategies as

the coordination point for enterprise-level direction setting with regard to risk management issues.

The multi-disciplinary ERMC

regularly monitors risk reports and metrics regarding a variety of continuing and emerging risks that may adversely affect the

Company, its policyholders, or other stakeholders.

The Audit Committee of the Board of Directors oversees risk management and regularly

receives reports from the ERMC.

Cybersecurity risk is an important and

evolving focus for the Company.

The increased sophistication and activities of unauthorized parties attempting to access our systems

is an ever-present risk.

Cybersecurity risks may also arise from human error, fraud, or malice on the part of employees or third

parties who have authorized access to the Company’s systems or information.

Our cybersecurity strategy employs a

variety of tactics to monitor and assess threat levels, remediate our exposures, and enhance our systems and applications security.

The Company collaborates with a third party cybersecurity advisor to provide periodic assessments and recommendations.

also requires monthly online security training to be completed by employees.

We consider an enterprise-wide risk management program to be an integral part of managing our business and a key element in our approach to corporate governance.

Our Enterprise Risk Management Committee (the “ERMC”) is responsible for the alignment of operational risk management strategies as the coordination point for enterprise-level direction setting with regard to risk management issues.

The multi-disciplinary ERMC regularly monitors risk reports and metrics regarding a variety of continuing and emerging risks that may adversely affect the Company, its policyholders, or other stakeholders.

The Audit Committee of the Board of Directors oversees risk management and regularly receives reports from the ERMC.

Cybersecurity risk is an important and evolving focus for the Company.

The increased sophistication and activities of unauthorized parties attempting to access our systems is an ever-present risk.

Cybersecurity risks may also arise from human error, fraud, or malice on the part of employees or third parties who have authorized access to the Company’s systems or information.

Our cybersecurity strategy employs a variety of tactics to monitor and assess threat levels, remediate our exposures, and enhance our systems and applications security.

The Company collaborates with a third party cybersecurity advisor to provide periodic

assessments and recommendations.

The Company also requires monthly online security training to be completed by employees.

While we have experienced threats to our data and systems, to date, we are not aware of any cyber-security breach.

Reinsurance Ceded

We reinsure a portion of our exposure

and pay to the reinsurers a portion of the premiums received on all policies reinsured.

Insurance policies written by us are reinsured

with other insurance companies principally to:

reduce our net liability exposure on individual risks;

We reinsure a portion of our exposure and pay to the reinsurers a portion of the premiums received on all policies reinsured.

Insurance policies written by us are reinsured with other insurance companies principally to:

reduce our net liability exposure on individual risks;  

stabilize our underwriting results;

increase our underwriting capacity.

Reinsurance does not legally discharge

us, as the insurance company issuing the policy, from primary liability for the full amount due under the reinsured policies, even

though the assuming reinsurer is obligated to reimburse the company issuing the policy to the extent of the coverage ceded.

A primary factor in the selection of

reinsurers from whom we purchase reinsurance is their financial strength.

Our reinsurance arrangements are generally renegotiated

annually or bi-annually.

For the year ended December 31, 2019, NI Holdings ceded to reinsurers $17,120 of written premiums, compared

to $30,394 of written premiums for the year ended December 31, 2018 and $16,665 of written premiums for the year ended December

The higher level of premiums ceded in 2018 was primarily

due to additional sharing of multi-peril crop insurance premiums

with the federal government as a result of the excellent loss experience in that year.

The chart below illustrates the reinsurance

coverage under our excess of loss treaty for individual casualty risks during the years 2017 through 2019:

Losses Incurred

Nodak Insurance

Reinsurance Treaty

$11,400 in excess of $600

The chart below illustrates the reinsurance

coverage under our excess of loss treaty for individual property risks during the years 2017 through 2019:

Losses Incurred

Nodak Insurance

Reinsurance Treaty

$19,500 in excess of $500

During 2020, the retention level for

both individual casualty and property risks increased to $700, with reinsurance coverage of $12,000 for casualty risks and $25,000

for property risks.

As a group, Nodak Insurance, American

West, and Battle Creek collectively retains the first dollars of weather-related losses from catastrophic events and has reinsurance

under various reinsurance agreements up to certain levels in excess of the retained risk.

The table below illustrates the Company’s

reinsurance coverage during the years 2017 through 2020, including coverage for Westminster American in 2020:

and  

increase our underwriting capacity.  

Reinsurance does not legally discharge us, as the insurance company issuing the policy, from primary liability for the full amount due under the reinsured policies, even though the assuming reinsurer is obligated to reimburse the company issuing the policy to the extent of the coverage ceded.

A primary factor in the selection of reinsurers from whom we purchase reinsurance is their financial strength.

Our reinsurance arrangements are generally renegotiated annually or bi-annually.

For the year ended December 31, 2020, NI Holdings ceded to reinsurers $23,633 of written premiums, compared to $17,120 of written premiums for the year ended December 31, 2019 and $30,394 of written premiums for the year ended December 31, 2018.

Written premiums ceded for 2020 increased year-over-year due to the addition of Westminster’s commercial business.

The higher level of premiums ceded in 2018 was primarily due to additional sharing of multi-peril crop insurance premiums with the federal government as a result of the excellent loss experience in that year.

The Company purchases reinsurance coverage under excess of loss treaties for both individual casualty and individual property risks.

Prior to 2020, the Company retained $600 of risk on individual casualty risks with coverage of $12,000, and $500 of risk on individual property risks with coverage of $25,000.

Beginning in 2020, the Company retained $700 of risk on both casualty and property risks, with the same $12,000 coverage on casualty risks and $25,000 coverage on property risks.

As a group, Nodak Insurance, American West, Battle Creek, and Westminster collectively retain the first dollars of weather-related losses from catastrophic events and have reinsurance under various reinsurance agreements up to certain levels in excess of the retained risk.

The table below illustrates the Company’s reinsurance coverage during the years 2018 through 2021:

Year Ended December 31,

Weather-Related

Catastrophic Events

Weather-Related Losses from Catastrophic Events Retained

Coverage in Excess

The insolvency or inability of any reinsurer

to meet its obligations to us could have a material adverse effect on our results of operations or financial condition.

NI Holdings’

reinsurance providers, the majority of whom are longstanding partners that understand our business, are all carefully selected

with the help of our reinsurance brokers.

We monitor the solvency of reinsurers through regular review of their financial statements

and their A.M.

The insolvency or inability of any reinsurer to meet its obligations to us could have a material adverse effect on our results of operations or financial condition.

NI Holdings’

reinsurance providers, the majority of whom are longstanding partners that understand our business, are all carefully selected with the help of our reinsurance brokers.

We use many reinsurers, both domestic and international, which helps us to avoid concentration of credit risk associated with our reinsurance.

We also monitor the solvency of reinsurers through regular review of their financial statements and their A.M.

Best ratings.

All of our current reinsurance partners have at least an “A-”

financial strength rating

All of our current reinsurance partners have at least an “A-”

financial strength rating from A.M.

According to A.M.

Best, companies with a financial strength rating of “A-”

or better “have an

excellent ability to meet their ongoing obligations to policyholders.”

We have limited exposure to one prior reinsurer that

previously had a “B++”

rating before it was withdrawn by A.M.

We have experienced no significant difficulties

collecting amounts due from any reinsurers.

Reinsurance for multi-peril crop insurance

is provided by the Federal Crop Insurance Corporation (“FCIC”).

Insurers can assign each policy issued to either its

“assigned risk”

or “commercial”

The FCIC retains an increasing percentage of underwriting losses

at successively higher loss ratios while ceding an increasing percentage of the premium at lower loss ratios.

The commercial fund

permits insurers to retain more of the underwriting gains and losses, while the assigned risk fund cedes up to 80% of the risk

Best, companies with a financial strength rating of “A-”

or better “have an excellent ability to meet their ongoing obligations to policyholders”.

We have experienced no significant difficulties collecting amounts due from any reinsurers.

Reinsurance for multi-peril crop insurance is provided by the Federal Crop Insurance Corporation (“FCIC”).

Insurers can assign each policy issued to either its “assigned risk”

or “commercial”

The FCIC retains an increasing percentage of underwriting losses at successively higher loss ratios while ceding an increasing percentage of the premium at lower loss ratios.

The commercial fund permits insurers to retain more of the underwriting gains and losses, while the assigned risk fund cedes up to 80% of the risk to the FCIC.

The exact treatment of the commercial fund varies by state groups.

In Group 1, which includes Illinois, Indiana, Iowa,

Minnesota and Nebraska, the FCIC retains a larger share of the underwriting gains and a smaller portion of the underwriting losses

when compared to all other states.

Aggregate stop loss reinsurance is purchased for crop hail and multi-peril insurance.

the years 2017 through 2019, we purchased fifty percentage points of coverage above a 100% direct loss ratio for crop hail and

we purchased forty-five percentage points of coverage for multi-peril crop above a 105% loss ratio after the FCIC reinsurance protection.

In Group 1, which includes Illinois, Indiana,

Iowa, Minnesota and Nebraska, the FCIC retains a larger share of the underwriting gains and a smaller portion of the underwriting losses when compared to all other states.

Aggregate stop loss reinsurance is also purchased for crop hail and multi-peril insurance.

During the years 2018 through 2020, we purchased fifty percentage points of coverage above a 100% direct loss ratio for crop hail and we purchased forty-five percentage points of coverage for multi-peril crop above a 105% loss ratio after the FCIC reinsurance protection.

This represents the worst loss exposure given the FCIC formula, thereby capping the multi-peril crop loss ratio at 105%.

The following table sets forth the amounts

of reinsurance recoverables on losses by company as of December 31, 2019 and the current A.M.

The following table sets forth the amounts of reinsurance recoverables on losses by company as of December 31, 2020 and the current A.M.

Best rating of each as of February 2, 2021.

Reinsurance Company

Recoverables On

Percentage of

Total Recoverable

Reinsurance Recoverables On Losses

Percentage of Total Recoverable

Allied World Reinsurance Company

Arch Reinsurance Company

Aspen Insurance UK Limited

Axis Insurance Company

Employers Mutual Casualty Company

3 unchanged sentences

Hannover Rueck SE

Maiden Reinsurance North America

Helvetia Schweizerische

Munich Reinsurance of America

Partner Reinsurance Company Ltd

QBE Reinsurance Corporation

Renaissance Reinsurance US Inc.

Scor Reinsurance Company

1 unchanged sentence

Reinsurance Assumed

Nodak Insurance assumes 100% of the risk

under policies written by Battle Creek.

In addition, Nodak Insurance is required by statute to participate in certain residual

market pools.

This participation requires Nodak Insurance to assume business for property exposures that are not insured in the

voluntary marketplace.

Nodak Insurance is required by statute to participate in certain residual market pools.

This participation requires Nodak Insurance to assume business for property exposures that are not insured in the voluntary marketplace.

Nodak Insurance participates in these residual markets pro rata on a market share basis.

Additionally, through American Agriculture

Insurance Company (affiliated with the American Farm Bureau Federation), Nodak Insurance participates in both domestic and international

property insurance pools.

Additionally, through American Agriculture Insurance Company (affiliated with the American Farm Bureau Federation), Nodak Insurance participates in both domestic and international property insurance pools.

Annually, Nodak Insurance reviews the available pools and selects the pools in which it will participate.

No multi-peril crop or crop hail insurance policies are included in such pools.

Participation in such pools provides Nodak Insurance

with the opportunity to diversify its risk while increasing its annual net premiums earned.

In 2019, 2018 and 2017, Nodak Insurance

assumed $3,545, $3,945, and $3,959, respectively, of written premiums from such pools.

Since 2016, Nodak Insurance has assumed

100% of the crop hail premiums and losses from American West and Rural Mutual Insurance Company (a company affiliated with the

Wisconsin Farm Bureau Federation).

The business was then pooled annually with Nodak Insurance’s crop hail business and proportionately

retroceded back to each participant.

This crop hail pool allows Nodak Insurance and American West to diversify their crop insurance

risk across an additional geographic region.

Participation in such pools provides Nodak Insurance with the opportunity to diversify its risk while increasing its annual net premiums earned.

In 2020, 2019 and 2018, Nodak Insurance assumed $4,290, $3,545, and $3,945, respectively, of written premiums from such pools.

Since 2016, Nodak Insurance has assumed 100% of the crop hail premiums and losses from American West and Rural Mutual Insurance Company (a company affiliated with the Wisconsin Farm Bureau Federation).

The business was then pooled annually with Nodak Insurance’s crop hail business and proportionately retroceded back to each participant.

This crop hail pool allows Nodak Insurance and American West to diversify their crop insurance risk across an additional geographic region.

Unpaid Loss and Loss Adjustment Expense

NI Holdings is required by applicable

insurance laws and regulations to maintain reserves for unpaid losses and LAE.

Our liability for unpaid losses and LAE consists

of (1) case reserves, which are reserves for claims that have been reported to us, and (2) reserves for claims that have been incurred

but not yet been reported and for the future development of case reserves (“IBNR”).

The laws and regulations require

that provision be made for the ultimate cost of those claims without regard to how long it takes to settle them or the time value

The determination of reserves involves actuarial and statistical projections of what we expect to be the cost of the

ultimate settlement and administration of such claims.

The liability for unpaid losses and LAE is set based on facts and circumstances

then known, estimates of future trends in claims severity, and other variable factors such as inflation and changing judicial theories

of liability.

Estimating the ultimate liability for

unpaid losses and LAE is an inherently uncertain process.

Therefore, the liability for unpaid losses and LAE does not represent

an exact calculation of that liability.

Our reserving policy recognizes this uncertainty by maintaining reserves at a level providing

for the possibility of adverse development relative to the estimation process.

When a claim is reported to us, our claims

personnel establish a case reserve for the estimated amount of the ultimate payment to the extent it can be determined or estimated.

This estimate reflects an informed judgment based upon general insurance reserving practices and on the experience and knowledge

of our claims staff.

In estimating the appropriate reserve, our claims staff considers the nature and value of the specific claim,

the severity of injury or damage, and the policy provisions relating to the type of loss, to the extent determinable at the time.

NI Holdings is required by applicable insurance laws and regulations to maintain reserves for unpaid losses and LAE.

Our liability for unpaid losses and LAE consists of (1) case reserves, which are reserves for claims that have been reported to us, and (2) reserves for claims that have been incurred but not yet been reported and for the future development of case reserves (“IBNR”).

The laws and regulations require that provision be made for the ultimate cost of those claims without regard to how long it takes to settle them or the time value of money.

The determination of reserves involves actuarial and statistical projections of what we expect to be the cost of the ultimate settlement and administration of such claims.

The liability for unpaid losses and LAE is set based on facts and circumstances then known, estimates of future trends in claims severity, and other variable factors such as inflation and changing judicial theories of liability.

Estimating the ultimate liability for unpaid losses and LAE is an inherently uncertain process.

Therefore, the liability for unpaid losses and LAE does not represent an exact calculation of that liability.

Our reserving policy recognizes this uncertainty by maintaining reserves at a level providing for the possibility of adverse development relative to the estimation process.

When a claim is reported to us, our claims personnel establish a case reserve for the estimated amount of the ultimate payment to the extent it can be determined or estimated.

This estimate reflects an informed judgment based upon general insurance reserving practices and on the experience and knowledge of our claims staff.

In estimating the appropriate reserve, our claims staff considers the nature and value of the specific claim, the severity of injury or damage, and the policy provisions relating to the type of loss, to the extent determinable at the time.

In many situations, we use average default case reserve amounts for less costly claims.

Case reserves are adjusted by our claims

staff as more information becomes available.

Case reserves are adjusted by our claims staff as more information becomes available.

It is our policy to settle each claim as expeditiously as possible.

We maintain IBNR reserves to provide

for already incurred claims that have not yet been reported and development on reported claims.

The IBNR reserve is determined

by estimating our ultimate net liability for both reported and IBNR claims, and then subtracting the case reserves and paid losses

and LAE for reported claims.

Each quarter, NI Holdings computes its

estimated ultimate liability using methodologies and procedures that follow appropriate actuarial standards.

However, because the

establishment of loss reserves is an inherently uncertain process, we cannot assure you that ultimate losses will not exceed the

established loss reserves.

Adjustments in aggregate reserves, if any, are reflected in the operating results of the period during

which such adjustments are made.

The following table provides a reconciliation

of beginning and ending unpaid losses and LAE reserve balances of NI Holdings for the years ended December 31, 2019, 2018 and 2017.

We maintain IBNR reserves to provide for already incurred claims that have not yet been reported and development on reported claims.

The IBNR reserve is determined by estimating our ultimate net liability for both reported and IBNR claims, and then subtracting the case reserves and paid losses and LAE for reported claims.

Each quarter, NI Holdings computes its estimated ultimate liability using methodologies and procedures that follow appropriate actuarial standards.

However, because the establishment of loss reserves is an inherently uncertain process, we cannot assure you that ultimate losses will not exceed the established loss reserves.

Adjustments in aggregate reserves, if any, are reflected in the operating results of the period during which such adjustments are made.

The following table provides a reconciliation of beginning and ending unpaid losses and LAE reserve balances of NI Holdings for the years ended December 31, 2020, 2019 and 2018.

Year Ended December 31,

12 unchanged sentences

Net balance at end of year

The estimation process for determining

the liability for unpaid losses and LAE inherently results in adjustments each year for claims incurred (but not paid) in preceding

Negative amounts reported for claims incurred related to prior years are a result of claims being settled for amounts less

than originally estimated (favorable development).

Positive amounts reported for claims incurred related to prior years are a result

of claims being settled for amounts greater than originally estimated (unfavorable or adverse development).

The following table shows the development

of NI Holding’s liability for unpaid loss and LAE from 2009 through 2019.

The top line of the table shows the liabilities

at the balance sheet date, including losses incurred but not yet reported.

The upper portion of the table shows the cumulative

amounts subsequently paid as of successive years with respect to the liability.

The lower portion of the table shows the re-estimated

amount of the previously recorded liability based on experience as of the end of each succeeding year.

The estimates fluctuate

as more information becomes known about the frequency and severity of claims for individual years.

The redundancy (deficiency)

exists when the re-estimated liability for each reporting period is less (greater) than the prior liability estimate.

The “cumulative

redundancy (deficiency)”

depicted in the table, for any particular calendar year, represents the aggregate change in the

initial estimates over all subsequent calendar years.

Gross deficiencies and redundancies may

be significantly more or less than net deficiencies and redundancies due to the nature and extent of applicable reinsurance.

The estimation process for determining the liability for unpaid losses and LAE inherently results in adjustments each year for claims incurred (but not paid) in preceding years.

Negative amounts reported for claims incurred related to prior years are a result of claims being settled for amounts less than originally estimated (favorable development).

Positive amounts reported for claims incurred related to prior years are a result of claims being settled for amounts greater than originally estimated (unfavorable or adverse development).

The following table shows the development of NI Holding’s liability for unpaid loss and LAE from 2010 through 2020.

The top line of the table shows the liabilities at the balance sheet date, including losses incurred but not yet reported.

The upper portion of the table shows the cumulative amounts subsequently paid as of successive years with respect to the liability.

The lower portion of the table shows the re-estimated amount of the previously recorded liability based on experience as of the end of each succeeding year.

The estimates fluctuate as more information becomes known about the frequency and severity of claims for individual years.

The redundancy (deficiency) exists when the re-estimated liability for each reporting period is less (greater) than the prior liability estimate.

The cumulative redundancy (deficiency) depicted in the table, for any particular calendar year, represents the aggregate change in the initial estimates over all subsequent calendar years.

Gross deficiencies and redundancies may be significantly more or less than net deficiencies and redundancies due to the nature and extent of applicable reinsurance.

As of December 31, 2020

23 unchanged sentences

Cumulative total redundancy (deficiency)

Gross liability –

Reinsurance recoverable

Net liability –

Gross re-estimated liability –

Re-estimated reinsurance recoverables –

Gross liability –

end of year

Reinsurance recoverable

Net liability –

end of year

Gross re-estimated liability –

Re-estimated reinsurance recoverables –

Net re-estimated liability - latest

Gross cumulative redundancy (deficiency)

NI Holdings’

investments in fixed

income and equity securities are classified as available for sale and are carried at fair value.

Beginning in 2019, in accordance with

a change in accounting principle, changes in unrealized gains and losses on the Company’s investments in equity securities

are included in net income as a part of net capital gains and losses on investments.

These gains and losses may be significant

given the size of the equity securities holdings and the inherent volatility in equity securities prices.

Prior to 2019, the changes

in unrealized gains and losses pertaining to such investments were recorded in other comprehensive income, net of income taxes.

These changes in unrealized gains and losses on fixed income securities continue to be recorded in other comprehensive income,

net of income taxes.

The new accounting treatment has no effect on Equity.

The goal of the Company’s investment

activities is to complement and support its overall mission.

As such, the investment portfolio is structured to maximize after-tax

investment income and price appreciation while maintaining the portfolio’s target risk profile.

The Company’s overall investment

objectives are (i) growth and preservation of capital, (ii) achieving favorable returns on invested assets through investment in

high quality income producing assets, and (iii) assuring proper levels of liquidity to fund expected operating needs.

See “Item

Quantitative and Qualitative Information about Market Risk”

NI Holdings’

investments in fixed income and equity securities are classified as available for sale and are carried at fair value.

Beginning in 2019, in accordance with a change in accounting principle, changes in unrealized gains and losses on the Company’s investments in equity securities are reported in net income as a part of net capital gains and losses on investments.

These gains and losses may be significant given the size of the equity securities holdings and the inherent volatility in equity securities prices.

Prior to 2019, the changes in unrealized gains and losses pertaining to such investments were recorded in other comprehensive income, net of income taxes.

These changes in unrealized gains and losses on fixed income securities continue to be recorded in other comprehensive income, net of income taxes.

The new accounting treatment has no effect on shareholders’

The goal of the Company’s investment activities is to complement and support its overall mission.

As such, the investment portfolio is structured to maximize after-tax investment income and price appreciation while maintaining the portfolio’s target risk profile.

The Company’s overall investment objectives are (i) growth and preservation of capital, (ii) achieving favorable returns on invested assets through investment in high quality income producing assets, and (iii) assuring proper levels of liquidity to fund expected operating needs.

See “Item 7A.

Quantitative and Qualitative Information About Market Risk”

for discussion about specific risks concerning investments.

In addition to any investments prohibited

by the insurance laws and regulations of North Dakota and any other applicable states, NI Holdings’

investment policies prohibit

the following investments and investing activities:

commodities and futures contracts;

options (except covered call options);

non-investment grade debt obligations (determined at time of purchase);

interest only, principal only, and residual tranche collateralized mortgage obligations;

private placements;

foreign currency trading;

limited partnerships, other than publicly traded master limited partnerships;

convertible securities;

venture capital investments;

investment real estate properties;

securities lending;

In addition to any investments prohibited by the insurance laws and regulations of North Dakota and any other applicable states, NI Holdings’

investment policies prohibit the following investments and investing activities:

commodities and futures contracts;  

options (except covered call options);  

non-investment grade debt obligations (determined at time of purchase);  

interest only, principal only, and residual tranche collateralized mortgage obligations;  

foreign currency trading;  

limited partnerships, other than publicly traded master limited partnerships;  

convertible securities;  

venture capital investments;  

investment real estate properties;  

securities lending;  

portfolio leveraging (i.e., margin transactions);

short selling.

The Executive Committee of NI Holdings’

Board of Directors reviews and approves the Company’s investment policy periodically.

The investment portfolio is managed

by Conning, Inc., Disciplined Growth Investors, and CIBC Personal Wealth Management.

The following table sets forth information

concerning NI Holdings’

and  

short selling.  

The Executive Committee of NI Holdings’

Board of Directors reviews and approves the Company’s investment policy periodically.

The investment portfolio is managed by Conning, Inc., Disciplined Growth Investors, and CIBC Personal Wealth Management.

The following table sets forth information concerning NI Holdings’

Amortized Cost

9 unchanged sentences

Equity securities

The amortized cost and estimated fair

value of fixed income securities by contractual maturity are shown below as of December 31, 2019.

Actual maturities could differ

from contractual maturities because issuers of the securities may have the right to call or prepay certain obligations, which may

or may not include call or prepayment penalties.

The amortized cost and estimated fair value of fixed income securities by contractual maturity are shown below as of December 31, 2020.

Actual maturities could differ from contractual maturities because issuers of the securities may have the right to call or prepay certain obligations, which may or may not include call or prepayment penalties.

December 31, 2020

6 unchanged sentences

Total fixed income securities

At December 31, 2019, the average maturity

of NI Holdings’

At December 31, 2020, the average maturity of NI Holdings’

fixed income investment portfolio was 4.65 years and the average duration was 3.57 years.

As a result, the

fair value of investments may fluctuate significantly in response to changes in interest rates.

In addition, NI Holdings may experience

investment losses to the extent our liquidity needs require the disposition of fixed income securities in unfavorable interest

rate environments.

NI Holdings uses quoted values and other

data provided by independent pricing services as inputs in its process for determining fair values of its investments.

services cover substantially all of the securities in the portfolio for which publicly quoted values are not available.

services’

evaluations represent an exit price, which is a good faith opinion as to what a buyer in the marketplace would

pay for a security in a current sale.

The pricing is based on observable inputs either directly or indirectly, such as quoted prices

in markets that are active, quoted prices for similar securities at the measurement date, or other inputs that are observable.

NI Holdings’

investment managers

provide pricing information that they utilize, together with information obtained from independent pricing services, to determine

the fair value of our fixed income securities.

After a detailed review of the information obtained from the pricing services at

December 31, 2019 and 2018, no adjustment was made to the values provided.

The following table sets forth our average

cash and invested assets, net investment income, and return on average cash and invested assets for the reported periods:

As a result, the fair value of investments may fluctuate significantly in response to changes in interest rates.

In addition, NI Holdings may experience investment losses to the extent our liquidity needs require the disposition of fixed income securities in unfavorable interest rate environments.

NI Holdings uses quoted values and other data provided by independent pricing services as inputs in its process for determining fair values of its investments.

The pricing services cover substantially all of the securities in the portfolio for which publicly quoted values are not available.

The pricing services’

evaluations represent an exit price, which is a good faith opinion as to what a buyer in the marketplace would pay for a security in a current sale.

The pricing is based on observable inputs either directly or indirectly, such as quoted prices in markets that are active, quoted prices for similar securities at the measurement date, or other inputs that are observable.

NI Holdings’

investment managers provide pricing information that they utilize, together with information obtained from independent pricing services, to determine the fair value of our fixed income securities.

After a detailed review of the information obtained from the pricing services at December 31, 2020 and 2019, no adjustment was made to the values provided.

The following table sets forth our average cash and invested assets, net investment income, and return on average cash and invested assets for the reported periods:

Year Ended December 31,

5 unchanged sentences

Net return on average cash and invested assets

Best rates insurance companies based

on factors of concern to policyholders.

The rating evaluates the claims paying ability of a company, and is not a recommendation

of the merits of an investment in our common stock, or the common stock of any other insurer.

Nodak Insurance and Battle Creek are

rated “A”

Best, which is the third highest out of 15 possible ratings.

Best has affirmed a stable financial

strength outlook to both Nodak Insurance and Battle Creek.

American West is rated “A-”

with a stable financial strength

Primero and Direct Auto are unrated because the nature of the non-standard auto business is not ratings sensitive.

its evaluation of a company, A.M.

Best’s Credit Rating Methodology (“BCRM”) builds on a focus of balance sheet

strength, operating performance, the business profile, and enterprise risk management.

More specifically, the components of the

BCRM include:

the company’s profitability, leverage, and liquidity;

its book of business, product and geographic diversity, distribution channels, competition, and market position;

the quality and appropriateness of its reinsurance program;

the quality and management of its assets and liabilities;

the adequacy of its reserves and surplus;

its capital structure;

its pricing sophistication and data quality;

its regulatory, event, and product risks;

the experience and competence of its management;

Best rates insurance companies based on factors of concern to policyholders.

The rating evaluates the claims paying ability of a company, and is not a recommendation of the merits of an investment in our common stock, or the common stock of any other insurer.

All of the Company’s insurance subsidiary and affiliate companies are rated “A”

Excellent by A.M.

Best, which is the third highest out of 15 possible ratings, under a group rating due to the intercompany pooling reinsurance agreement.

Best has affirmed a stable financial strength outlook to the group.

In its evaluation of a company, A.M.

Best’s Credit Rating Methodology (“BCRM”) builds on a focus of balance sheet strength, operating performance, the business profile, and enterprise risk management.

More specifically, the components of the BCRM include:

the company’s profitability, leverage, and liquidity;  

its book of business, product and geographic diversity, distribution channels, competition, and market position;  

the quality and appropriateness of its reinsurance program;  

the quality and management of its assets and liabilities;  

the adequacy of its reserves and surplus;  

its capital structure;  

its pricing sophistication and data quality;  

its regulatory, event, and product risks;  

the experience and competence of its management;  

its risk identification, management, appetite, and tolerances;

its governance and risk culture.

If we are unable to maintain at least

an “A-”

and  

its governance and risk culture.  

If we are unable to maintain at least an “A-”

rating from A.M.

Best, it may impair our ability to compete effectively.

The property casualty and crop insurance

markets are highly competitive.

The property casualty and crop insurance markets are highly competitive.

NI Holdings competes with stock insurance companies, mutual companies, and other underwriting organizations.

Our largest competitors in North Dakota for private passenger auto and homeowners include Progressive Casualty Insurance Company,

State Farm Mutual Insurance Company, American Family Insurance, QBE Insurance Group, Farmers Union Mutual Insurance, and Auto-Owners

In South Dakota and Nebraska, we have small market shares and our competitors are the large national and regional companies

as well as Farmers Mutual of Nebraska.

Based on 2018 data, Nodak Insurance is the largest writer of farmowners insurance in North

Our largest competitors include Farmers Union Mutual Insurance, North Star Mutual Insurance Company, and American Family

In Nebraska and South

Dakota, we have a small farmowners market share, which is dominated by the large national and

regional carriers.

Certain of these competitors have substantially greater financial, technical, and operating resources than we

do and may be able to offer lower rates or higher commissions to their producers.

The chart below illustrates the reported

premiums written for multi-peril crop insurance through the federal multi-peril crop insurance program during the years 2017 through

2019 (in thousands):

Our largest competitors in North Dakota for private passenger auto and homeowners include Progressive Casualty Insurance Company, State Farm Mutual Insurance Company, American Family Insurance, Allstate Corporation, Farmers Union Mutual Insurance Company, and Auto-Owners Insurance.

In South Dakota and Nebraska, we have small market shares and our competitors are the large national and regional companies as well as Farmers Mutual

In our non-standard auto markets, which are primarily Chicago, Nevada, and Arizona, our primary competitors are regional carriers.

Westminster’s primary competition comes from regional carriers including Harford Mutual Insurance Company, Greater New York Mutual, and Millers Capital.

We also see competition from national companies like The Travelers Companies and Nationwide Mutual Insurance Company.

Based on 2019 data, Nodak Insurance is the largest writer of farmowners insurance in North Dakota.

Our largest competitors include Farmers Union Mutual Insurance Company, North Star Mutual Insurance Company, American Family Insurance, and Nationwide Mutual Insurance Company.

In Nebraska and South Dakota, we have a small farmowners market share, which is dominated by the large national and regional carriers.

Certain of these competitors have substantially greater financial, technical, and operating resources than we do and may be able to offer lower rates or higher commissions to their producers.

The chart below illustrates the reported premiums written for multi-peril crop insurance through the federal multi-peril crop insurance program during the years 2018 through 2020 (in thousands):

Year Ended December 31,

1 unchanged sentence

Company multi-peril crop premiums:

The Company also wrote less than $100

in multi-peril crop insurance in Nebraska for each of the last three years.

The principal competitors in our markets for multi-peril

crop insurance include QBE Insurance Group, Chubb Corporation, Rural Community Insurance Services, CGB Enterprises, and Great American

Insurance Group.

The premium rates for multi-peril crop

insurance are established by the Risk Management Agency (“RMA”), an agency of the United States Department of Agriculture,

and, accordingly, we compete with other insurance companies on factors such as agency relationships, claim service, and market

reputation in the crop insurance market.

We believe that our relationship with the North Dakota Farm Bureau and our leading market

share are significant factors in maintaining our market share of the crop insurance business in North Dakota.

With respect to writing property and

casualty insurance, we compete on a number of factors such as pricing, agency relationships, policy support, claim service, and

market reputation.

Like other writers of property and casualty insurance, our policy terms vary from state to state based on the

prescribed minimum liability limits in each state, as established by state law.

We believe our company differentiates itself from

many larger companies competing for this business by focusing on ease of doing business and providing excellent claims service

with local, knowledgeable employees.

To compete successfully in the property

and casualty insurance market, we rely on our ability to identify insureds that are most likely to produce an underwriting profit,

operate with a disciplined underwriting approach, practice prudent claims management, reserve appropriately for unpaid claims,

and provide quality service and competitive commissions to our independent and captive agents.

We are subject to extensive regulation,

particularly at the state level.

The method, extent, and substance of such regulation varies by state, but generally has its source

in statutes and regulations that establish standards and requirements for conducting the business of insurance and that delegate

regulatory authority to state insurance regulatory agencies.

In general, such regulation is intended for the protection of those

who purchase or use insurance products, not the companies that write the policies.

These laws and regulations have a significant

impact on our business and relate to a wide variety of matters including accounting methods, agent and company licensure, claims

procedures, corporate governance, examinations, investing practices, policy forms, pricing, trade practices, reserve adequacy,

and underwriting standards.

State insurance laws and regulations

require our insurance company subsidiaries to file financial statements with state insurance departments everywhere they do business,

and the operations of such companies and their respective accounts are subject to examination by those departments at any time.

Our insurance company subsidiaries prepare statutory-basis financial statements in accordance with accounting practices and procedures

prescribed or permitted by the state in which they are domiciled.

North Dakota generally conforms to National Association of Insurance

Commissioners (“NAIC”) accounting practices and procedures, so its examination reports and other filings generally

are accepted by other states.

The NAIC provides guidance to the states

with respect to standardized laws and regulations (including the accounting practices and procedures discussed above), which represent

an effort to standardize insurance industry practices across state lines, oftentimes referred to as “Model Regulations”.

It should be noted that these “model”

laws are regulations have no authority until the individual states pass them

as part of the state legislative process, which may, or may not, be done as suggested, or with modifications.

Premium rate regulation varies greatly

among jurisdictions and lines of insurance.

In the states in which our insurance company subsidiaries write insurance, premium

rates for the various lines of insurance are subject to either prior approval or limited review upon implementation.

rates for multi-peril crop insurance are established by the RMA.

See “Item 1.

Business —

Crop Insurance.”

Many jurisdictions have laws and regulations

that limit an insurer’s ability to withdraw from a particular market.

For example, states may limit an insurer’s ability

to cancel or non-renew policies.

Laws and regulations that limit cancellation and non-renewal may restrict our ability to exit

unprofitable marketplaces in a timely manner.

The Company also wrote less than $100 in multi-peril crop insurance in Nebraska for each of the last three years.

The principal competitors in our markets for multi-peril crop insurance include Chubb Corporation, QBE Insurance Group, Rural Community Insurance Services, CGB Enterprises, and Great American Insurance Group.

The premium rates for multi-peril crop insurance are established by the Risk Management Agency (“RMA”), an agency of the United States Department of Agriculture, and, accordingly, we compete with other insurance companies on factors such as agency relationships, claim service, and market reputation in the crop insurance market.

We believe that our relationship with the North Dakota Farm Bureau and our leading market share are significant factors in maintaining our market share of the crop insurance business in North Dakota.

With respect to writing property and casualty insurance, we compete on a number of factors such as pricing, agency relationships, policy support, claim service, and market reputation.

Like other writers of property and casualty insurance, our policy terms vary from state to state based on state regulations, competition, pricing, and other factors including the prescribed minimum liability limits in each state.

We believe our company differentiates itself from many larger companies competing for this business by focusing on ease of doing business and providing excellent claims service with local, knowledgeable employees.

To compete successfully in the property and casualty insurance market, we rely on our ability to identify insureds that are most likely to produce an underwriting profit, operate with a disciplined underwriting approach, practice prudent claims management, reserve appropriately for unpaid claims, and provide quality service and competitive commissions to our independent and captive agents.

We are subject to extensive regulation, particularly at the state level.

The method, extent, and substance of such regulation varies by state, but generally has its source in statutes and regulations that establish standards and requirements for conducting the business of insurance and that delegate regulatory authority to state insurance regulatory agencies.

In general, such regulation is intended for the protection of those who purchase or use insurance products, not the companies that write the policies.

These laws and regulations have a significant impact on our business and relate to a wide variety of matters including accounting methods, agent and

company licensure, claims procedures, corporate governance, examinations, investing practices, policy forms, pricing, trade practices, reserve adequacy, and underwriting standards.

State insurance laws and regulations require our insurance company subsidiaries to file financial statements with state insurance departments everywhere they do business, and the operations of such companies and their respective accounts are subject to examination by those departments at any time.

Our insurance company subsidiaries prepare statutory-basis financial statements in accordance with accounting practices and procedures prescribed or permitted by the state in which they are domiciled.

Our domiciliary states generally conform to National Association of Insurance Commissioners (“NAIC”) accounting practices and procedures, so our examination reports and other filings generally are accepted by other states.

The NAIC provides guidance to the states with respect to standardized laws and regulations (including the accounting practices and procedures discussed above), which represent an effort to standardize insurance industry practices across state lines, oftentimes referred to as “Model Regulations”.

It should be noted that these “model”

laws are regulations that have no authority until the individual states pass them as part of the state legislative process, which may, or may not, be done as suggested, or with modifications.

Premium rate regulation varies greatly among jurisdictions and lines of insurance.

In the states in which our insurance company subsidiaries write insurance, premium rates for the various lines of insurance are subject to either prior approval or limited review upon implementation.

The premium rates for multi-peril crop insurance are established by the RMA.

See “Item 1.

Business —

Crop Insurance.”

Many jurisdictions have laws and regulations that limit an insurer’s ability to withdraw from a particular market.

For example, states may limit an insurer’s ability to cancel or non-renew policies.

Laws and regulations that limit cancellation and non-renewal may restrict our ability to exit unprofitable marketplaces in a timely manner.

Crop Insurance

The multi-peril crop insurance business

is overseen by the federal government through the RMA.

The RMA outlines policy language, establishes premium rates, and develops

loss adjustment procedures for insurance programs under the federal crop insurance program.

In addition, through the Federal Crop

Insurance Corporation (“FCIC”), the RMA provides premium subsidies to farmers and sets the commission percentages that

can be paid to agents.

All participating insurance carriers are subject to the same Standard Reinsurance Agreement (“SRA”),

which outlines items such as reporting requirements and claims handling procedures, proportional and non-proportional reinsurance

terms, and the level of administrative and operating reimbursement paid to insurers.

The RMA also provides oversight to the approved

insurance providers (“AIPs”).

The AIPs are required to use the policies, premium rates, and loss adjustment procedures

set by the RMA without modification and are required to issue a policy to any eligible applicant regardless of risk or profitability.

The multi-peril crop insurance business is overseen by the federal government through the RMA.

The RMA outlines policy language, establishes premium rates, and develops loss adjustment procedures for insurance programs under the federal crop insurance program.

In addition, through the FCIC, the RMA provides premium subsidies to farmers and sets the commission percentages that can be paid to agents.

All participating insurance carriers are subject to the same Standard Reinsurance Agreement (“SRA”), which outlines items such as reporting requirements and claims handling procedures, proportional and non-proportional reinsurance terms, and the level of administrative and operating reimbursement paid to insurers.

The RMA also provides oversight to the approved insurance providers (“AIPs”).

The AIPs are required to use the policies, premium rates, and loss adjustment procedures set by the RMA without modification and are required to issue a policy to any eligible applicant regardless of risk or profitability.

The RMA conducts audits of AIPs with respect to claims and loss adjustment procedures.

American Agricultural Insurance Company

is the AIP through which we issue multi-peril crop insurance policies, and is the holder of the SRA with the FCIC.

Examinations for NI Holdings’

of insurance companies are conducted every five years by the Departments of Insurance where the insurance companies are domiciled.

American Agricultural Insurance Company is the AIP through which we issue multi-peril crop insurance policies, and is the holder of the SRA with the FCIC.

Examinations for NI Holdings’

group of insurance companies are conducted every five years by the Departments of Insurance where the insurance companies are domiciled.

Nodak Insurance and American West were last examined by the North Dakota Insurance Department as of December 31, 2016.

was last examined by the Nebraska Insurance Department as of December 31, 2016, and the last examination of Primero by the Nevada

Insurance Department was as of December 31, 2016.

Battle Creek was last examined by the Nebraska Insurance Department as of December 31, 2016, and the last examination of Primero by the Nevada Insurance Department was as of December 31, 2016.

Direct Auto was last examined by the Illinois Department of Insurance as of December 31, 2017.

None of these examinations resulted in any adjustments to their financial positions.

Westminster American was last examined

by the Maryland Insurance Administration as of December 31, 2017.

The examination resulted in an adjustment to their financial

position relating to losses and loss adjustment expenses due to deficiencies in the liabilities for unpaid losses and LAE.

to its acquisition by the Company, Westminster American strengthened its liabilities for unpaid losses and LAE.

Westminster was last examined by the Maryland Insurance Administration as of December 31, 2017.

The examination resulted in an adjustment to their financial position relating to losses and loss adjustment expenses due to deficiencies in the liabilities for unpaid losses and LAE.

Prior to its acquisition by the Company, Westminster strengthened its liabilities for unpaid losses and LAE.

NAIC Risk-Based Capital Requirements

North Dakota and most other states have

adopted the NAIC system of risk-based capital requirements that require insurance companies to calculate and report information

under a risk-based formula.

These risk-based capital requirements attempt to measure statutory capital and surplus needs based

on the risks in a company’s mix of products and investment portfolio.

Under the formula, a company first determines its “authorized

control level”

North Dakota and most other states have adopted the NAIC system of risk-based capital requirements that require insurance companies to calculate and report information under a risk-based formula.

These risk-based capital requirements attempt to measure statutory capital and surplus needs based on the risks in a company’s mix of products and investment portfolio.

Under the formula, a company first determines its “authorized control level”

risk-based capital.

This authorized control level takes into account (i) the risk with respect to the insurer’s

(ii) the risk of adverse insurance experience with respect to the insurer’s liabilities and obligations;

interest rate risk with respect to the insurer’s business;

and (iv) all other business risks and such other relevant risks

as are set forth in the risk-based capital instructions.

A company’s “total adjusted capital”

is the sum of statutory

capital and surplus and such other items as the risk-based capital instructions may provide.

The formula is designed to allow state

insurance regulators to identify weakly capitalized companies.

The requirements provide for four different

levels of regulatory attention.

The “company action level”

is triggered if a company’s total adjusted capital

is less than 2.0 times its authorized control level but greater than or equal to 1.5 times its authorized control level.

company action level, the company must submit a comprehensive plan to the regulatory authority that discusses proposed corrective

actions to improve the capital position.

The “regulatory action level”

is triggered if a company’s total adjusted

capital is less than 1.5 times but greater than or equal to 1.0 times its authorized control level.

At the regulatory action level,

the regulatory authority will perform a special examination of the company and issue an order specifying corrective actions that

must be followed.

The “authorized control level”

is triggered if a company’s total adjusted capital is less than

1.0 times but greater than or equal to 0.7 times its authorized control level.

At this level, the regulatory authority may take

action it deems necessary, including

placing the company under regulatory control.

The “mandatory control level”

triggered if a company’s total adjusted capital is less than 0.7 times its authorized control level.

At this level, the regulatory

authority is mandated to place the company under its control.

The capital levels of our insurance company subsidiaries are all

12 to 15 times the authorized control level, and have never triggered any of these regulatory capital levels.

We cannot guarantee,

however, that the capital requirements applicable to such companies will not increase in the future, or that the underlying ratios

will not erode.

The NAIC has also developed a set of

13 financial ratios referred to as the Insurance Regulatory Information System (“IRIS”).

Based on statutory-basis financial

statements filed with state insurance regulators, the NAIC annually calculates these IRIS ratios to assist state insurance regulators

in monitoring the financial condition of insurance companies.

The NAIC has established an acceptable range for each of the IRIS

financial ratios.

If four or more of its IRIS ratios fall outside the range deemed acceptable by the NAIC, an insurance company

may receive inquiries from individual state insurance departments.

During each of the years ended December 31, 2019, 2018 and 2017,

none of our insurance company subsidiaries produced results outside the acceptable range for more than three of the IRIS tests.

This authorized control level takes into account (i) the risk with respect to the insurer’s assets;

(ii) the risk of adverse insurance experience with respect to the insurer’s liabilities and obligations;

(iii) the interest rate risk with respect to the insurer’s business;

and (iv) all other business risks and such other relevant risks as are set forth in the risk-based capital instructions.

A company’s “total adjusted capital”

is the sum of statutory capital and surplus and such

other items as the risk-based capital instructions may provide.

The formula is designed to allow state insurance regulators to identify weakly capitalized companies.

The requirements provide for four different levels of regulatory attention.

The “company action level”

is triggered if a company’s total adjusted capital is less than 2.0 times its authorized control level but greater than or equal to 1.5 times its authorized control level.

At the company action level, the company must submit a comprehensive plan to the regulatory authority that discusses proposed corrective actions to improve the capital position.

The “regulatory action level”

is triggered if a company’s total adjusted capital is less than 1.5 times but greater than or equal to 1.0 times its authorized control level.

At the regulatory action level, the regulatory authority will perform a special examination of the company and issue an order specifying corrective actions that must be followed.

The “authorized control level”

is triggered if a company’s total adjusted capital is less than 1.0 times but greater than or equal to 0.7 times its authorized control level.

At this level, the regulatory authority may take action it deems necessary, including placing the company under regulatory control.

The “mandatory control level”

is triggered if a company’s total adjusted capital is less than 0.7 times its authorized control level.

At this level, the regulatory authority is mandated to place the company under its control.

The capital levels of our insurance subsidiary and affiliate companies all exceed the authorized control level, and have never triggered any of these regulatory capital levels.

We cannot guarantee, however, that the capital requirements applicable to such companies will not increase in the future, or that the underlying ratios will not erode.

The NAIC has also developed a set of 13 financial ratios referred to as the Insurance Regulatory Information System (“IRIS”).

Based on statutory-basis financial statements filed with state insurance regulators, the NAIC annually calculates these IRIS ratios to assist state insurance regulators in monitoring the financial condition of insurance companies.

The NAIC has established an acceptable range for each of the IRIS financial ratios.

If four or more of its IRIS ratios fall outside the range deemed acceptable by the NAIC, an insurance company may receive inquiries from individual state insurance departments.

During each of the years ended December 31, 2020, 2019 and 2018, none of our insurance company subsidiaries produced results outside the acceptable range for more than three of the IRIS tests.

Enterprise Risk Assessment

In 2012, the NAIC adopted various changes

to its Model Regulations, herein known as the “NAIC Amendments”.

The NAIC Amendments, when adopted by the various states,

are designed to respond to perceived gaps in the regulation of insurance holding company systems in the United States.

Amendments include a requirement that an insurance holding company system’s ultimate controlling person submit annually to

its lead state insurance regulator an “enterprise risk report”.

This enterprise risk report identifies the activities,

circumstances, or events involving one or more affiliates of an insurer that, if not remedied properly, are likely to have a material

adverse effect upon the financial condition or liquidity of the insurer or its insurance holding company system as a whole.

Company files a Form F Enterprise Report annually with each domiciliary state in support of this requirement.

The NAIC Amendments

also include provisions requiring a controlling person to submit prior notice to its domiciliary insurance regulator of its divestiture

of control, having detailed minimum requirements for cost sharing and management agreements between an insurer and its affiliates,

and expanding of the agreements between an insurer and its affiliates to be filed with its domiciliary insurance regulator.

In 2012, the NAIC also adopted the Own

Risk Solvency Assessment (“ORSA”) Model Act.

The ORSA Model Act, when adopted by the various states, will require an

insurance holding company system’s chief risk officer to submit at least annually to its lead state insurance regulator a

confidential report detailing its own internal solvency assessment.

Such an assessment is to be tailored to the nature, scale,

and complexity of an insurer.

This assessment will include the material and relevant risks identified by the insurer associated

with an insurer’s current business plan and the sufficiency of capital resources to support those risks.

Although our insurance

company subsidiaries are exempt from ORSA because of their size, NI Holdings intends to incorporate those elements of ORSA that

it believes constitute “best practices”

In 2012, the NAIC adopted various changes to its Model Regulations, herein known as the “NAIC Amendments”.

The NAIC Amendments, when adopted by the various states, are designed to respond to perceived gaps in the regulation of insurance holding company systems in the United States.

The NAIC Amendments include a requirement that an insurance holding company system’s ultimate controlling person submit annually to its lead state insurance regulator an “enterprise risk report”.

This enterprise risk report identifies the activities, circumstances, or events involving one or more affiliates of an insurer that, if not remedied properly, are likely to have a material adverse effect upon the financial condition or liquidity of the insurer or its insurance holding company system as a whole.

The Company files a Form F Enterprise Report annually with each domiciliary state in support of this requirement.

The NAIC Amendments also include provisions requiring a controlling person to submit prior notice to its domiciliary insurance regulator of its divestiture of control, having detailed minimum requirements for cost sharing and management agreements between an insurer and its affiliates, and expanding of the agreements between an insurer and its affiliates to be filed with its domiciliary insurance regulator.

In 2012, the NAIC also adopted the Own Risk Solvency Assessment (“ORSA”) Model Act.

The ORSA Model Act, when adopted by the various states, will require an insurance holding company system’s chief risk officer to submit at least annually to its lead state insurance regulator a confidential report detailing its own internal solvency assessment.

Such an assessment is to be tailored to the nature, scale, and complexity of an insurer.

This assessment will include the material and relevant risks identified by the insurer associated with an insurer’s current business plan and the sufficiency of capital resources to support those risks.

Although our insurance company subsidiaries are exempt from ORSA because of their size, NI Holdings intends to incorporate those elements of ORSA that it believes constitute “best practices”

into its annual internal enterprise risk assessment.

Market Conduct Regulation

State insurance laws and regulations

include numerous provisions governing trade practices and the marketplace activities of insurers, including provisions governing

the form and content of disclosure to consumers, illustrations, advertising, sales practices, and complaint handling.

State regulatory

authorities generally enforce these provisions through periodic market conduct examinations.

State insurance laws and regulations include numerous provisions governing trade practices and the marketplace activities of insurers, including provisions governing the form and content of disclosure to consumers, illustrations, advertising, sales practices, and complaint handling.

State regulatory authorities generally enforce these provisions through periodic market conduct examinations.

Guaranty Fund Laws

All states have guaranty fund laws under

which insurers doing business in the state can be assessed to fund policyholder liabilities of insolvent insurance companies.

these laws, an insurer is subject to assessment depending upon its market share in the state of a given line of business.

years ended December 31, 2019, 2018 and 2017, we paid only minimal assessments pursuant to state insurance guaranty association

We establish reserves relating to insurance companies that are subject to insolvency proceedings when it becomes probable

that we will be subject to an assessment and the amount of such assessment can be estimated.

We cannot predict the amount and timing

of any future assessments under these laws.

All states have guaranty fund laws under which insurers doing business in the state can be assessed to fund policyholder liabilities of insolvent insurance companies.

Under these laws, an insurer is subject to assessment depending upon its market share in the state of a given line of business.

For the years ended December 31, 2020, 2019 and 2018, we paid only minimal assessments pursuant to state insurance guaranty association laws.

We establish reserves relating to insurance companies that are subject to

insolvency proceedings when it becomes probable that we will be subject to an assessment and the amount of such assessment can be estimated.

We cannot predict the amount and timing of any future assessments under these laws.

Federal Regulation

federal government generally

does not directly regulate the insurance industry except for certain areas of the market, such as insurance for crops, flood, nuclear,

and terrorism risks.

However, the federal government has undertaken initiatives or considered legislation in several areas that

may affect the insurance industry, including tort reform, corporate governance, and the taxation of reinsurance companies.

Dodd-Frank Act established the Federal Insurance Office, which is authorized to study, monitor, and report to Congress on the insurance

industry and to recommend that the Financial Stability Oversight Council designate an insurer as an entity posing risks to the

financial stability in the event of the insurer’s material financial distress or failure.

In December 2013, the Federal

Insurance Office issued a report on alternatives to modernize and improve the system of insurance regulation in the United States,

including by increasing national uniformity through either a federal charter or effective action by the

Changes to federal

legislation and administrative policies in several areas, including changes in federal taxation, can also significantly affect

the insurance industry and us.

We are also subject to the Fair and Accurate

Credit Transactions Act of 2003 (“FACTA”) and the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”),

both of which require us to protect the privacy of our customers’

federal government generally does not directly regulate the insurance industry except for certain areas of the market, such as insurance for crops, flood, nuclear, and terrorism risks.

However, the federal government has undertaken initiatives or considered legislation in several areas that may affect the insurance industry, including tort reform, corporate governance, and the taxation of reinsurance companies.

The Dodd-Frank Act established the Federal Insurance Office, which is authorized to study, monitor, and report to Congress on the insurance industry and to recommend that the Financial Stability Oversight Council designate an insurer as an entity posing risks to the U.S.

financial stability in the event of the insurer’s material financial distress or failure.

In December 2013, the Federal Insurance Office issued a report on alternatives to modernize and improve the system of insurance regulation in the United States, including by increasing national uniformity through either a federal charter or effective action by the states.

Changes to federal legislation and administrative policies in several areas, including changes in federal taxation, can also significantly affect the insurance industry and us.

We are also subject to the Fair and Accurate Credit Transactions Act of 2003 and the Health Insurance Portability and Accountability Act of 1996, both of which require us to protect the privacy of our customers’

information, including health and credit information.

We are subject to numerous U.S.

and state laws governing the collection, disclosure, and protection of personal and confidential information of our clients or

federal and state laws governing the collection, disclosure, and protection of personal and confidential information of our clients or employees.

These laws and regulations are increasing in complexity and number, change frequently, and may conflict.

Congress, state

legislatures, and regulatory authorities are expected to consider additional regulation relating to privacy and other aspects of

customer information.

As mandated by the Gramm-Leach-Bliley

Act (“GLBA”), states have promulgated laws and regulations that require financial institutions, including insurance

companies, to take steps to protect the privacy of certain consumer and customer information.

The NAIC has adopted several provisions

to facilitate the implementation of the GLBA, including the Privacy of Consumer Financial and Health Information Model Regulation

and the Standards for Safeguarding Customer Information Model Regulation.

Several states adopted similar provisions regarding the

safeguarding of customer information.

NI Holdings and its subsidiaries have implemented procedures to comply with the Gramm-Leach-Bliley

Act’s related privacy requirements.

In October 2017, the NAIC adopted the

Insurance Data Security Model Law (“IDSML”), which would require insurers, insurance producers, and other entities

required to be licensed under state insurance laws to develop and maintain a written information security program, conduct risk

assessments, oversee the data security practices of third-party service providers, and other related requirements.

It is not clear

whether, and to what extent, legislatures or insurance regulators in the states in which we, or our subsidiaries, operate will

enact the IDMSL.

Such enactments and regulations could raise compliance costs and subject us to the risk of regulatory enforcement

actions, penalties, and reputational harm.

Any such events could potentially have an adverse impact on our business, financial

condition, or results of operations.

Congress, state legislatures, and regulatory authorities are expected to consider additional regulation relating to privacy and other aspects of customer information.

As mandated by the Gramm-Leach-Bliley Act (“GLBA”), states have promulgated laws and regulations that require financial institutions, including insurance companies, to take steps to protect the privacy of certain consumer and customer information.

The NAIC has adopted several provisions to facilitate the implementation of the GLBA, including the Privacy of Consumer Financial and Health Information Model Regulation and the Standards for Safeguarding Customer Information Model Regulation.

Several states adopted similar provisions regarding the safeguarding of customer information.

NI Holdings and its subsidiaries have implemented procedures to comply with the GLBA’s related privacy requirements.

In October 2017, the NAIC adopted the Insurance Data Security Model Law (“IDSML”), which would require insurers, insurance producers, and other entities required to be licensed under state insurance laws to develop and maintain a written information security program, conduct risk assessments, oversee the data security practices of third-party service providers, and other related requirements.

It is not clear whether, and to what extent, legislatures or insurance regulators in the states in which we, or our subsidiaries, operate will enact the IDMSL.

Such enactments and regulations could raise compliance costs and subject us to the risk of regulatory enforcement actions, penalties, and reputational harm.

Any such events could potentially have an adverse impact on our business, financial condition, or results of operations.

Office of Foreign Asset Control

The Treasury Department’s Office

of Foreign Asset Control (“OFAC”) maintains a list of “Specifically Designated Nationals and Blocked Persons”

(“the SDN List”).

The SDN List identifies persons and entities that the government believes are associated with terrorists,

rogue nations, or drug traffickers.

OFAC’s regulations prohibit insurers, among others, from doing business with persons

or entities on the SDN List.

If the insurer finds and confirms a match, the insurer must take steps to block or reject the transaction,

notify the affected person, and file a report with OFAC.

Jumpstart Our Business Startups

We are an emerging growth company (“EGC”),

as defined in the Jumpstart Our Business Startups Act of 2012 (“the JOBS Act”), and we may take advantage of certain

exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies,

such as reduced public company reporting, accounting, and corporate governance requirements.

We currently intend to avail ourselves

of the reduced disclosure obligations available under the JOBS Act.

Section 107 of the JOBS Act also provides

that an EGC can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying

with new or revised accounting standards.

We will remain an EGC for up to five

years following our initial public offering (“IPO”), or until the earliest of (i) the last day of the first fiscal

year in which our annual gross revenue exceeds $1.07 billion, (ii) the date that we become a “large accelerated filer”

as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (“the Exchange Act”), which would occur

if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our

most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1.07 billion in non-convertible

debt during the preceding three year period.

North Dakota law sets the maximum amount

of dividends that may be paid by Nodak Insurance to NI Holdings during any twelve-month period after notice to, but without prior

approval of, the North Dakota Insurance Department.

This amount cannot exceed the lesser of (i) 10% of the insurance company’s

surplus as regards policyholders as of the preceding December 31, or (ii) the insurance company’s statutory net income for

the preceding calendar year (excluding realized capital gains), less any prior dividends paid during such twelve-month period.

In addition, any insurance company other than a life insurance company may carry forward net income from the preceding two calendar

years, not including realized capital gains, less any dividends actually paid during those two calendar years.

As of December 31,

2019, the amount available for payment of dividends by Nodak Insurance in 2020 without

the prior approval of the North Dakota Insurance

Department is $18,984.

“Extraordinary dividends”

in excess of the foregoing limitations may only be paid with prior

notice to, and approval of, the North Dakota Insurance Department.

Illinois law sets the maximum amount

of dividends that may be paid by Direct Auto to NI Holdings during any twelve-month period after notice to, but without prior approval

of, the Illinois Department of Insurance.

This amount cannot exceed the greater of (i) 10% of the Company’s surplus as regards

policyholders as of the preceding December 31, or (ii) the Company’s statutory net income for the preceding calendar year

(excluding realized capital gains).

As of December 31, 2019, the amount available for payment of dividends by Direct Auto in 2020

without the prior approval of the Illinois Department of Insurance is $6,881.

Dividends in excess of this amount are considered

“extraordinary”

The Treasury Department’s Office of Foreign Asset Control (“OFAC”) maintains a list of “Specifically Designated Nationals and Blocked Persons”

(“the SDN List”).

The SDN List identifies persons and entities that the government believes are associated with terrorists, rogue nations, or drug traffickers.

OFAC’s regulations prohibit insurers, among others, from doing business with persons or entities on the SDN List.

If the insurer finds and confirms a match, the insurer must take steps to block or reject the transaction, notify the affected person, and file a report with OFAC.

Jumpstart Our Business Startups Act of 2012

We are an emerging growth company (“EGC”), as defined in the Jumpstart Our Business Startups Act of 2012 (“the JOBS Act”), and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, such as reduced public company reporting, accounting, and corporate governance requirements.

We currently intend to avail ourselves of the reduced disclosure obligations available under the JOBS Act.

Section 107 of the JOBS Act also provides that an EGC can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards.

We will remain an EGC for up to five years following our initial public offering (“IPO”), or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenue exceeds $1.07 billion, (ii) the date that we become a “large accelerated filer”

as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (“the Exchange Act”), which would occur if

the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1.07 billion in non-convertible debt during the preceding three year period.

North Dakota law sets the maximum amount of dividends that may be paid by Nodak Insurance to NI Holdings during any twelve-month period after notice to, but without prior approval of, the North Dakota Insurance Department.

This amount cannot exceed the lesser of (i) 10% of the insurance company’s surplus as regards policyholders as of the preceding December 31, or (ii) the insurance company’s statutory net income for the preceding calendar year (excluding realized capital gains), less any prior dividends paid during such twelve-month period.

In addition, any insurance company other than a life insurance company may carry forward net income from the preceding two calendar years, not including realized capital gains, less any dividends actually paid during those two calendar years.

As of December 31, 2020, the amount available for payment of dividends by Nodak Insurance in 2021 without the prior approval of the North Dakota Insurance Department is $21,628.

“Extraordinary dividends”

in excess of the foregoing limitations may only be paid with prior notice to, and approval of, the North Dakota Insurance Department.

Illinois law sets the maximum amount of dividends that may be paid by Direct Auto to NI Holdings during any twelve-month period after notice to, but without prior approval of, the Illinois Department of Insurance.

This amount cannot exceed the greater of (i) 10% of the Company’s surplus as regards policyholders as of the preceding December 31, or (ii) the Company’s statutory net income for the preceding calendar year (excluding realized capital gains).

As of December 31, 2020, the amount available for payment of dividends by Direct Auto in 2021 without the prior approval of the Illinois Department of Insurance is $3,582.

Dividends in excess of this amount are considered “extraordinary”

and are subject to the approval of the Illinois Department of Insurance.

We will have the ability to receive dividends

from Westminster American only after all of Westminster American’s obligations and regulatory requirements with the Maryland

Insurance Administration have been satisfied.

In general, under Maryland law an insurer may pay dividends after providing notice

to the Maryland Insurance Commissioner within five business days after declaration of the dividend or at least 10 days prior to

payment of the dividend.

However, Maryland law imposes additional limitations on “extraordinary dividends”.

law defines an extraordinary dividend as a dividend that, when combined with the value of other dividends made in the preceding

12 months, exceeds the lesser of (i) 10% of the insurer’s surplus as regards policyholders as of the preceding December 31,

or (ii) the insurer’s net investment income not including (a) realized capital gains for the 12-month period ending December

31 of the preceding year and (b) pro rata distributions of any class of the insurer’s own securities.

An insurer may not

pay an extraordinary dividend unless the insurer provides notice of the declaration to the Maryland Insurance Commissioner at least

30 days before the declaration is made and the Maryland Insurance Commissioner has approved or not disapproved the declaration

within 30 days.

See “Item 5.

Market for the Registrant’s

Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities —

Dividend Policy.”

The amount available for payment of dividends from Westminster to NI Holdings during 2021 without the prior approval of the Maryland Insurance Administration is $505 based upon the statutory net investment income of Westminster for the year ended December 31, 2020 and the three preceding years.

Prior to its payment of any dividend, Westminster will be required to provide notice of the dividend to the Maryland Insurance Administration.

This notice must be provided to the Maryland Insurance Administration within five business days following declaration of any dividend and no less than 30 days prior to the payment of an extraordinary dividend or 10 days prior to the payment of an ordinary dividend.

The Maryland Insurance Administration has the power to limit or prohibit dividend payments if Westminster is in violation of any law or regulation.

These restrictions or any subsequently imposed restrictions may affect our future liquidity.

See “Item 5.

Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities —

Dividend Policy.”

Holding Company Laws

Most states, including North Dakota,

have enacted legislation that regulates insurance holding company systems.

Each insurance company in a holding company system is

required to register with the insurance supervisory agency of its state of domicile and furnish certain information, including

information concerning the operations of companies within the holding company group that may materially affect the operations,

management, or financial condition of the insurers within the group.

Pursuant to these laws, the North Dakota Insurance Department

requires prior disclosure of material transactions involving an insurance company and its affiliates.

Under these laws, the North

Dakota Insurance Department will have the right to examine us at any time.

All transactions within our consolidated

group affecting our insurance company subsidiaries must be fair and equitable.

Notice of certain material transactions between

NI Holdings and any person or entity in our holding company system will be required to be given to the Department of Insurance

of the applicable domiciliary state.

Certain transactions cannot be completed without the prior approval of the various Departments

of Insurance.

Approval of the state insurance commissioner

is required prior to any transaction affecting the control of an insurer domiciled in that state.

In North Dakota, the acquisition

of 10% or more of the outstanding voting securities of an insurer or its holding company is presumed to be a change in control.

North Dakota law also prohibits any person or entity from (i) making a tender offer for, or a request or invitation for tenders

of, or seeking to acquire or acquiring any voting security of a North Dakota insurer if, after the acquisition, the person or entity

would be in control of the insurer, or (ii) effecting or attempting to effect an acquisition of control of or merger with a North

Dakota insurer, unless the offer, request, invitation, acquisition, effectuation, or attempt has received the prior approval of

the North Dakota Insurance Department.

As of December 31, 2019, NI Holdings

and its subsidiaries had 186 total employees.

None of these employees are covered by a collective bargaining agreement, and we

believe that our employee relations are good.

Most states, including North Dakota, have enacted legislation that regulates insurance holding company systems.

Each insurance company in a holding company system is required to register with the insurance supervisory agency of its state of domicile and furnish certain information, including information concerning the operations of companies within the holding company group that may materially affect the operations, management, or financial condition of the insurers within the group.

Pursuant to these laws, the North Dakota Insurance Department requires prior disclosure of material transactions involving an insurance company and its affiliates.

Under these laws, the North Dakota Insurance Department will have the right to examine us at any time.

All transactions within our consolidated group affecting our insurance company subsidiaries must be fair and equitable.

Notice of certain material transactions between NI Holdings and any person or entity in our holding company system will be required to be given to the Department of Insurance of the applicable domiciliary state.

Certain transactions cannot be completed without the prior approval of the various Departments of Insurance.

Approval of the state insurance commissioner is required prior to any transaction affecting the control of an insurer domiciled in that state.

In North Dakota, the acquisition of 10% or more of the outstanding voting securities of an insurer or its holding company is presumed to be a change in control.

North Dakota law also prohibits any person or entity from (i) making a tender offer for, or a request or invitation for tenders of, or seeking to acquire or acquiring any voting security of a North Dakota insurer if, after the acquisition, the person or entity would be in control of the insurer, or (ii) effecting or attempting to effect an acquisition of control of or merger with a North Dakota insurer, unless the offer, request, invitation, acquisition, effectuation, or attempt has received the prior approval of the North Dakota Insurance Department.

Human Capital

The Company’s key human capital management objectives are to attract, retain, and develop talent to deliver on the Company’s strategy.

To support these objectives, the Company’s human resources programs are designed to:

recruit and retain

talented individuals;

provide training and development within the Company and the insurance industry;

reward and support employees through competitive pay and benefit programs;

keep employees safe and healthy;

and provide opportunities for community involvement.

We offer comprehensive compensation and benefits packages to our employees including a 401k Plan, employee stock ownership plan, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, and flexible work arrangements.

We also offer stock-based compensation to certain management personnel as a way to attract and retain key talent.

See Notes 14 and 20 to the Consolidated Financial Statements included under Item 8 for further discussion of our benefit plans and stock-based compensation.

In response to the COVID-19 pandemic in March 2020, we pivoted to a remote working environment for substantially all of our employees with a commitment to the safety of our employees, business partners, and the communities we serve.

As appropriate, certain of our offices have opened on an optional and limited basis in accordance with applicable rules and regulations in their respective jurisdictions.

We believe that we have adjusted well to date, benefitting from prior investments in technology, systems, and training, which have enabled us to maintain full, continuous operations through the pandemic.

As of December 31, 2020, NI Holdings and its subsidiaries had 205 total employees.

Employee turnover averaged 17.3% during 2020, with higher than average rates experienced by our Direct Auto employee base located in Chicago.

None of our employees are covered by a collective bargaining agreement, and we believe that our employee relations are good.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business