Securities registered pursuant to Section 12(g) of the Act: NONE

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CERTAIN IMPORTANT INFORMATION

Unless the context otherwise requires, as used in this annual report on Form 10-K:

FORWARD-LOOKING STATEMENTS

This documentreport contains, and management may make, certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, may be forward-looking statements. Words such as “may”, “will”, “should”, “likely”, “anticipates”, “expects”, “intends”, “plans”, “projects”, “believes”, “views”, “estimates”, and similar expressions are used to identify these forward-looking statements. These statements include, among other things, the Company’s statements about:

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our anticipated operating and financial performance, business plans, and prospects;  

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strategic reviews, capital allocation objectives, dividends, and share repurchases;  

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plans for and prospects of acquisitions, dispositions, and other business development activities, and our ability to successfully capitalize on these opportunities;  

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the impact of COVID-19 or a future pandemic and related economic conditions, including the potential impact on the Company's investments;  

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our ability to enter new markets successfully and capitalize on growth opportunities either through acquisitions or the expansion of our agent network;  

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cyclical changes in the insurance industry, competition, and innovation and emerging technologies;  

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expectations for impact of or changes to existing or new government regulations or laws;  

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our ability to anticipate and respond to macroeconomic, geopolitical, health and industry trends, pandemics, acts of war, and other large-scale crises;  

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developments in general economic conditions, domestic and global financial markets, interest rate, unemployment, or inflation, that could affect the performance of our insurance operations and/or investment portfolio; and  

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our ability to effectively manage future growth, including additional necessary capital, systems, and personnel.  

Given their nature, we cannot assure that any outcome expressed in these or other forward-looking statements which canwill be identified by the use of such words as “estimate”, “project”, “believe”, “could”, “may”, “intend”, “anticipate”, “plan”, “seek”, “expect”realized in whole or in part. Actual outcomes may vary materially from past results and similar expressions.those anticipated, estimated, implied, or projected. These forward-looking statements include:

The forward-looking statements are subject to numerousmay be affected by underlying assumptions that may prove inaccurate or incomplete, or by known or unknown risks and uncertainties, including among other things,those described in this section and in the factors discussed under the headingPart I, Item 1A., “Risk Factors” thatsection in this Form 10-K. The occurrence of any of the risks identified in the Part I, Item 1A., “Risk Factors” section in this Form 10-K, or other risks currently unknown, could affect the actual outcomehave a material adverse effect on our business, financial condition or results of future events.

All of these factors are difficultoperations, or we may be required to increase our accruals for contingencies. It is not possible to predict and manyor identify all such factors. Consequently, you should not consider such discussion to be a complete discussion of all potential risks or uncertainties.

Therefore, you are beyond our control. These important factors include those discussed under “Risk Factors” and those listed below:cautioned not to unduly rely on forward-looking statements, which speak only as of the date of this Form 10-K. We undertake no obligation to update forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable securities law. You are advised, however, to consult any further disclosures we make on related subjects.

Because forward-looking information is subject to various risks and uncertainties, actual results may differ materially from that expressed or implied by the forward-looking information.

PART I

Item 1. Business

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

Overview

NI Holdings, Inc. (“NI Holdings”, “the Company”, “we”, “us”, and “our”) 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 (“Nodak Mutual”) from thea mutual to stock form of organization and the creation of a mutual holding company. The conversion was consummatedcompleted on March 13, 2017. Immediately following the conversion, all of the outstanding shares of common stock of Nodak StockInsurance Company (“Nodak Insurance”, the successor to Nodak Mutual Insurance Company) were issued to Nodak Mutual Group, Inc., which then contributed the shares to NI Holdings in exchange for 55% of the outstanding shares of common stock of NI Holdings. Nodak StockInsurance then became a wholly ownedwholly-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 StockInsurance and its existing subsidiaries. Concurrent with the conversion, on March 13, 2017, the Company completed an initial public offering (“IPO”) of 10,350,000 shares of common stock at a price of $10.00 per share. The Company received net proceeds of $93,145 from the offering, after deducting the underwriting discounts and offering expenses. The newly issued shares of NI Holdings were available for public trading on March 16, 2017.

These Consolidated Financial Statements include the financial position and results of operations of NI Holdings and seven other entities:

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Nodak Insurance – a wholly-owned subsidiary of NI Holdings;  

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Nodak Agency, Inc. (“Nodak Agency”) – a wholly-owned subsidiary of Nodak Insurance;  

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American West Insurance Company (“American West”) – a wholly-owned subsidiary of Nodak Insurance;  

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Primero Insurance Company (“Primero”) – an indirect wholly-owned subsidiary of Nodak Insurance;  

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Battle Creek Mutual Insurance Company (“Battle Creek”) – an affiliated company of Nodak Insurance;  

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Direct Auto Insurance Company (“Direct Auto”) – a wholly-owned subsidiary of NI Holdings; and  

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Westminster American Insurance Company (“Westminster”) – a wholly-owned subsidiary of NI Holdings.  

A chart of the corporate structure as of December 31, 2021, and a more complete description of each of the NI Holdings subsidiaries, is included below.

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. The Company makes available, free of charge on its website, its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after it electronically files such material with, or furnish it to, the U.S. Securities and Exchange Commission (“SEC”). 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.

Subsidiary and Affiliate Companies

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 Company, Inc. (“AM 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 that had been in place since 2011 between Battle Creek and Nodak Insurance was cancelled. As a result, a portion of the Company’s underwriting results are now allocated to the policyholders of Battle Creek rather than the shareholders of NI Holdings.

For the years ended December 31, 2021 and 2020, the pooling share percentages by insurance company were:

Nodak Insurance Company

Nodak Insurance is the largest domestic property and casualty insurance company in North Dakota, offering private passenger auto, homeowners, farmowners, commercial multi-peril, crop hail, and Federal multi-peril crop insurance coverages through its captive agents in the state.

Nodak Insurance was formed in 1946 to offer property and casualty insurance to members of the North Dakota Farm Bureau.Bureau (“NDFB”), and benefits from a strong marketing affiliation with that organization. Nodak Insurance’s bylaws provide that a person must be a member and remain a member of the North Dakota Farm BureauNDFB in order to become and remain a policyholder of Nodak Insurance. SuchNodak Insurance’s bylaws also require that four members of the Board of Directors of Nodak Insurance must be members of the Board of Directors of the North Dakota Farm Bureau Federation (“North Dakota Farm Bureau”).NDFB. 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.NDFB.

The North Dakota Farm BureauNDFB 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 BureauNDFB and Nodak Insurance renewed on October 1, 2017,2021, with an expiration date of September 30, 2018.2022. 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 BureauNDFB 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 $1,303.$1,444. 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”). Battle Creek Mutual Insurance Company is an affiliate of Nodak Insurance. A chart of the corporate structure and a more complete description of each of the Nodak Insurance subsidiaries is included below. Nodak Insurance and Battle Creek have been assigned “A” ratings by A.M. Best Company, Inc. (“A.M. Best”), which is the third highest out of 15 possible ratings. American West is rated A- and Primero is unrated. The consolidated financial statements presented herein reflect the financial position and results of operations of NI Holdings, Nodak Insurance, American West, Battle Creek, and Primero. Each of the four insurance companies is subject to examination and comprehensive regulation by the insurance department of its state of domicile.

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, 2017,2021, Nodak Insurance distributed its insurance products through 72 exclusive agents appointed by Nodak Insurance.

The following tables provide selected amounts from the Company’s consolidated statements of operations and balance sheets. Additional informationNodak Agency, Inc.

Nodak Agency is presented throughout this annual report.

an inactive shell corporation.

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 numberTri-State, Ltd

Tri-State, Ltd is 701-298-4200. NI Holdings’ website address iswww.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.an inactive shell corporation.

American West Insurance Company (“American West”)

American West is a property and casualty insurance company licensed to write insurance in eight states in the Midwest and Western regions of the United States, but currently issuesStates. American West began writing policies in South Dakota, Minnesota,2002 and North Dakota. American West currently issues multi-peril crop, crop hail,

farmowners, private passengerprimarily writes personal auto, homeowners, and homeowners insurance primarilyfarm coverages in South Dakota. American West distributesalso writes personal auto coverage in North Dakota, as well as crop hail and Federal multi-peril crop insurance coverages in Minnesota and South Dakota. As of December 31, 2021, American West distributed its products through independent agents located in approximately 100122 offices.

Primero Insurance Company

Primero is a wholly-owned subsidiary of Tri-State, Ltd. Tri-State, Ltd. is an inactive shell corporation 100% owned by Nodak Insurance. Primero is a property and casualty insurance company writing non-standard automobile coverage in the states of Nevada, Arizona, North Dakota, and South Dakota. Primero was acquired by Nodak Insurance in 2014. As of December 31, 2021, Primero distributed its policies through independent agents in 341 contracted agencies in those four states.

Battle Creek Mutual Insurance Company (“Battle Creek”)

Battle Creek issues private passenger automobile,is a property and casualty insurance company writing personal auto, homeowners, and farmowners policiesfarm coverages solely in the state of Nebraska. As of December 31, 2021, Battle Creek distributesdistributed its policies through independent agents located in approximately 290280 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

Effective January 1, 2020, all of our insurance company subsidiaries entered into an intercompany reinsurance pooling agreement. In conjunction with this agreement, the previous 100% quota-share reinsurance agreement between Battle Creek cedes 100% of its net premiums to Nodak Insurance and Nodak Insurance fully reinsures allwas terminated on a cut-off basis as of Battle Creek’s risk under its insurance policies. In connection with entering into the affiliation agreement,January 1, 2020. Upon termination, Nodak Insurance purchased atransferred 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. The surplus noteCreek 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, 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. If Battle Creek terminated the quota-share reinsurance agreement, it would not have sufficient capital to continue to operate.

PrimeroDirect Auto Insurance Company (“Primero”)

Primero writesDirect Auto is a property and casualty insurance company licensed in Illinois. Direct Auto began writing non-standard automobile insurancecoverage in Nevada, Arizona, North Dakota,2007, and South Dakota. Primero was acquired by Nodak Insurance in 2014. Primero distributesNI Holdings on August 31, 2018 via a stock purchase agreement. As of December 31, 2021, Direct Auto distributed its policies through independent agents located in approximately 325139 offices, concentrated primarily in the Chicago area.

Westminster American Insurance Company

Westminster is a property and casualty insurance company licensed in seventeen states and the District of Columbia. Westminster is headquartered in Owings Mills, Maryland and underwrites commercial multi-peril insurance in the states of 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 via a stock purchase agreement. As of December 31, 2021, Westminster distributed its policies through independent agents in 98 contracted agencies in those four states.nine states and the District of Columbia. The financial results of Westminster have been included in the Consolidated Financial Statements and the Company’s commercial segment following the acquisition date. See Part II, Item 8, Note 3 “Acquisition of Westminster American Insurance Company”.

General Information

Nodak Insurance markets and distributes its policies through its captive agents, while all other companies utilize the independent agent distribution channel. Additionally, all of the Company’s insurance subsidiary and affiliate companies are rated “A” Excellent by AM Best.

The same executive management team provides oversight and strategic direction for the entire organization. Nodak Insurance provides common product oversight, pricing practices, and underwriting standards, as well as underwriting and claims administration, to itself, American West, and Battle Creek. Primero, Direct Auto, and Westminster personnel manage the day-to-day operations of their respective companies.

The Consolidated Financial Statements of NI Holdings presented herein include the financial position and results of operations of NI Holdings, Direct Auto, 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.

Market Overview

We market our property and casualtypersonal lines 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. We offer commercial multi-peril insurance in the states of New Jersey, Maryland, Pennsylvania, Virginia, Georgia, North Carolina, Delaware, South Dakota.Carolina, and West Virginia, North Dakota, South Dakota, and the District of Columbia. The following chart depictsshows our direct premiums written forduring the last two years and our relative market share within each of our key states during 2016.

the year ended December 31, 2020:

Market size information is not yet available for the year ended December 31, 2021.

Organic Growth Strategy

Given our market presence in each of our key states, weWe believe we have many opportunities to increase business inorganically grow our primary markets organically.business. Strategies we employ to achieve this growth include:

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

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using the cost advantage created by our low expense ratio compared to peers (32.1% expense ratio in 2021 compared to an average expense ratio of our peers of 34.1% in 2020) to selectively expand market share;  

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leveraging our AM Best financial strength rating and financial size category to strategically grow organically include:Westminster’s commercial business;  

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selective expansion of our non-standard auto business in Illinois and our other core upper Midwest markets;  

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excellent claims service for all insureds; and  

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

External Growth Strategy

We acquired Direct Auto in 2018 with capital raised through our IPO. The acquisition was the initial step in executing our growth strategy developed at the time of the IPO.

We also acquired Westminster in January 2020 with capital raised through our IPO. This acquisition expanded our commercial insurance business, geographically diversified our spread of insurance risks, and provided additional expense efficiencies.

Prior to the IPO, we successfully acquired Primero in 2014, and acquired control of Battle Creek in 2011.2011, and acquired American West was acquired in 2001. With the additional capital

Going forward, we raised through our initial public offering, we desireplan to make selectiveconsider other strategic investments and acquisitions that complementcan enhance our strategy. Areasbusinesses 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 current interest include acquisitionunderlying strategies implemented across the organization that are focused on preservation of capital, including:

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

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maintaining a commercial writerconservatively managed investment portfolio that supports our insurance operations under a wide range of operating and geographic expansionmarket conditions;  

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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  

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relying upon our Enterprise Risk Management framework to identify, quantify, and manage a broad range of existing product lines. The acquisitionrisks across the organization.

We view our capital position to consist of three layers, each of which has a commercial writer would help us to better balance our book of business among personal lines insurance, multi-peril crop insurance,specific size and commercial lines insurance where we currently write only a limited amount of business. Selective geographic expansion would help to diversify our weather-related risks and assist us in maintaining competitive expense levels.purpose:

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The completionfirst layer of our initial public offering suppliedcapital, which we refer to as “regulatory capital”, is the additionalamount of capital needed to support substantial increasessatisfy state insurance regulatory requirements while supporting our growth objectives. This capital is held by each of our insurance company subsidiaries.  

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The second layer of capital is considered “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.  

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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 premium volume, whichconjunction with our excess capital deployment priorities.  

Our excess capital deployment priorities are to (1) invest in existing businesses where we expectsee 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 result from the implementation of bothshareholders through share repurchases or shareholder dividends.

Insurance Products by Segment

The Company’s consolidated financial results include our organicPrivate Passenger Auto, Non-Standard Auto, Home and external growth strategies.

SegmentFarm, Commercial, Crop, and All Other reporting segments. Information

See regarding products and services offered in each segment is included below. Additionally, revenues, underwriting results, and identifiable assets and liabilities for each segment are shown in Part II, Item 8, Note 20 to the Consolidated“Segment Information”. The financial performance of each segment is discussed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Statements for the Company’s segment disclosures.Condition and Results of Operations”.

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 $60,747 or 31.1%$77,277 (22.6%) of direct premiums written by the Company on a consolidated basis during 2017.2021.

Non-standard Auto

Primero and Direct Auto write non-standard auto insurance with a focus on minimum-limit auto liability coverage. Non-standard auto insurance accounted for $61,374 (17.9%) of direct premiums written by the Company on a consolidated basis during 2021.

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 $66,615 or 34.1%$85,200 (24.9%) of direct premiums written by the Company on a consolidated basis during 2017.2021.

Non-standard Auto

Primero writes non-standard auto insurance with a focus on minimum-limit auto liability coverage. Primero’s direct premiums written on non-standard auto insurance during 2017 were $10,835, which accounted for 5.6% of the direct premiums written by the Company on a consolidated basis in 2017.

Crop Insurance

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 $49,012 or 25.1%$43,540 (12.7%) of direct premiums written by the Company on a consolidated basis during 2021.

Commercial

Nodak Insurance, American West, and Westminster write commercial multi-peril policies. Collectively, commercial insurance accounted for $69,753 (20.4%) of the direct premiums written by the Company on a consolidated basis during 2017.2021.

All Other

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 $8,029, or 4.1%,$5,071 (1.5%) of the direct premiums written by the Company on a consolidated basis during 2017. Also in this2021. This segment isalso includes an assumed reinsurance blockbook of business, with $3,959$6,076 of assumed premiums written on a consolidated basis during 2017.2021.

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.

Beginning in 1980, the U.S. 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.

In 2017, the federal crop insurance program covered approximately 23.2 million acres in North Dakota, 17.4 million acres in South Dakota, 17.6 million acres in Minnesota, and 311.6 million acres nationwide. In 2017, Nodak Insurance multi-peril crop insurance policies covered approximately 1.9 million acres in North Dakota. During the same period, American West crop insurance policies covered approximately 13,000 acres in South Dakota and approximately 145,000 acres in Minnesota. Nodak Insurance, through its Battle Creek affiliate, 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 farm bureau-affiliatedstate 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 receivedreceive with respect to such policies. Nodak Insurance is a shareholder of AFBIS, along withas 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.its shareholders. Nodak Insurance did not receive any material distributions from AFBIS during the years ended December 31, 2014 through 2017.2021, 2020, or 2019.

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, Direct Auto, and PrimeroWestminster rely on independent producers.agents. We view these independent producersagents 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 producersagents with respect to both premium volume and profitability. Our producerscaptive agents for Nodak Insurance are monitored primarilyhired and trained by our three-person marketingsales staff who also have principal responsibility for recruiting and training exclusive agents in North Dakota, andwhile the independent producers inagents for our other states.companies are appointed by the underwriting or marketing staff for each respective company. We hold annual seminars for producersregular training sessions when we introduce new products or product changes, and conduct training programswe identify specific topics that provide both technical training aboutmay help our products and sales training to help themagents more effectively market our products.

For the year ended December 31, 2017,2021, no individual produceragent was responsible for more than 5% of the Company’s direct premiums written by our insurance companies.

written.

ProducersAgents are compensated through a fixed base commission structure. Agents receive commission as a percentage of premiums (generally 5% to 15%) 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 producersagents 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 sharingprofit-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 producersagents and policyholders. We believe that these positive experiences result incontribute to achieving higher policyholder retention and new business opportunities when communicated by producers and policyholders to potential customers.growth over time. 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

OurWe strive to be disciplined in our pricing by pursuing rate increases to maintain or improve our underwriting philosophy is aimed at consistently generating profits through sound risk selectionprofitability while still being able to attract and retain customers. We utilize pricing discipline. Throughreviews that we believe will help us price risks more accurately, improve policyholder retention, and support the production of profitable new business. These pricing reviews involve evaluating our management and underwriting staff, we regularly establish rates and rating classifications for our insureds based on lossclaims experience and loss adjustment expense (“LAE”) experience we have developed overtrends on a periodic basis to identify changes in the years.frequency and severity of our claims. We have various rating classifications based on location, typethen consider whether our premium rates are adequate relative to the level of business, and otherunderwriting risk factors.as well as the sufficiency of our underwriting guidelines.

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,a reference point, we normallytypically 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 qualityhigh-quality service to our producersagents 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 19 employees with approximately 270 combined years of experience in property and casualty underwriting. They are located primarily at our home office in Fargo, North Dakota, which underwritesas well as our office in Battle Creek, Nebraska, and underwrite coverage issued by Nodak Insurance, American West and Battle Creek, includes 22 employeesCreek.

Primero and Direct Auto employ 8 underwriters in connection with over 360 combined yearstheir non-standard auto insurance businesses. Westminster has a staff of experience12 in propertythe underwriting area consisting of a Vice President, underwriters, and casualty underwriting. Primero employs an additional 3assistant underwriters in connection with its non-standard autocommercial insurance business. All of the underwriting for our crop insurance is underwritten by AFBIS, as described in an earlier section.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 LitigationEnterprise Risk Management

Our claims management philosophy involves:

Our claims team supports our underwriting strategy by workingCompany is subject to providesignificant risks, including the normal risks of 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 located in Fargo, North Dakota is comprised of 44 employees with over 760 years of combined experience in processing property and casualty insurance claims. Primerocompany. These risks are discussed in more detail in Part I, Item 1A, “Risk Factors”.

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 employs 12 claims personnel in connection with its non-standard auto insurance business. All claims made under our multi-peril crop and crop hail insurance policies are processed and administered by AFBIS.

Technologyarise 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 insurance operations rely on commercially available softwarecybersecurity 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 the information managementperiodic penetration tests, system assessments, and recommendations based on industry best practices. The Company also requires monthly online security training to be completed by all employees. While we have experienced threats to our data and systems, platform that runs our accounting, policy underwritingto date, we have not experienced any known cyber-security breaches.

Reinsurance

We cede and issuance,assume certain premiums and claims processing functions. These systems permit uslosses to integrate the accounting and reporting functionsfrom various companies and associations under a variety 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.reinsurance agreements. We seek to invest continuouslylimit the maximum net loss that can arise from large risks or risks in new technologyconcentrated areas of exposure through use of these agreements, either on an automatic basis under general reinsurance contracts known as treaties or through facultative contracts on substantial individual risks.

Reinsurance contracts do not relieve us from our obligation to maximize our business opportunities while protecting our interestspolicyholders. Additionally, failure of reinsurers to honor their obligations could result in significant losses to us. There can be no assurance that reinsurance will continue to be available to us at the same extent, and those of our clients.

Reinsurance

Reinsurance Ceded

We reinsure a portion of our exposure and pay toat 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:

Reinsurance does not legally discharge 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 factorsame cost, as it has in the selectionpast. The Company may choose in the future to reevaluate the use of reinsurers from whom we purchase reinsurance is their financial strength. Our reinsurance arrangements are generally renegotiated annually. Forto increase or decrease the year ended December 31, 2017, NI Holdingsamounts of risk ceded to reinsurers $16,665 of written premiums, compared to $30,748 of written premiums for the year ended December 31, 2016 and $33,439 of written premiums for the year ended December 31, 2015. The decrease in premiums ceded in 2017 was primarily due to less sharing of multi-peril crop insurance premiums with the federal government and an increase to our catastrophe retention amount in the reinsurance program.

The chart below illustrates the reinsurance coverage under our excess of loss treaty for individual casualty risks:

The chart below illustrates the reinsurance coverage under our excess of loss treaty for individual property risks:

As a group, during the year ended December 31, 2017, Nodak Insurance, American West, and Battle Creek retained $10,000 of losses from catastrophic events and had reinsurance under various reinsurance agreements up to $74,600 in excess of their $10,000

retained risk. For 2018, the catastrophe retention amount remained at $10,000. Prior to January 1, 2017, the group collectively retained the first $5,000 of weather related loss.

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. Best ratings. All of our current reinsurance partners have at least an “A” rating from A.M. Best. According to A.M. Best, companies with a 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 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” fund. 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. We purchase fifty percentage points of coverage above a 100% direct loss ratio for crop hail. We purchase 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%For additional information, see Part II, Item 8, Note 7 “Reinsurance”.

The following table sets forth the largest amounts of loss and LAE recoverable by the Company from reinsurers as of December 31, 2017 and the current A.M. Best rating of each as of January 24, 2018.

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 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. 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 2017, 2016 and 2015, Nodak Insurance assumed $3,959, $3,634, and $3,478, respectively, of premiums from such pools.

Beginning on January 1, 2016, Nodak Insurance 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 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 LossLosses and Loss Adjustment Expense

NI Holdings isWe are required by applicable insurance laws and regulations to maintain reserves for unpaid losses and LAE.loss adjustment expenses (“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 Our liability for unpaid losses and LAE is an inherently uncertain process. Therefore,not discounted.

For additional information, see Part II, Item 7, “Critical Accounting Policies” and Part II, Item 8, Note 9 “Unpaid Losses and Loss Adjustment Expenses”.

Investments

The majority of funds available for investments are deployed in a widely diversified portfolio of high quality, liquid, taxable U.S. government, tax-exempt, and taxable U.S. municipal and taxable corporate and U.S. agency mortgage-backed bonds. The Company regularly monitors the liability for unpaid losseseffective duration of its fixed maturity investments, and LAE does not represent an exact calculationthe Company’s investment purchases and sales are executed with the objective of that liability. Our reserving policy recognizes this uncertaintyhaving adequate funds available to satisfy its insurance and debt obligations. Generally, the expected principle and interest payments produced 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 forCompany’s fixed maturity portfolio adequately funds the estimated amountrunoff of the ultimate payment toCompany’s insurance reserves. The substantial amount by which 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 andfair value of the specific claim,fixed maturity portfolio exceeds the severityvalue of injury or damage,the net insurance liabilities, as well as the positive cash flow from newly sold policies and the policy provisions relatinglarge amount of high-quality liquid bonds, contributes to the type of loss,Company’s ability to the extent determinable at the time. Case reserves are adjusted by our claims staff as more information becomes available. It is our policyfund claim payments without having to settle each claim as expeditiously as possible.sell illiquid assets or access its credit facilities.

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 its methodologies and procedures. 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 resultsCompany also invests a much smaller percentage 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, 2017, 2016 and 2015.

The estimation process for determining the liability for unpaid losses and LAE inherently resultsportfolio 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 2007 through 2017. 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 change 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.

Investments

NI Holdings’ investments in fixed incomeprivate placement debt offerings and equity securities, are classified as availablewhich have the potential for salehigher returns but also involve varying degrees of risk, including less stable rates of return and are carried at fair value with unrealized gains and losses reflected as a component of equity, net of income taxes. 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.less liquidity.

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:

The Executive Committee of NI Holdings’ Board of Directors approvedreviews and approves the Company’s investment policy and reviews it periodically. The investment portfolio is managed by Conning, Inc. and Disciplined Growth Investors.

For additional information, see Part II, Item 7, “Critical Accounting Policies” and Part II, Item 8, Note 5 “Investments”.

Financial Strength

Ratings are an important factor in assessing the Company’s competitive position in the insurance industry. The following table sets forth information concerning NI Holdings’ investments.

The amortized cost and estimated fair value of fixed income securities by contractual maturity are shown below as of December 31, 2017. Actual maturities could differ from contractual maturities because issuersan insurer’s ability to meet its financial obligations to policyholders. An insurer’s financial strength rating is one of the securities may have the right to call or prepay certain obligations, which may or may not include call or prepayment penalties.

At December 31, 2017, the average maturity of NI Holdings’ fixed income investment portfolio was 4.85 years and the average duration was 3.99 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 providedprimary factors evaluated by independent pricing services as inputs in its process for determining fair values of its investments. The pricing services cover substantially all of the securitiesthose in the portfoliomarket to purchase insurance. A poor rating indicates that there is an increased likelihood that the insurer could become insolvent and therefore not able to fulfill its obligations under the insurance policies it issues. This rating can also affect an insurer’s level of premium writings, the lines of business it can write, and, 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 marketsinsurers like us that are active, quoted prices for similar securities atalso public registrants, 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 fairmarket value of its fixed income securities. After performing a detailed review

All of the information obtained from the pricing services, no adjustment was made to the values provided.

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

A.M. Best Rating

A.M. Best rates insuranceaffiliate companies based on factors of concern to policyholders. The rating evaluates the claims paying ability of a company, and is not a recommendation on the merits of an investment in our common stock.

Nodak Insurance and Battle Creek are rated “A” Excellent by A.M.AM Best, which is the third highest out of 15 possible ratings. A.M.ratings, under a group rating due to the intercompany pooling reinsurance agreement. AM 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 outlook, and Primero is unrated because the nature of its business is not ratings sensitive. In its evaluation of a company’s financial and operating performance, A.M. Best reviews:group.

If we are unable to maintain at least an “A-” rating from A.M. Best, it may impair our ability to compete effectively.

Competition

The property casualty and crop insurance markets are highly competitive. NI Holdings competesWe compete with stock insurance companies, mutual companies, and other underwriting organizations. Our largest competitors in North Dakota for private passenger auto and homeowners areinclude Progressive Casualty Insurance Company, State Farm Progressive,Mutual Insurance Company, American Family QBE,Insurance, Allstate Corporation, Farmers Union Mutual Insurance Company, and Auto-Owners.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 of Nebraska. In our non-standard auto markets, which are primarily Illinois, 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 20162020 data, Nodak Insurance is the second largest writer of farmowners insurance in North Dakota. Our largest competitors areinclude Farmers Union Mutual Insurance Company, North Star Mutual Insurance Company, American Family Insurance, and American Family.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.

Total industry-reportedThe chart below shows the reported premiums written for multi-peril crop insurance in 2017 was $929,135 in North Dakota and $634,021 in Minnesota. In North Dakota, ourthrough the federal multi-peril crop insurance direct premiums written were $39,270, $38,708, and $39,914 forprogram during the years ended December 31, 2017, 2016 and 2015, respectively. In Minnesota, our multi-peril crop insurance direct premium written were $4,534, $3,504, and $2,652 for the years ended December 31, 2017, 2016 and 2015, respectively. NI Holdings2019 through 2021:

We also wrote less than $500$100 in multi-peril crop insurance in Nebraska and South Dakota for each of the last three years. The principal competitors in our markets for multi-peril crop insurance areinclude Chubb RCIS,Corporation, QBE Insurance Group, Rural Community Insurance Services, CGB Enterprises, and Great American.American Insurance Group.

The premium rates for multi-peril crop insurance are established by the RMA 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 BureauNDFB 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, as established by state law.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.

Regulation

Regulation

General

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 accountsthey are subject to examination by thosethe departments they are domiciled in at any time. Our insurance company subsidiaries prepare statutorystatutory-basis financial statements in accordance with accounting practices and procedures prescribed or permitted by the state in which they are domiciled. North Dakota

Our domiciliary states generally conformsconform to National Association of Insurance Commissioners (“NAIC”) accounting practices and procedures, so itsour 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.”For additional information, see Part I, Item 1, “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 FCIC,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 RMA conducts audits of AIPs with respect to claims and loss adjustment procedures.

ExaminationsAmerican 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 are conducted every three to 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. The final examination report for American West included a finding related to intercompany expense charges between the two companies, which offset in consolidation. The underlying cause of this finding has been resolved.

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. Neither examination resulted in any adjustments to their financial positions, nor were there any substantive matters raised in the final examination reports.

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” risk-based capital. 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 company subsidiariessubsidiary 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.

future, or that the underlying ratios will not erode.

NAIC Ratios

The NAIC has also has developed a set of 13 financial ratios referred to as the Insurance Regulatory Information System (“IRIS”). Based on statutorystatutory-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, 20172021, 2020 and 2016,2019, none of our insurance company subsidiaries produced results outside the acceptable range for more than two of the IRIS tests.

Enterprise Risk Assessment

In 2012, the NAIC adopted various changes to its Model Regulations herein known as the(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 includesinclude 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. While the NAIC Amendments have not been adoptedThe Company files a Form F Enterprise Report annually with each domiciliary state in whole by the North Dakota Insurance Department, North Dakota currently requires insurers domiciled in North Dakota to include an enterprise risk assessment in its annual report.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 intendswe intend 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.

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. 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, 2017, 20162021, 2020 and 2015,2019, we paid noonly 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. See “Item 7. Management’s Discussion and Analysis

Federal Regulation

The U.S. federal government generally hasdoes not directly regulatedregulate 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. See “Item 1. Business — Crop Insurance.”

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’ information, including health and credit information.

Privacy

We are subject to numerous U.S. 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 continue to promulgate and refinehave promulgated laws and regulations that require financial institutions, including insurance companies, to take steps to protect the privacy of certain consumer and customer information relatinginformation. The NAIC has adopted several provisions to products or services primarily for personal, family or household purposes. A recent NAIC initiative that affectedfacilitate the insurance industry wasimplementation of the adoption in 2000 ofGLBA, including the Privacy of Consumer Financial and Health Information Model Regulation which assisted states in promulgating regulations to comply with the Gramm-Leach-Bliley Act. In 2002, to further facilitate the implementation of the Gramm-Leach-Bliley Act, the NAIC adoptedand the Standards for Safeguarding Customer Information Model Regulation. Several states have now adopted similar provisions regarding the safeguarding of customer information. NI Holdings and its subsidiariesWe have each implemented procedures to comply with the Gramm-Leach-Bliley Act’sGLBA’s related privacy requirements.

In October 2017, the NAIC adopted the Insurance Data Security Model Law (“IDSML”), which requires insurers, insurance agents, 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"). 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”),EGC, as defined in the Jumpstart Our Business Startups Act of 2012 (“the JOBS(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,EGCs, 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 thatHowever, beginning on December 31, 2022, we will no longer be an EGC can take advantageand will no longer have the ability to delay adoption of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying withthese new or revised accounting standards.standards, or to take advantage of reduced corporate governance disclosures.

We will remainDividends

As an EGC for upinsurance holding company with no independent operations or source of revenue, our capacity to five years followingpay dividends to our initial public offering (“IPO”),shareholders is based on the ability of our insurance company subsidiaries to pay dividends to us. The ability of our subsidiaries to pay dividends to us is regulated by the laws of their state of domicile. Under these laws, insurance companies must provide advance informational notice to the domicile state insurance regulatory authority prior to payment of any dividend or untildistribution to its shareholders. Prior approval from the earlieststate insurance regulatory authority must be obtained before payment 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”an “extraordinary dividend” as defined in Rule 12b-2 under the Securities Exchange Actstate's insurance code. For additional information, see Part II, Item 7, “Management’s Discussion and Analysis of 1934, as amended (“the Exchange Act”)Financial Condition and Results of Operations - Liquidity and Capital Resources”, 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 billion in non-convertible debt during the preceding three year period.and Part II, Item 8, Note 21 “Statutory Net Income, Capital and Surplus, and Dividend Restrictions”.

Dividends

North Dakota law sets the maximum amount of dividends that may be paid by Nodak Insurance 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, 2017, the amount available for payment of dividends by Nodak Insurance in 2018 without the prior approval of

the North Dakota Insurance Department is $15,654. “Extraordinary dividends” in excess of the foregoing limitations may only be paid with prior notice to, and approval of, the North Dakota Insurance Department. 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, and requires prior notice and/or approval of certain transactions, such as extraordinary dividends distributed by the insurance company.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 North DakotaDepartment of Insurance Department.of the applicable domiciliary state. Certain transactions cannot be completed without the prior approval of the North Dakota Insurance Department.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

EmployeesThe 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 (“ESOP”), 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. For additional information, see Part II, Item 8, Note 13 “Benefit Plans” and Note 19 “Stock-Based Compensation” for further discussion of our benefit plans and stock-based compensation.

As of December 31, 2017,2021, NI Holdings and its subsidiaries had 136207 total employees, of which 204 were full-time employees. None of these employees are covered by a collective bargaining agreement, and we believe that our employee relations are good.Employee turnover averaged 14.7% during 2021, compared to 17.3% during 2020.

Item 1A. Risk Factors

An investment in the Company’s common shares involves certain risks. The following is a discussion of the most significantmaterial risks and uncertainties that may affect the Company’s business, financial condition, and future results.

Insurance Risks Related to Our Business and Industry

Catastrophic or other significant natural or man-made losses may negatively affect our financial condition and operating results.

As a property and casualty insurer, we are subject to claims from catastrophes or other natural perils that may have a significant negative impact on our operating and financial results. We have experienced catastrophe losses and can be expected to experience catastrophe losses in the future. Catastrophe losses can be caused by various events, including snow storms, ice storms, freezing temperatures, tropical storms and hurricanes, earthquakes, tornadoes, wind, hail, fires, and other natural or man-made disasters. In addition, longer-term natural catastrophe trends may be changing, and new types of catastrophe losses may be developing due to climate change, a phenomenon that has been associated with extreme weather events linked to rising temperatures, and includes effects on global weather patterns, greenhouse gases, sea, land and air temperatures, sea levels, rain, hail and snow. The frequency, number, and severity of these losses are unpredictable. The extent of losses from a catastrophe is a function of both the total amount of insured exposure in the area affected by the event and the severity of the event. Our ability to effectively manage catastrophe risk is dependent, in part, on the reliance of various catastrophe models, which may produce unreliable output as a result of inaccurate or incomplete data, along with the inherent uncertainty of future frequency and severity of losses. The impact of changing climate conditions on the overall insurance industry may also materially affect the availability and cost of reinsurance to us. In addition, these changes could impact the creditworthiness of issuers of securities in which the Company invests, subjecting our investment portfolio to increased credit and interest rate risk, with the potential for reduced investment returns and/or material realized or unrealized losses.

Approximately 71.2%Despite our continued geographic expansion, we write a significant amount of NI Holdings’ consolidated direct premiums written in 2017 were writtenbusiness in North Dakota. Because NI Holdings’ business is concentrated in North Dakota,As a result, adverse developments from severe weather events such as hailstorms, flooding, or droughts affecting a large portion ofin North Dakota would have a disproportionately greater effect on NI Holdings’our financial condition and results of operations than if itsour business werewas less geographically concentrated. The incidence and severity of such events are inherently unpredictable. In recent years, changing climate conditions have increased the unpredictability, severity, and frequency of tornados and other storms.

We attempt to reduce our exposure to catastrophe losses through a disciplined underwriting and risk management approach that emphasizes long-term profitability over short-term gains in premiums or market share, continued geographical diversification of our operations, and the use of reinsurance. However, there can be no guarantee that our underwriting and risk management efforts will be successful in mitigating our exposure to catastrophe losses or the impact of such losses when they occur. In addition, while we maintain reinsurance coverage with a catastrophe excess of loss program, such coverage may be insufficient to cover our losses. Our reinsurance coverage includes a catastrophe excess of loss program, which in 2021 limited our catastrophe exposure to $10 million retention per event, with $117 million of reinsurance coverage placed in excess of this retention. In 2022, our catastrophe exposure was increased to $15 million retention per event, with $125 million of reinsurance coverage placed in excess of this retention. If we are not able to effectively mitigate our exposure to catastrophe losses, whether through our underwriting process and by obtainingor reinsurance coverage. However,coverage, in the event of such losses our business and results of operations could be adversely affected.

For additional information, see Part II, Item 8, Note 2 “Summary of Significant Accounting Policies” and Note 7 “Reinsurance.”

Changes in the legal, regulatory, and economic environments in which we operate could materially impact our financial results, including our loss reserves, operating expenses, and investment portfolio.

We maintain reserves to cover estimated unpaid losses and expenses necessary to settle claims. The reserves for losses and loss adjustment expenses (“LAE”) that we experience catastrophe losses,have established are estimates of amounts needed to pay reported and unreported claims and related expenses, based on facts and circumstances known to us at the time we cannot assure youestablished the reserves. Reserves are actuarially projected based on historical claims information, industry statistics, anticipated trends, and other factors. The process of estimating loss reserves involves a high degree of judgment and is subject to a number of variables. While we believe that our unearned premiums, liabilitiesreserves for unpaid losses and LAE are appropriate, to the extent that such reserves prove to be inadequate or excessive in the future, we would adjust them and reinsurancerecognize the change in earnings in the period the reserves are adjusted. There can be no assurance that the estimates of such liabilities will be adequate to cover these risks. In addition, because accounting rules do not permit insurers to reserve for catastrophic events until they occur, claims from catastrophic events could cause substantial volatilitychange in our financial results forthe future and any fiscal quarter or year andsuch adjustment could have a material adverse effectimpact on our financial condition or results of operations. Our ability to write new business also could be adversely affected.

Our financial condition and results of operations also are affected periodically by losses caused by natural perils such as those described above that are not deemed a catastrophe. If a number of these events occur in a short time period, it may materially affect our financial condition and results of operations. For additional information, see Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, “Losses and Loss Adjustment Expenses”, and Part II, Item 8, Note 9 “Unpaid Losses and Loss Adjustment Expenses.”

It is possible that, among other things, past or future steps taken by the federal government and the Federal Reserve to stimulate the U.S. economy, including actions taken in response to COVID-19 such as fiscal and monetary policy measures, and tax reform, could lead to higher inflation than we had anticipated, which generally leads to increased loss costs and other operating expenses. However, our relatively high concentration in short tail lines of business limits the potential impact of this exposure and allows us to price for those increases on a timely basis.

Potential higher interest rates oftentimes correlated to inflation could reduce the carrying value of our fixed maturity and short-term investments, negatively impacting the Company's book value in the short-term. Over the long-term, however, higher interest rates would provide an incremental benefit to our net investment income over time as excess cash and proceeds of maturing bonds are reinvested at higher rates. We manage our exposure to interest rate increases by monitoring the duration within our investment portfolio and maintaining maturities that minimize any forced sales within the portfolio. However, even with such monitoring efforts, we may be forced to sell securities at a loss, which would adversely affect our results of operations.

Any downgrade in our A.M. Best Company, Inc. rating could affect our ability to write new business or renew our existing business, which would lead to a decrease in revenue and net income.

Third-party rating agencies, such as A.M.AM Best, periodically assess and rate the claims-paying ability of insurers based on criteria established by the rating agencies. Ratings assigned by A.M.AM Best are an important factor influencing the competitive position of insurance companies. A.M.AM Best ratings, which are reviewed at least annually, represent independent opinions of financial strength and ability to meet obligations to policyholders and are not directed toward the protection of investors. Therefore, our A.M.AM Best rating should not be relied upon as a basis for an investment decision to purchase our common stock.

Nodak Insurance holdsAll of the Company’s insurance subsidiaries hold a financial strength rating of “A” (Excellent) by A.M.AM Best, the third highest rating out of 15 rating classifications. Nodak Insurance has held an “A” rating for the past six years. Our most recent rating by A.M.AM Best was issued on March 16, 2017. Battle Creek also holds an “A” rating and American West holds an “A-” rating.April 14, 2021. Financial strength ratings are used by producersagents, customers, lenders, and customersother insurance carriers as a means of assessing the financial strength and quality of insurers.insurance companies. If our financial position deteriorates, we may not maintain our favorable financial strength rating from A.M.AM Best. A downgrade of our rating could severely limit or prevent us from writing desirable business or from renewing our existing business. In addition, a downgrade could negatively affect our ability to implement our strategy because it could cause our current or potential producersagents to choose other more highly rated competitors or reduce our ability to obtain reinsurance. See “Item 1. Business — A.M. Best Rating.For additional information, see Part I, Item 1, “Business” and “Financial Strength.”

A significant percentage of NI Holdings’ written premiums and net profits are generated from its multi-peril crop insurance business, and the loss of such business as a result of a termination of or substantial changes to the Federal crop insurance program would have a material adverse effect on our revenues and net income.

In 2017, 2016 and 2015, NI Holdings’ net premiums written generated from its multi-peril crop insurance line of business were 22.6%, 23.6%, and 24.9%, respectively. Through the Federal Crop Insurance Corporation, the United States government subsidizes insurance companies by assuming an increasingly higher portion of losses incurred by farmers as a result of weather-related and other perils as well as commodity price fluctuations. The United States government also subsidizes the premium cost to farmers

for multi-peril crop yield and revenue insurance. Without this risk assumption, losses incurred by insurance companies would be higher and without the premium subsidy, the number of farmers purchasing multi-peril crop insurance would decline significantly. Periodically, members of the United States Congress propose to reduce significantly the government’s involvement in the federal crop insurance program in an effort to reduce government spending. If legislation is adopted to reduce the amount of risk the government assumes, the amount of insurance premium subsidy provided to farmers or otherwise reduce the coverage provided under multi-peril crop insurance policies, losses would increase and purchases of multi-peril crop insurance could experience a significant decline nationwide and in our market area. Such changes could have a material adverse effect on our revenues and income.

Our results may fluctuate as a result of many factors, including cyclical changes in the insurance industry.industry, competition, and innovation and emerging technologies.

Results of companies in the insurance industry, and particularly theThe property and casualty insurance industry has historically have been subject to significant fluctuationscharacterized by soft markets (periods of relatively high levels of price competition, less restrictive underwriting practices, and uncertainties and have fluctuated in cyclical periods ofgenerally low premium rates and excess underwriting capacity resulting from increased competition (a so-called “soft market”),rates) followed by periodshard markets (periods of capital shortages resulting in a lack of insurance availability, relatively low levels of price competition, more selective underwriting of risks, and relatively high premium ratesrates). During soft markets, we may lose business to other carriers offering competitive insurance at lower rates. We may also choose to reduce our premiums or limit premium increases leading to a reduction in profit margins and revenues. Our industry is also influenced by general economic conditions, which could reduce overall premium volume for us and our competitors. Additionally, the industry could be impacted by changes in customer preferences, including customer demand for direct distribution channels, point-of-sale, or other non-traditional distribution channels. Consolidation within the industry also could influence future growth and profit potential.

We monitor the competitive marketplace on both a shortagegeographic and line of underwriting capacity resulting from decreased competition (a so-called “hard market”).business basis. The industry’s profitability canprivate passenger marketplace continues to be affected significantly by:a very competitive and challenging pricing environment. Rates for private passenger auto are competitive across the country. The non-standard auto market also remains competitive with more companies seeking to grow this line of business.

FluctuationsThe commercial property market has experienced significant hardening in underwriting capacity,recent years, allowing us to demand more premium while being more selective on individual risks. If we do not effectively respond to changes in market conditions, the Company may be adversely affected.

Innovation and competition, andemerging technologies are greatly impacting the impact on our business of the other factors identified above, could have a negative impact on our results of operations and financial condition. Based on our analysis of the underwriting capacity and price competition in the current market, we believe thatinsurance industry. If we are generally in a “firming market” phase ofunable to keep pace with the insurance industry cycle. If other insurers seek to expand the kinds or amounts of insurance coverage they offer, this could result in increased underwriting capacity and competition and declining pricing as some insurers seek to maintain market share at the expense of underwriting discipline.

Competition for potential acquisitions from other property and casualty insurers could increase the pricetechnological changes that NI Holdings will be required to pay in connection with future acquisitions.

Over-capacity in the property and casualty market has led other market participants to seek acquisitions in order to generate revenue growth. These market conditions may cause significant competition for acquisitions and increase the price for acquisitions. This competitive market could impede execution of NI Holdings’ external growth strategy.

Integration of existing businesses and future acquisitions may require a significant investment of management’s time and distract management from the day-to-day operations of NI Holdings’ business.

NI Holdings has spent considerable time and effort integrating Battle Creek and Primero in the areas of sales and marketing, operations, financial reporting, and employee benefits. Future acquisitions will require additional integration, particularly to realize the anticipated coordination designed to drive revenue growth and reduce costs. NI Holdings’ executive management staff is small, and there can be no assurance that acquisitions will be successfully executed and integrated.

Weour competitors implement, we may not be able to manageattract and maintain customers, adequately price risks, or operate as efficiently as our growth effectively.

We intend to grow our businesscompetitors. In addition, emerging technologies in the automotive industry such as autonomous vehicles, driver-assistance and accident-avoidance features, sensor technology, and other forms of automation may reduce the future which could require additional capital, systems development, and skilled personnel. We cannot assure you that we will be able to locate profitable business opportunities, meetneed for, or decrease the future pricing of, our capital needs, expand our systems and our internal controls effectively, allocate our human resources optimally, identify qualified employees or agents, or incorporate effectively the components of any businesses we may acquire in our effort to achieve growth. The failure to manage our growth effectively and maintain underwriting discipline could have a material adverse effect on our business, financial condition, and results of operations.auto insurance products.

We may not be able to grow our business if our insurance company subsidiaries cannot maintain and grow their agent relationships, or if consumers seek other distribution methods offered by our competitors.

Our ability to retain existing agents, and to attract new agents, is essential to the continued growth of our business. If independent agents find it easier to do business with our competitors, our agent base may erode and, as a result, be unable to retain existing business or generate sufficient new business. While we believe that we have good relationships with our independent agents, we cannot be certain that these agents will continue to sell our products instead of our competitors’ products.

While our products are sold through either independent or captive agents, our competitors may sell insurance through other delivery models, including the internet, direct marketing, or other emerging alternative distribution methods. To the extent that current and potential policyholders change their insurance shopping preferences, this may have an adverse effectsuccess depends primarily on our ability to grow, our financial position,underwrite risks effectively and our results of operations.

Our success depends on the ability ofprice our insurance company subsidiaries to underwrite risks accurately and to price our commercial and personal lines insurance products accordingly.appropriately.

The nature of the insurance business is such that pricing must be determined before the underlying costs are fully known. This requires significant reliance on estimates and assumptions in setting prices. If our insurance subsidiarieswe fail to assess accuratelyappropriately price the risks that they assume inwe insure or if our commercial and personal lines products, they may fail to charge adequate premium rates, which could affectclaims experience is more frequent or severe than our underlying risk assumptions, our profitability may be negatively affected. If we overestimate the risks we are exposed to, we may overprice our products, and have a material adverse effect on our financial condition, resultsnew business growth and retention of operations, or cash flows. Theirexisting business may be adversely affected. The ability to assess their policyholdereffectively underwrite risks and to price their products accuratelyappropriately is subject to a number of risks and uncertainties, including, but not limited to:including:

These risks•

availability of sufficient reliable data and uncertainties could cause our insurance subsidiariesability to underprice their policies, which would negatively affect their resultsproperly analyze available data;  

•

market and competitive conditions;  

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regulatory or legislative changes;  

•

selection and application of operations,appropriate pricing techniques; and  

•

adverse changes in claims experience, such as distracted driving or to overprice their policies, which could reduce their competitiveness. Either such event could have a material adverse effect on their financial condition, results of operations, and cash flows.more aggressive tort environment.  

Under the federal crop insurance program, each insurer is required to accept every application for multi-peril crop insurance that they receive, and the premiums and the policy terms are set by the RMA, which is the federal government agency administering the federal crop insurance program. Accordingly, no policy underwriting is necessary in connection with our multi-peril crop insurance line of business. We,Unlike the multi-peril crop business, we have the ability to underwrite and several otherprice crop insurers,hail insurance. We rely on AFBIS to underwrite our crop hail insurance line of business. Unlike the multi-peril crop business, however, we have the ability to decline to issue any crop hail insurance policy ifIf we believe the policy will expose us to too much risk in a particular geographic area or if we are unwilling to insure the crop, thatwe have the policy would cover.ability to decline to issue the policy.

Our ability to manage our exposure to underwriting risks depends on the availability and cost of reinsurance coverage.

We use reinsurance arrangements to limit and manage the amount of risk we retain, to stabilize underwriting results, and to increase underwriting capacity. The availability and cost of reinsurance are subject to current market conditions and may vary significantly over time. Any decrease in the amount of reinsurance maintained will increase our risk of loss. We may be unable to maintain our desired reinsurance coverage or to obtain other reinsurance coverage in adequate amounts and/or favorable rates. If we acceptare unable to maintain appropriate reinsurance coverage, it may be difficult for us to manage our underwriting risks and operate our business profitably. For additional information, see Part II, Item 8, Note 7 “Reinsurance.”

If we cannot collect loss recoveries from our reinsurers in accordance with our reinsurance agreements, we may incur additional losses.

Although reinsurance creates a contractual liability for reinsurers to the application for crop hail insurance, however,extent the risk is transferred, it does not eliminate our liability to policyholders because we remain liable as the direct insurer on all reinsured risks. Our reinsurance program strategically spreads exposure among a group of highly-rated, geographically diverse, and well-capitalized reinsurers. All of our significant reinsurance partners are rated “A-” (Excellent) or better by AM Best. However, we remain subject to credit risk relating to our ability to collect these recoverables. Our reinsurance recoveries are also subject to the underlying losses meeting the qualifying conditions and specified limits within the respective contracts. Additionally, we are subject to the risk that reinsurers may dispute their obligations to pay our claims. Our inability to collect a material recovery from a reinsurer on a timely basis, or at all, could incur losses if AFBIS fails to adequately underwrite and price such coverage.

Ourhave material adverse effect on our liquidity, operating results, and financial condition may be affected bycondition. For additional information, see Part II, Item 8, Note 7 “Reinsurance.”

Business and Operational Risks

The impact of COVID-19 or a failurefuture pandemic, and related economic conditions, could materially affect our results of operations, financial position, and/or liquidity.

We face risks associated with pandemics, including the impact of reduced economic activity and unemployment, government actions, and capital markets disruption. These risks are unpredictable and difficult to quantify, and could vary significantly depending on the extent and duration of the pandemic and related economic conditions, along with potentially impacting each of our insurance subsidiariesbusiness segments and geographic markets differently.

Any future federal, state, and local government actions to establish adequate liabilities for unpaid lossesaddress the impact of a pandemic may adversely affect us. Regulatory restrictions or requirements could impact pricing, risk selection, and LAEour rights and obligations with respect to our policies and insureds, including our ability to cancel policies or our right to collect premiums. It is also possible that changes in economic conditions and steps taken by adverse developmentfederal, state, and local governments could require an increase in taxes at the federal, state, and local levels, which would adversely impact our results of prior year reserves.operations. Additionally, potential capital markets disruption could lead to our fixed income portfolio being adversely impacted by ratings downgrades, increased bankruptcies, declines in real estate valuations, and/or declines in fixed income yields, along with increased volatility in our equity portfolio.

NI Holdings maintains reserves to cover amounts it estimates will be needed to pay for unpaid losses and for the expenses necessary to settle insured claims. Estimating liabilities for unpaid losses and LAE is a difficult and complex process involving many variables and subjective judgments. The liability for unpaid losses and LAE is the largest liability of NI Holdings and represents the financial statement item most sensitive to estimation and judgment. In developing its estimates of unpaid losses and LAE, NI

HoldingsCompetition for potential acquisitions from other property and casualty insurers could increase the price that we will be required to pay in connection with future acquisitions.

Over-capacity in the property and casualty market has evaluatedled other market participants to seek acquisitions in order to generate revenue growth. These market conditions may cause significant competition for acquisitions and considered actuarial projection techniques based on its assessmentincrease the price for acquisitions. This competitive market could impede execution of factsour external growth strategy.

We may not be able to grow our business if we cannot retain and circumstances then known, historical loss experience data,expand our captive and estimatesindependent agent relationships, provide competitive products for these agents to sell, and/or if consumers seek other distribution methods offered by our competitors.

Our ability to retain existing agents, and to attract new agents, is essential to the continued growth of anticipated trends. This process assumes that past experience, adjusted forour business. Nodak Insurance utilizes captive agents who only sell our Company’s products. Outside of North Dakota, we write business through the effectsindependent agent distribution model. If we are not able to offer competitive products and a competitive compensation structure to our captive agents and/or if our independent agents find it easier to do business with our competitors, we may be unable to retain existing business or generate sufficient new business.

While our products are sold through either independent or captive agents, our competitors may sell insurance through other distribution models, including the internet, direct marketing, or other emerging forms of current developments, changes in operations, and anticipated trends, constitutes an appropriate basis for predicting future events. While NI Holdings believes that its liability for unpaid losses and LAE is appropriate, todistribution. To the extent that such reserves provecurrent and potential policyholders change their insurance shopping preferences, this may have an adverse effect on our ability to be inadequate or excessive in the future, we would adjust themgrow, our financial position, and incur a charge or credit to earnings, as the case may be, in the period the reserves are adjusted. Any such adjustmentour results of operations.

Future acquisitions could have a material impact ondisrupt our business and harm our financial condition andor results of operations. There can be no assurance

As part of our growth strategy, we will continue to evaluate opportunities to acquire other property and casualty insurers. Any potential future acquisitions involve a number of risks that the estimates of such liabilities will not change in the future. For additional information on our liability for unpaid losses and LAE, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

We rely on our systems and employees, and those of certain third-party vendors and service providers in conducting our operations, and certain failures, including internal or external fraud, operational errors, systems malfunctions, or cyber-security incidents, could materially adversely affect our business and operating results, including:

•

problems integrating the acquired operations into our existing business;  

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operating and underwriting results of the acquired operations not meeting our expectations;  

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diversion of management’s time and attention from our existing business;  

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higher than anticipated capital requirements;  

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difficulties in retaining business relationships with agents and policyholders of the acquired company;  

•

risks associated with entering markets in which we lack extensive prior experience;  

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tax issues associated with acquisitions;  

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acquisition-related disputes, including disputes over contingent consideration and escrows;  

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potential loss of key employees of the acquired company; and  

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potential impairment of related goodwill and intangible assets.  

We could be adversely affected by the loss of our existing management and/or other key employees.

The success of our business is dependent, to a large extent, on our ability to attract and retain key employees, in particular our senior officers and key management of our insurance subsidiaries. Our business may be adversely affected if labor market conditions make it difficult for us to retain or, if needed, replace our current key officers with individuals having equivalent qualifications and experience at compensation levels competitive for our industry. There is significant competition from within the property and casualty insurance industry and from businesses outside the industry for those in key management positions, as well as others possessing highly specialized knowledge in areas such as actuarial, accounting, information technology, and data and analytics. If we are not able to successfully attract, retain, and motivate our employees, our business, financial results, and reputation could be materially and adversely affected.