NI Holdings, Inc. (NODK) Business

Item 1. Business

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

Overview

NI Holdings is a North Dakota business corporation
that is the stock holding company of Nodak Insurance Company and became such in connection with the conversion of Nodak Mutual Insurance
Company (“Nodak Mutual”) from a mutual to stock form of organization and the creation of a mutual holding company. The conversion
was completed on March 13, 2017. Immediately following the conversion, all of the outstanding shares of common stock of Nodak Insurance
Company (“Nodak Insurance,” the successor to Nodak Mutual Insurance Company) were issued to Nodak Mutual Group, Inc. (“Nodak
Mutual Group”), which then contributed the shares to NI Holdings in exchange for 55% of the outstanding shares of common stock of
NI Holdings. Nodak Insurance then became a wholly-owned stock subsidiary of NI Holdings. Prior to completion of the conversion, NI Holdings
conducted no business and had no assets or liabilities. As a result of the conversion, NI Holdings became the holding company for Nodak
Insurance 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 the following other entities:

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A chart of the corporate structure as of December 31, 2025, 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 on its website, free of charge, 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 (the “Exchange Act”) as soon as reasonably practicable after it electronically
files such material with, or furnish it to, the United States Securities and Exchange Commission (“SEC”). Information contained
on such website is not incorporated by reference into this 2025 Annual Report, and such information should not be considered to be part
of this 2025 Annual Report.

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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. Nodak Insurance is the lead company of the pool, and assumes
the net premiums, net losses, and underwriting expenses from each of the other four 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. Subsequent to the June
30, 2024, date of sale, Westminster is no longer a member of the pool, and the pooling percentages for the remaining insurance subsidiaries
were updated based on their respective surplus as a percentage of the pool as of December 31, 2023.

Nodak Insurance Company

Nodak Insurance is the largest domestic property and casualty insurance
company based in North Dakota, offering private passenger auto, homeowners, farmowners, commercial multi-peril, excess liability, dwelling,
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 (“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 NDFB in order
to become and remain a policyholder of Nodak Insurance. Nodak Insurance’s bylaws also require that four members of the Board of
Directors of Nodak Insurance must be members of the NDFB. Similarly, one-third of the members of the Board of Directors of Nodak Mutual
Group must be persons designated by the NDFB.

The NDFB 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. 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 NDFB and Nodak Insurance renewed on October
1, 2025, with an expiration date of September 30, 2026. 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 NDFB 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 $1,717. The maximum royalty payment is adjusted annually based upon the June index month for the
Consumer Price Index.

As of December 31, 2025, Nodak Insurance distributed
its insurance products through 59 exclusive agents appointed by Nodak Insurance.

Nodak Agency, Inc.

Nodak Agency is an inactive shell corporation.

American West Insurance Company

American West is a property and casualty insurance
company licensed in eight states in the Midwest and Western regions of the United States (“U.S.”). American West primarily
writes private passenger auto, homeowners, and farm coverages in South Dakota. American West also writes private passenger 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,
2025, American West distributed its products through independent agents in 64 contracted agencies.

Battle Creek Insurance Company

Battle Creek is a property and casualty insurance
company writing private passenger auto, homeowners, and farm coverages solely in the state of Nebraska. As of December 31, 2025, Battle
Creek distributed its policies through independent agents in 103 contracted agencies. 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.

On January 2, 2024, Battle Creek issued 300,000 shares
of its common stock to Nodak Insurance at a $10.00 per share par value and became a wholly-owned subsidiary of Nodak Insurance. Because
we concluded that we controlled Battle Creek prior to January 2, 2024, we consolidated the financial statements of Battle Creek, and Battle
Creek’s policyholders’ interest in Battle Creek was reflected as a non-controlling interest in shareholders’ equity
in our Consolidated Balance Sheets for NI Holdings (“Consolidated

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Balance Sheets”) and its net income or loss was excluded
from net income or loss attributed to NI Holdings in our Consolidated Statements of Operations for NI Holdings (“Consolidated Statements
of Operations”). Subsequent to January 2, 2024, Battle Creek is fully consolidated in our Consolidated Balance Sheets and Consolidated
Statements of Operations and, as such, no longer reflected as a non-controlling interest.

Tri-State, Ltd.

Tri-State, Ltd. is an inactive shell corporation.

Primero Insurance Company

Primero is a wholly-owned subsidiary of Tri-State,
Ltd. Tri-State, Ltd. is an inactive shell corporation that is 100% owned by Nodak Insurance. Primero is a property and casualty insurance
company that primarily provides non-standard auto coverage in the states of Arizona, North Dakota, South Dakota, and Nevada. The Company
made the strategic decision to stop writing non-standard auto business for Primero in Nevada during 2024 and in Arizona and South Dakota
during the third quarter of 2025, and existing policies will be non-renewed.

Direct Auto Insurance Company

Direct Auto is a property and casualty insurance
company that provides non-standard auto coverage in the state of Illinois. The Company made the strategic decision to stop writing non-standard
auto business for Direct Auto in Illinois during the third quarter of 2025, and existing policies will be non-renewed.

Westminster American Insurance Company

Westminster was a property and casualty insurance
company underwriting commercial multi-peril insurance in 18 states and the District of Columbia. Westminster was sold to Scott Insurance
Holdings on June 30, 2024. Subsequent to the date of sale, Westminster is reflected as discontinued operations within our Consolidated
Balance Sheets and Consolidated Statements of Operations. For additional information see Part II, Item 8, Note 20 “Discontinued
Operations” of this 2025 Annual Report.

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. Westminster personnel managed the day-to-day operations of their company prior to
the date of sale.

The consolidated financial statements of NI Holdings
presented herein include the financial position and results of operations of NI Holdings, Nodak Insurance, including Nodak Insurance’s
subsidiaries of American West, Primero and Battle Creek; Direct Auto, and Westminster (as discontinued operations until the date of sale).
Each of the insurance companies is subject to examination and comprehensive regulation by the insurance department of its state of domicile,
North Dakota.

Market Overview for Continuing Operations

We market our personal lines products in the upper
Midwest states of North Dakota, Nebraska, South Dakota, Arizona, and Minnesota. We offer commercial multi-peril insurance in the states
of North Dakota and South Dakota. Prior to our strategic decision to discontinue writing non-standard auto, we marketed this coverage
in the states of Illinois, Arizona, Nevada, South Dakota, and North Dakota. The following chart shows our direct premiums written during
the last two years and our relative market share within each of our states during the year ended December 31, 2024:

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Market size information
is not yet available for the year ended December 31, 2025.

Growth Strategy

We believe we have many opportunities to grow our
business. Strategies we employ to achieve this growth include:

Corporate Capital Strategy

Our philosophy is to deploy capital in a manner that
provides long-term protection for our policyholders and creates long-term value for our shareholders. This philosophy is supported by
a number of underlying strategies implemented across the organization that are focused on preservation of capital, including:

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

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

Insurance Products by Segment

Our consolidated financial results from continuing
operations include our Private Passenger Auto, Non-Standard Auto, Home and Farm, Crop, and All Other reporting segments. Information 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 21 “Segment Information.” The financial performance of
each segment is discussed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of
Operations.”

Private Passenger Auto

Nodak Insurance, American West, and Battle Creek
each write private passenger auto insurance to provide protection against liability for bodily injury and property damage arising from
automobile accidents as well as protection against loss from damage to automobiles owned by the insured. Private passenger auto accounted
for $95,156 (32.8%) of direct premiums written by the Company on a consolidated basis during 2025.

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 $25,499 (8.8%) of direct premiums written
by the Company on a consolidated basis during 2025. We made the strategic decision to stop writing non-standard auto business for Primero
in Nevada during 2024 and in Arizona, Illinois, and South Dakota during 2025, and existing policies will be non-renewed.

Home and Farm

Nodak Insurance, American West, and Battle Creek
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 $115,764 (39.9%) of direct premiums written by the Company on a consolidated
basis during 2025.

Crop

Nodak Insurance, American West, and Battle Creek
offer crop hail and multi-peril crop insurance policies. Multi-peril crop insurance is a federal program that protects against crop yield
losses from all types of natural causes and loss of revenue due to declines in the prices of agricultural products. Crop hail insurance
is a private insurance product designed to provide protection against losses to farmers’ crops due primarily to hail damage. Collectively,
crop insurance accounted for $36,707 (12.7%) of direct premiums written by the Company on a consolidated basis during 2025.

All Other

In addition to the products described above, Nodak
Insurance, American West, and Battle Creek write commercial and excess liability coverages. Collectively, these other coverages accounted
for $16,659 (5.8%) of the direct premiums written by the Company on a consolidated basis during 2025. This segment also includes an assumed
reinsurance book of business, with $483 of assumed premiums written on a consolidated basis during 2025. The majority of these assumed
premiums written are related to a domestic and international reinsurance pool for which the Company made the decision to non-renew its
participation as of January 1, 2022, and the associated assumed premiums represent run-off of this business.

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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, freezing, plant disease, 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 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.

American Farm Bureau Insurance Services (“AFBIS”)
underwrites all of our, as well as several other state Farm Bureau affiliated insurers, multi-peril crop and crop hail insurance policies.
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 receive with respect to such policies.

Marketing and Distribution

Our marketing philosophy is to sell profitable business
using a focused, cost-effective distribution system. Nodak Insurance distributes its insurance products through exclusive agents in North
Dakota, while American West, Battle Creek, Primero, and Direct Auto rely on independent agents.

We review our agents with respect to both premium
volume and profitability. Our captive agents for Nodak Insurance are hired and trained by our sales staff in North Dakota, while the independent
agents for our other companies are appointed by the underwriting or marketing staff for each respective company. We hold regular training
sessions when we introduce new products or product changes, and we identify specific topics that may help our agents more effectively
market our products.

For the year ended December 31, 2025, no individual
agent was responsible for more than 5% of the Company’s direct premiums written.

Agents are compensated through a fixed base commission
structure. Agents receive commission as a percentage of premiums as their primary compensation from us. The Risk Management Agency of
the U.S. Department of Agriculture (“RMA”) establishes the maximum commission that can be paid to agents with respect to crop
insurance policies. Nodak Insurance, Battle Creek, and American West also pay annual profit-sharing commissions with respect to all property
and casualty (non-crop) business based on company-specific production metrics related to premiums 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 agents and policyholders. We believe that these positive experiences contribute to achieving higher policyholder retention and new
business growth over time. While we rely on our captive and 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

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, maintain appropriate policyholder retention, and support the
production of profitable new business. These 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.

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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.

Enterprise Risk Management

Our Company is subject to significant risks, including
the normal risks of a property and casualty insurance company. These risks are discussed in more detail in 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 shareholders, its policyholders,
or other stakeholders. The Audit Committee of the Board of Directors oversees risk management and regularly receives reports from the
ERMC.

Reinsurance

We cede and assume certain premiums and losses to and from various
companies and associations under a variety of reinsurance agreements. We seek to limit the maximum net loss that can arise from large
risks or risks in concentrated 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 policyholders.
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 to the same extent, and at the same cost, as it has in the past. We may choose in the
future to reevaluate the use of reinsurance to increase or decrease the amounts of risk ceded to reinsurers.

For additional information, see Part II, Item 8, Note 6 “Reinsurance.”

Unpaid Losses and Loss Adjustment Expenses

We maintain reserves for unpaid losses and loss adjustment expenses.
Our liability for unpaid losses and loss adjustment expenses 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”). We determine a provision 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 loss adjustment expenses 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. Our liability for unpaid losses and loss adjustment expenses is not discounted.

For additional information, see Part II, Item 7, “Critical Accounting
Policies” and Part II, Item 8, Note 8 “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, taxable corporate, and U.S.
agency mortgage-backed bonds. We regularly monitor the effective duration of our fixed income investments, and our investment purchases
and sales are executed with the objective of having adequate funds available to satisfy our insurance and other obligations. Generally,
the expected principal and interest payments produced by our fixed income portfolio adequately fund the estimated runoff of the Company’s
insurance reserves. The substantial amount by which the fair value of the fixed income portfolio exceeds the value of the net insurance
liabilities, as well as the positive cash flow from newly sold policies and the large amount of high-quality liquid bonds, contribute
to the Company’s ability to fund claim payments without having to sell illiquid assets or access its credit facilities.

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We also invest a much smaller percentage of the portfolio in private
placement debt offerings and equity securities, which have the potential for higher returns but also involve varying degrees of risk,
including higher volatility and/or less liquidity.

The Investment Committee of NI Holdings’ Board of Directors reviews
and approves the Company’s investment policy periodically. The investment portfolio is managed by Conning, Inc.

For additional information, see Part II, Item 7, “Critical Accounting
Policies” and Part II, Item 8, Note 4 “Investments.”

Financial Strength

Ratings are an important factor in assessing the
Company’s competitive position in the insurance industry. The Company is reviewed regularly by the independent rating agency AM
Best, who assigns a financial strength rating to the Company, which reflects its assessment of an insurer’s ability to meet its
financial obligations to policyholders. An insurer’s financial strength rating is one of the primary factors evaluated by those
in the market 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 written premiums, the lines of business it can write, and, for insurers like us that are also public registrants, the market
value of its securities.

All of the Company’s insurance subsidiaries
and affiliate companies are rated “A” Excellent by AM Best, which is the third highest out of 15 possible ratings, under a
group rating due to the intercompany pooling reinsurance agreement. Effective May 20, 2025, AM Best affirmed a stable financial strength
outlook to the group.

Competition

The property casualty and crop insurance markets
are competitive. We compete with stock insurance companies, mutual insurance companies, and other underwriting organizations. Our largest
competitors in North Dakota for private passenger auto and homeowners include Progressive, State Farm, American Family, National General,
Farmers Union, and Auto-Owners insurance companies. 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 and Arizona, our primary competitors are regional carriers.

Based on 2024 data, Nodak Insurance is the second
largest writer of farmowners insurance in North Dakota. Our largest competitors include Farmers Union, North Star Mutual, American Family,
and Farmers Alliance insurance companies. In Nebraska and South Dakota, we have a small farmowners market share, which is dominated by
the large national and regional carriers.

The principal competitors in our markets for multi-peril
crop insurance include Chubb, QBE Insurance Group, Zurich, AgriSompo, and Great 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 NDFB and our leading market
share are significant factors in maintaining our market share of the crop insurance business in North Dakota. The Company’s multi-peril
crop insurance premiums for North Dakota were $28,976, $30,641, and $39,073 for the years ended December 31, 2025, 2024, and 2023, respectively.
Total North Dakota multi-peril crop premiums for the industry were $1,311,424, $1,231,110, and $1,491,650 for the years ended December
31, 2025, 2024, and 2023, respectively.

With respect to writing property and casualty insurance,
competitive factors include pricing, agency relationships, policy support, claim service, and market reputation. Like other writers of
property and casualty insurance, our policy terms vary from state to state based on state regulations, competition, pricing, and other
factors including the prescribed minimum liability limits in each state. We believe our Company differentiates itself from many larger
companies competing for this business by focusing on ease of doing business and providing excellent claims service with local, knowledgeable
employees.

To compete successfully in the property and casualty
insurance market, we utilize data-driven insights and a disciplined underwriting approach to assess and price risks, practice prudent
claims management, reserve appropriately for unpaid claims, and provide quality service and competitive commissions to our independent
and captive agents.

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Regulation

General

We are subject to extensive regulation, particularly
at the state level. This 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 they are
subject to examination by the departments they are domiciled in at any time. Our insurance company subsidiaries prepare statutory-basis
financial statements in accordance with accounting practices and procedures prescribed or permitted by the state in which they are domiciled.
Our domiciliary states generally conform to National Association of Insurance Commissioners (“NAIC”) accounting practices
and procedures, so our examination reports and other filings generally are accepted by other states. As of December 31, 2025, all of our
insurance subsidiaries are domiciled in North Dakota.

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. 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 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.

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

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 insufficiently 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.

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At the company action level,
the company must submit a comprehensive plan to the regulatory authority that discusses proposed corrective actions to improve the capital
position. The “regulatory action level” is triggered if a company’s total adjusted capital is less than 1.5 times but
greater than or equal to 1.0 times its authorized control level. At the regulatory action level, the regulatory authority will perform
a special examination of the company and issue an order specifying corrective actions that must be followed. The “authorized control
level” is triggered if a company’s total adjusted capital is less than 1.0 times but greater than or equal to 0.7 times its
authorized control level. At this level, the regulatory authority may take action it deems necessary, including placing the company under
regulatory control. The “mandatory control level” is triggered if a company’s total adjusted capital is less than 0.7
times its authorized control level. At this level, the regulatory authority is mandated to place the company under its control. The capital
levels of our insurance subsidiary and affiliate companies all exceed the authorized control level and have never triggered any of these
regulatory capital levels. We cannot guarantee, however, that the capital requirements applicable to such companies will not increase
in the future, or that the underlying ratios will not erode.

NAIC Ratios

The NAIC has also developed a set of 13 financial
ratios referred to as the Insurance Regulatory Information System (“IRIS”). Based on statutory-basis financial statements
filed with state insurance regulators, the NAIC annually calculates these IRIS ratios to assist state insurance regulators in monitoring
the financial condition of insurance companies. The NAIC has established an acceptable range for each of the IRIS financial ratios. If
four or more of its IRIS ratios fall outside the range deemed acceptable by the NAIC, an insurance company may receive inquiries from
individual state insurance departments. However, a ratio falling outside the usual range may not necessarily be considered adverse. In
some years, it may not be unusual for financially sound companies to have several ratios with results outside the usual ranges. During
the years ended December 31, 2025, 2024, and 2023, none of our insurance company subsidiaries produced results outside the acceptable
range for more than three of the IRIS tests.

Enterprise Risk Assessment

In 2012, the NAIC adopted various changes to its
Model Regulations (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 U.S. The NAIC Amendments include a requirement that an
insurance holding company system’s ultimate controlling person submit annually to its lead state insurance regulator an “enterprise
risk report.” This enterprise risk report identifies the activities, circumstances, or events involving one or more affiliates of
an insurer that, if not remedied properly, are likely to have a material adverse effect upon the financial condition or liquidity of the
insurer or its insurance holding company system as a whole. The Company files a Form F Enterprise Report annually with each domiciliary
state in support of this requirement. The NAIC Amendments also include provisions requiring a controlling person to submit prior notice
to its domiciliary insurance regulator of its divestiture of control, having detailed minimum requirements for cost sharing and management
agreements between an insurer and its affiliates, and expanding of the agreements between an insurer and its affiliates to be filed with
its domiciliary insurance regulator.

In 2012, the NAIC also adopted the Own Risk Solvency
Assessment (“ORSA”) Model Act. The ORSA Model Act, when adopted by the various states, will require an insurance holding company
system’s chief risk officer to submit at least annually to its lead state insurance regulator a confidential report detailing its
own internal solvency assessment. Such an assessment is to be tailored to the nature, scale, and complexity of an insurer. This assessment
will include the material and relevant risks identified by the insurer associated with an insurer’s current business plan and the
sufficiency of capital resources to support those risks. Although our insurance company subsidiaries are exempt from ORSA because of their
size, we have incorporated those elements of ORSA that we believe constitute “best practices” into our 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, 2025,
2024, and 2023, we paid only minimal assessments pursuant to state insurance guaranty association laws. We establish reserves relating
to insurance companies that are subject to insolvency proceedings when it becomes probable that we will be subject to an assessment and
the amount of such assessment can be estimated. We cannot predict the amount and timing of any future assessments under these laws.

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Federal Regulation

The U.S. federal government generally does not directly
regulate the insurance industry except for certain areas of the market, such as insurance for crops, flood, nuclear, and terrorism risks.
However, the federal government has undertaken initiatives or considered legislation in several areas that may affect the insurance industry,
including tort reform, corporate governance, and the taxation of reinsurance companies. The Dodd-Frank Act established the Federal Insurance
Office, which is authorized to study, monitor, and report to Congress on the insurance industry and to recommend that the Financial Stability
Oversight Council designate an insurer as an entity posing risks to the U.S. financial stability in the event of the insurer’s material
financial distress or failure. In December 2013, the Federal Insurance Office issued a report on alternatives to modernize and improve
the system of insurance regulation in the U.S., including by increasing national uniformity through either a federal charter or effective
action by the states. Changes to federal legislation and administrative policies in several areas, including changes in federal taxation,
can also significantly affect the insurance industry and us.

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

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 have promulgated laws and regulations that require financial institutions, including insurance companies, to take steps to protect
the privacy of certain consumer and customer information. The NAIC has adopted several provisions to facilitate the implementation of
the GLBA, including the Privacy of Consumer Financial and Health Information Model Regulation and the Standards for Safeguarding Customer
Information Model Regulation. Several states adopted similar provisions regarding the safeguarding of customer information. We have implemented
procedures to comply with the GLBA’s related privacy requirements.

In October 2017, the NAIC adopted the Insurance Data
Security Model Law (“IDSML”), which 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. Several states in which we operate, including North Dakota,
have adopted the IDSML. Such enactments and regulations could raise compliance costs and subject us to the risk of regulatory enforcement
actions, penalties, and reputational harm. Any such events could potentially have an adverse impact on our business, financial condition,
or results of operations.

Office of Foreign Asset Control

The Treasury Department’s Office of Foreign
Asset Control (“OFAC”) maintains a list of “Specifically Designated Nationals and Blocked Persons” (the “SDN
List”). The SDN List identifies persons and entities that the government believes are associated with terrorists, rogue nations,
or drug traffickers. OFAC’s regulations prohibit insurers, among others, from doing business with persons or entities on the SDN
List. If the insurer finds and confirms a match, the insurer must take steps to block or reject the transaction, notify the affected person,
and file a report with OFAC.

Dividends

As an insurance holding company with no independent
operations or source of revenue, our capacity to pay dividends to our 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 distribution to its shareholders. Prior approval from the state insurance regulatory authority must be obtained
before payment of an “extraordinary dividend” as defined under the state’s insurance code. For additional information,
see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources,” and Part II, Item 8, Note 22 “Statutory Net Income (Loss), Capital and Surplus, and Dividend Restrictions.”

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

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materially affect the operations, management, or financial condition of the insurers
within the group. Pursuant to these laws, the North Dakota Insurance Department requires prior disclosure of material transactions involving
an insurance company and its affiliates. Under these laws, the North Dakota Insurance Department will have the right to examine us at
any time.

All transactions within our consolidated group affecting
our insurance company subsidiaries must be fair and equitable. Notice of certain material transactions between NI Holdings and any person
or entity in our holding company system will be required to be given to the Department of Insurance of the applicable domiciliary state.
Certain transactions cannot be completed without the prior approval of the various Departments of Insurance.

Approval of the state insurance commissioner is required
prior to any transaction affecting the control of an insurer domiciled in that state. In North Dakota, the acquisition of 10% or more
of the outstanding voting securities of an insurer or its holding company is presumed to be a change in control. North Dakota law also
prohibits any person or entity from (i) making a tender offer for, or a request or invitation for tenders of, or seeking to acquire or
acquiring any voting security of a North Dakota insurer if, after the acquisition, the person or entity would be in control of the insurer,
or (ii) effecting or attempting to effect an acquisition of control of or merger with a North Dakota insurer, unless the offer, request,
invitation, acquisition, effectuation, or attempt has received the prior approval of the North Dakota Insurance Department.

Human Capital

Our key human capital management objectives are to
attract, retain, and develop talent to deliver on the Company’s strategy. To support these objectives, our 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 401(k) 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 12 “Benefit
Plans” and Note 18 “Share-Based Compensation” for further discussion of our benefit plans and stock-based compensation.

As of December 31, 2025, NI Holdings and its subsidiaries
had 172 total employees, of which 166 were full-time employees. Employee turnover averaged 39.5% during 2025, compared to 29.0% during
2024, and 22.7% during 2023. A significant portion of this turnover is related to our strategic decision to no longer write non-standard
auto coverage in Nevada, Arizona, South Dakota, and Illinois.