NI Holdings, Inc. (NODK) Risk Factors

Item 1A. Risk Factors

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

Insurance Risks

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. Climate change may also impact insurability by impairing our ability to identify and quantify potential hazards that
will result in losses and offer our customers products at an affordable price. 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. Our investment portfolio is also subject to the effects of climate
change as economic shifts alter the return dynamic of long-term investments and reduce valuations.

We write a significant amount of business in North
Dakota. As a result, adverse developments from severe weather events in North Dakota would have a greater effect on our financial condition
and results of operations than if our business was less geographically concentrated. The incidence and severity of such events are inherently
unpredictable.

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, 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 2025 limited
our catastrophe exposure to $20 million retention per event, with $117 million of reinsurance coverage placed in excess of this retention.
For 2026, we expect our catastrophe excess of loss program will limit our catastrophe exposure to $20 million retention per event, with
$123 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 or reinsurance 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 3 “Summary of Significant Accounting Policies and Basis of Presentation” and Note 6 “Reinsurance.”

If actual losses exceed our loss and loss adjustment
expense reserves or if changes in the estimated level of loss and loss adjustment expense reserves are necessary as a result of changes
in the legal, regulatory, and economic environments in which we operate, our financial results could be materially and adversely affected.

We maintain reserves to cover estimated unpaid losses and expenses
necessary to settle claims. The reserves for losses and loss adjustment expenses that we 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 established 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 reserves for unpaid losses and loss adjustment expenses are appropriate, to the extent that such reserves prove to be
inadequate or excessive in the future, we would adjust them and recognize the change in earnings in the period the reserves are adjusted.
There can be no assurance that the estimates of such liabilities will not change in the future and any such adjustment could have a material
impact on 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 8 “Unpaid Losses and Loss Adjustment Expenses.”

15

It is possible that, among other things, past or future steps taken
by the federal government and the Federal Reserve to manage the U.S. economy, including fiscal and monetary policy measures, could lead
to higher than anticipated levels of inflation, 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 long-term and allows us to
price for those increases in future policy periods.

Any downgrade in our financial strength 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 AM Best, periodically
assess and rate the claims-paying ability of insurers based on criteria established by the rating agencies. Ratings assigned by AM Best
are an important factor influencing the competitive position of insurance companies. 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 AM Best rating should not be relied upon as a basis for an investment decision to purchase our
common stock.

All of the Company’s insurance subsidiaries
hold a financial strength rating of “A” (Excellent) by AM Best, the third highest rating out of 15 rating classifications.
Our most recent rating by AM Best was affirmed on May 20, 2025. Financial strength ratings are used by agents, customers, lenders, and
other insurance carriers as a means of assessing the financial strength and quality of insurance companies. If our financial position
deteriorates, we may not maintain our favorable financial strength rating from 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 agents to choose other more highly rated competitors
or reduce our ability to obtain reinsurance. For additional information, see Part I, Item 1, “Business” and “Financial
Strength.”

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

The property and casualty insurance industry has
historically been characterized by soft markets (periods of relatively high levels of price competition, less restrictive underwriting
practices, and generally low premium rates) followed by hard 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 rates). 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, point-of-sale, or other non-traditional distribution channels. Consolidation within
the industry could also influence future growth and profit potential.

Innovation and emerging technologies, including
artificial intelligence, continue to greatly impact the insurance industry. If we are unable to keep pace with the technological changes
that our competitors implement, we may not be able to attract and retain customers, adequately price risks, or operate as efficiently
as our competitors. 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 need for, or decrease the future
pricing of, our auto insurance products.

Our success depends primarily on our ability
to underwrite risks effectively and price our insurance products 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
used in pricing our policies. If we fail to appropriately price the risks we insure or if our claims 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 new business growth and retention of existing business may be adversely affected. The ability to effectively
underwrite risks and price products appropriately is subject to a number of uncertainties, including:

16

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. Unlike the multi-peril crop business, we have the ability
to underwrite and price crop hail insurance. We rely on AFBIS to underwrite our crop hail insurance line of business. If 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, we have the ability
to decline to issue the policy.

Volatility in crop prices and yields, as a result
of weather conditions, trade policies, or other events, could adversely impact our financial condition and operating results.

Unpredictable weather conditions and other events
such as excessive rain, flooding, droughts, hail, pests, and plant diseases can significantly impact crop prices and yields, creating
volatility in our crop insurance business. Additionally, international trade policies, including the imposition of tariffs between major
trading partners such as the U.S. and China, can create significant fluctuations in crop prices. We are unable to predict the ultimate
result and duration of any tariff actions by the U.S. government, or countermeasures that may be taken by other nations. These trade tensions
and retaliatory tariffs may affect agricultural commodity prices and create additional market uncertainty in our crop insurance business.
In addition, the amount of multi-peril crop insurance business we retain is subject to the terms of the SRA and is dependent on the actual
direct loss ratio experience. A significant decrease in crop prices and variability in the loss experience, whether caused by weather
events, trade policies, or other events, could have a material negative effect on our business and results of operations.

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

We use reinsurance arrangements to manage the amount
of risk we retain, stabilize underwriting results, and 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 at favorable rates. If we are 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 6 “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 extent the risk is transferred, it does not eliminate our liability to policyholders because we remain liable as
the primary 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 or “A+” or better by Standard & Poor’s. 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 have a material adverse
effect on our liquidity, operating results, and financial condition. For additional information, see Part II, Item 8, Note 6 “Reinsurance.”

Business and Operational Risks

The impact of a future 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 business segments and geographic markets differently.

Any future federal, state, and local government actions to address
the impact of a pandemic may adversely affect us. Regulatory restrictions or requirements could impact pricing, risk selection, and our
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 federal, state, and local governments could require an increase
in taxes at the federal, state, and local levels, which would adversely impact our results of 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.

17

We may not be able to grow our business if we
cannot retain and expand our captive and independent agent relationships, we cannot provide competitive products for these agents to sell,
and/or 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. Nodak Insurance utilizes captive agents who only sell our Company’s
products. Outside of North Dakota, we write business through the independent 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 distribution. To the extent that current and potential policyholders change their insurance shopping preferences,
this may have an adverse effect on our ability to grow, financial position, and results of operations.

Acquisitions could disrupt our business and
harm our financial condition or results of operations.

As part of our growth strategy, we will continue
to evaluate acquisition opportunities. Any acquisitions involve a number of risks that could materially adversely affect our business
and operating results, including:

Our access to capital may be limited or may not be available on
favorable terms.

Our future capital requirements depend on many factors, including rating
agency and regulatory requirements, the performance of our investment portfolio, strategic initiatives, acquisition opportunities, and
the ability to write business successfully at rate levels sufficient to cover losses. We may need to raise additional capital in the future
through debt or equity financings. However, we can provide no assurance that we will be successful in raising funds pursuant to additional
equity or debt financings or that such funds will be raised at prices that do not create substantial dilution for our existing stockholders.
Any debt financing obtained by us in the future would cause us to incur debt service expenses and could include restrictive covenants
relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain
additional capital and pursue business opportunities. Macroeconomic challenges and volatility in capital markets could limit our ability
to raise capital when needed on terms favorable to us, or at all. If we cannot obtain adequate capital or sources of credit on favorable
terms, or at all, our business, financial condition, results of operations, and strategic initiatives could be adversely affected.

18

We may be unable to attract, retain or effectively
manage the succession of key personnel.

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. While
we believe we offer competitive compensation and benefit arrangements, there can be no guarantee that we will be able to retain our key
employees. 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. In addition, our employment and other agreements with our key officers do not include
non-compete covenants or non-solicitation provisions because they are unenforceable under North Dakota law. 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.

A failure in our operational systems or infrastructure,
or those of our third-party service providers, including operational errors, could disrupt business, damage our reputation, and cause
losses.

Our operations rely on the secure processing, storage,
and transmission of confidential information, including in our computer systems and networks and those of third-party service providers.
We rely heavily on our operating systems in connection with issuing policies, paying claims, and providing the information we need to
conduct our business. We also rely on the operating systems of AFBIS in connection with various processes with respect to our crop lines
of business. Our business depends on effective information security and systems, and we place significant reliance on the integrity and
timeliness of the data our information systems process to support our business. A breakdown or disruption of any of these systems could
materially adversely affect our ability to conduct our business and our results of operations.

We are exposed to many other types of operational
risk, including the risk of fraud by employees and outsiders, clerical and recordkeeping errors, and computer or telecommunications systems
malfunctions. Our business depends on our ability to process a large number of increasingly complex transactions. If any of our operational,
accounting, or other data processing systems fail or have other significant shortcomings, we could be materially adversely affected. Similarly,
we depend on our employees. We could be materially adversely affected if one or more of our employees cause a significant operational
breakdown or failure, either as a result of human error or intentional sabotage or fraudulent manipulation of our operations or systems.

Cyberattacks, security breaches, or similar events
affecting the technologies and systems we rely on to operate our business and to maintain and protect sensitive Company and customer data
could disrupt our operations, harm our reputation, and result in material losses.

We have implemented administrative and technical
controls, have taken actions to reduce the risk of cyber incidents and to protect our information technology and assets, and will continue
to modify such procedures as circumstances warrant and negotiate appropriate terms in our agreements with third-party providers to protect
our assets. However, such measures may be insufficient to prevent unauthorized access, computer viruses, malware or other malicious code
or cyberattack, business compromise attacks, catastrophic events, system failures and disruptions, employee errors or malfeasance, third-party
(including outsourced service providers) errors or malfeasance, loss of assets, and other events that could have security consequences.
Such an event may result in data loss or loss of assets which could result in significant losses, reputational damage, or other adverse
effects on our operations.

In addition, our technologies, systems, and networks
may become the target of cyberattacks or information security breaches that could result in the unauthorized release, gathering, monitoring,
misuse, loss or destruction of our or our insureds’ confidential, proprietary and other information, or otherwise disrupt our or
our insureds’ or other third-parties’ business operations, which in turn may result in legal claims, regulatory scrutiny and
liability, reputational damage, the incurrence of costs to eliminate or mitigate further exposure, and the loss of customers. Although
to date we are not aware of any information security breaches or losses relating to cyberattacks, there can be no assurance that we will
not suffer such losses in the future. Our risk and exposure to these matters remains heightened because of, among other things, the evolving
nature and increasing frequency and sophistication of these threats and the outsourcing of some of our business operations. As a result,
cybersecurity and the continued development and enhancement of our controls, processes, and practices designed to protect our systems,
computers, software, data, and networks from attack, damage, or unauthorized access remain a priority. As cyber threats continue to evolve,
we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate
and remediate any information security vulnerabilities.

The compromise of personal, confidential, or proprietary
information could also subject us to legal liability or regulatory action, including fines, penalties, or intervention, under evolving
cybersecurity, data protection, and privacy laws and regulations enacted by the U.S. federal and state governments. Such laws and regulations
have become increasingly widespread and demanding in recent

19

years and may result in increased compliance costs and risk of regulatory
actions or penalties. If incurred, such regulatory actions or penalties could harm our reputation. Any such events could have an adverse
impact on our business, financial condition or results of operations.

Strategic decisions may not achieve their intended benefits, may
be based on incomplete or inaccurate information, or may not be implemented in a timely manner, which could adversely affect our results
of operations.

From time to time, we evaluate and adjust our business strategies in
response to changes in market conditions, underwriting results, competitive dynamics, regulatory developments, and other factors. For
example, we recently determined to cease writing new policies and non-renew existing policies in our Non-Standard Auto segment. Strategic
decisions such as these are based on information, estimates, and assumptions available to us at the time they are made. However, such
information may prove to be inaccurate or incomplete, and the anticipated benefits of these actions, such as improved underwriting performance,
reduced volatility, or more efficient capital allocation, may not be realized as expected, or at all.

In addition, there can be significant timing and execution risks associated
with strategic changes. Our decision-making and implementation processes may take longer than anticipated, or we may not identify needed
changes on a timely basis. While we evaluate and execute strategic adjustments, our business operations may experience disruption, our
relationships with agents, policyholders, or reinsurers may be adversely affected, and our overall financial results may be negatively
impacted. Furthermore, no longer writing a line of business may result in short-term declines in premium volume, increased expense ratios,
or other unforeseen consequences that could negatively impact our results of operations and financial condition.

Regulatory Risks

A portion of our written premiums and net profits
are generated from 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 could have an adverse effect on our revenues and net income.

In 2025, 2024, and 2023, our direct premiums written
generated from the multi-peril crop insurance line of business were 11.7%, 9.8%, and 10.2%, respectively, of total written premiums. Through
the FCIC, the U.S. 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 U.S. 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. Without the premium subsidy, the number of farmers purchasing multi-peril crop insurance would decline significantly.
Periodically, members of the U.S. Congress propose to significantly reduce 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 an adverse effect on our results of operations and financial condition.

Our businesses are heavily regulated by the
jurisdictions in which we conduct business and changes in regulation, including required participation in pools, premium surcharges, and
higher tax rates, may reduce our profitability and limit our growth.

Most states require insurance companies authorized
to do business in their state to participate in guaranty funds, which require the insurance companies to bear a portion of the unfunded
obligations of impaired, insolvent, or failed insurance companies. These obligations are funded by assessments, which are expected to
continue in the future. State guaranty associations levy assessments, up to prescribed limits, on all insurance companies doing business
in the state based on their proportionate share of premiums written in the lines of business in which the impaired, insolvent, or failed
insurance companies are engaged. Accordingly, the assessments levied on us may increase as we increase our written premiums. For additional
information, see Part I, Item 1, “Business” and “Regulation.”

In addition, as a condition to conducting business
in some states, insurance companies are required to participate in residual market programs to provide insurance to those who cannot procure
coverage from an insurance carrier on a negotiated basis. Insurance companies generally can fulfill their residual market obligations
by, among other things, participating in a reinsurance pool where the results of all policies provided through the pool are shared by
the participating insurance companies. Although we price our insurance to account for our potential obligations under these pooling arrangements,
we may not be able to accurately estimate our liability for these obligations. Accordingly, mandatory pooling arrangements may cause a
decrease in our profits. As we write policies in new states that have mandatory pooling arrangements, we will be required to participate
in additional pooling arrangements. Further, the impairment, insolvency, or failure of other insurance companies in these pooling arrangements
would likely increase the liability for other members in the pool.

20

The effect of assessments and premium surcharges
or increases in such assessments or surcharges could reduce our profitability in any given period or limit our ability to grow our business.
In addition, state tax laws that specifically impact the insurance industry, such as premium taxes, or more general tax laws, such as
U.S. federal corporate income taxes, could be enacted or changed and could have a material adverse impact on us.

We are subject to insurance industry laws and
regulations, as well as claims and legal proceedings, which if determined unfavorably, could have a material adverse effect on our profitability.

We are subject to extensive supervision and regulation
by the states in which we operate. The failure to comply with these regulations could subject the Company to sanctions and fines, including
the cancellation or suspension of our licenses, which could significantly impact our financial condition and results of operations. State
insurance departments also conduct periodic examinations of the affairs of insurance companies and require the filing of annual and other
reports relating to financial condition, holding company issues, and other matters.

Additionally, changes in the level of regulation
of the insurance industry or changes in laws or regulations themselves or interpretations by regulatory authorities could adversely affect
our ability to operate our business. Federal laws and regulations, and the influence of international laws and regulations, may have adverse
effects on our business, potentially including a change from a state-based system of regulation to a system of federal regulation, the
repeal of the McCarran Ferguson Act, and/or measures under the Dodd-Frank Act that establish the Federal Insurance Office and provide
for a determination that a non-bank financial company presents systemic risk and therefore should be subject to heightened supervision
by the Federal Reserve Board. It is not known how this federal office will coordinate and interact with the NAIC and state insurance regulators.
Adoption or implementation of any of these measures may restrict our ability to conduct our insurance business, govern our corporate affairs,
or effectively manage our cost of doing business.

We also face a risk of litigation in the ordinary
course of operating our businesses including the risk of class action lawsuits. We may become subject to class actions and individual
suits alleging breach of fiduciary or other duties, including our obligations to indemnify directors and officers in connection with certain
legal matters. We are also subject to litigation arising out of our general business activities such as contractual and employment relationships
and claims regarding the infringement of the intellectual property of others. Plaintiffs in class action and other lawsuits against us
may seek large or indeterminate amounts of damages, including punitive and treble damages, which may remain unknown for substantial periods
of time.

New or changes to existing accounting rules and standards could
adversely impact our reported results of operations.

Our consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States of America (“GAAP”), as promulgated by the Financial Accounting
Standards Board (“FASB”), subject to the accounting-related rules and interpretations of the SEC. New accounting rules or
changes in accounting standards or how they apply to our business may impact our reported financial condition or results of operations,
and could cause increased volatility in reported earnings, which could affect the trading price of our common stock or our credit ratings.

Risks Related to Our Common Stock

Nodak Mutual Group’s majority control
of our common stock will enable it to exercise voting control over most matters put to a vote of shareholders.

Nodak Mutual Group owns a majority of our outstanding
common stock and, through its Board of Directors, is able to exercise voting control over most matters put to a vote of shareholders.
The votes cast by Nodak Mutual Group may not be in the best interests of all shareholders. For example, Nodak Mutual Group may exercise
its voting control to defeat a shareholder nominee for election to the Board of Directors of NI Holdings.

In addition, certain provisions of our Articles of
Incorporation, such as the prohibition of cumulative voting for the election of directors and the prohibition on any person or group acquiring
and having the right to vote in excess of 10% of our outstanding stock without the prior approval of the Board of Directors will make
removal of the Company’s management difficult.

Our status as an insurance holding company with
no direct operations could adversely affect our ability to fund operations, execute future share repurchases, or meet potential future
shareholder dividend and/or debt obligations.

NI Holdings is an insurance holding company that
transacts substantially all of its business through its subsidiaries. A significant source of funds available to us for the payment of
operating expenses, share repurchases, and potential future dividends to shareholders and/or debt servicing are management fees, dividends
from our subsidiaries, or other sources of capital. The payment of

21

dividends by our subsidiaries are restricted by North Dakota’s
insurance law. If we are unable to obtain dividends from our subsidiaries as needed to fund our operations, our business and financial
results could be adversely affected.

Statutory provisions and provisions of our Articles
of Incorporation and Bylaws may discourage takeover attempts of NI Holdings that shareholders may believe are in their best interests.

We are subject to provisions of North Dakota corporate
and insurance law that hinder a change of control. North Dakota law requires the North Dakota Insurance Department’s prior approval
of a change of control of an insurance holding company. Under North Dakota law, the acquisition of 10% or more of the outstanding voting
stock of an insurer or its holding company is presumed to be a change in control. Approval by the North Dakota Insurance Department may
be withheld even if the transaction would be in the shareholders’ best interest if the North Dakota Insurance Department determines
that the transaction would be detrimental to policyholders.

Our Articles of Incorporation and Bylaws also contain
provisions that may discourage a change in control. These provisions may serve to entrench management and may discourage a takeover attempt
that shareholders may consider to be in their best interest or in which they would receive a substantial premium over the current market
price. These provisions may make it extremely difficult for any one person, entity, or group of affiliated persons or entities to acquire
voting control of NI Holdings, with the result that it may be extremely difficult to bring about a change in the Board of Directors or
management. Some of these provisions also may perpetuate present management because of the additional time required to cause a change
in the control of the Board of Directors. Other provisions make it difficult for shareholders owning less than a majority of the voting
stock to be able to elect even a single director.

General Risks

Our investment portfolio is subject to credit
and interest rate risk, and therefore our revenues and financial results may fluctuate with interest rates, investment results, equity
market fluctuations, and developments in the capital markets.

Investment income is an important component of our
net income and overall profitability. We invest premiums received from policyholders and other available cash to generate investment income
and capital appreciation, while also maintaining sufficient liquidity to pay claims and operating expenses. Changes in interest rates
and credit quality may result in fluctuations in the income derived from, the valuation of, and in the case of declines in credit quality,
payment defaults on our fixed income securities. Such conditions could give rise to significant realized and unrealized investment losses
or the impairment of securities. Potential higher interest rates could reduce the carrying value of our fixed income and short-term investments,
negatively impacting the Company’s carrying value in the short-term. Over the long-term, however, higher interest rates would provide
an incremental benefit to our net investment income as excess cash and the 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.

We also invest a portion of our assets in equity
securities, which are subject to greater volatility in their investment returns than fixed income investments. Unlike fixed income securities,
the changes in the fair value of our equity securities are recognized in net income. General economic conditions, stock market volatility,
changes in tax laws, and many other factors beyond our control can adversely affect the value of these securities and potentially reduce
our net investment income and/or lead to net investment losses.

Any significant or long-running negative changes
in the fixed income or equity markets could have a material adverse effect on our financial condition, results of operations, or cash
flows. Our investment portfolio is also subject to credit and cash flow risk, including risks associated with our investments in asset-backed
and mortgage-backed securities. Because our investment portfolio is the largest component of our assets and a multiple of our shareholders’
equity, adverse changes in economic conditions could result in impairments that are material to our financial condition and operating
results. Such economic changes could arise from overall changes in the financial markets or specific changes to industries, companies,
or municipalities in which we maintain investment holdings. See Part II, Item 7A, “Quantitative and Qualitative Disclosures About
Market Risk.”

We may not be able to manage our growth effectively.

We intend to continue to grow our business in the
future, which could require additional capital, systems development, and skilled personnel. However, there are inherent risks associated
with this strategy, including the risks of unsuccessfully identifying profitable business opportunities, managing capital requirements,
expanding systems and internal controls, maintaining innovative products and technologies, allocating human capital resources, identifying
qualified employees and/or agents, and integrating future acquisitions. The failure to manage our growth effectively could have a material
adverse effect on our business, financial condition, and results of operations.

22

We could be adversely affected by a future unexpected
business interruption involving our office buildings, operational systems and infrastructure, key external vendors, and/or workforce.

Our business operations could be substantially interrupted
by flooding, snow, ice, wind, and other weather-related incidents, or from fire, pandemics, power loss, telecommunications failures, terrorism,
or other such events. Our business continuity plans may not sufficiently remediate all risks associated with future significant business
interruptions. Any damage caused by such a failure or loss may cause interruptions in our business operations that may adversely affect
our service levels and business.

Trade policies, including tariffs, could adversely impact our financial
condition and operating results.

We maintain reserves to cover estimated unpaid losses and expenses
necessary to settle claims. The reserves for losses and loss adjustment expenses that we 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 established the
reserves. Reserves are actuarially projected based on historical claims information, industry statistics, anticipated trends, and other
factors. Changes in U.S. trade policy, including changes in tariffs, could have a material adverse impact on our business, financial condition,
and results of operations. The imposition of new tariffs or increases in existing tariffs on goods imported from other countries could
result in increased costs for raw materials, components, or finished goods and adversely impact loss severity. In addition, tariffs or
other trade restrictions may lead to continuing uncertainty and volatility in U.S. and global financial and economic conditions and commodity
markets, declining consumer confidence, significant inflation, and diminished expectations for the economy. Such conditions could have
a material adverse impact on our business, results of operations and cash flows. We are unable to predict the ultimate result and duration
of any tariff actions by the U.S. government or countermeasures that may be taken by other nations.