The Company cedes and assumes certain premiums and losses to and from various companies and associations under a variety of reinsurance agreements. The Company seeks 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 the Company from its obligation to policyholders.

During the six-month period ended June 30, 2022, the Company retained the first $15,000 of weather-related losses from catastrophic events and had reinsurance under various reinsurance agreements up to $125,000 in excess of its $15,000 retained risk. The Company experienced multiple severe weather events during the second quarter of 2022 with none of these events exceeding the retention level during the current quarter.

During the year ended December 31, 2021, the Company retained the first $10,000 of weather-related losses from catastrophic events and had reinsurance under various reinsurance agreements up to $117,000 in excess of its $10,000 retained risk. The Company experienced one catastrophe event during the second quarter of 2021 in excess of the retention level.

The Company actively monitors and evaluates the financial condition of the reinsurers and develops estimates of the uncollectible amounts due from reinsurers. Such estimates are made based on periodic evaluation of balances due from reinsurers, judgments regarding reinsurers’ solvency, known disputes, reporting characteristics of the underlying reinsured business, historical experience, current economic conditions, and the state of reinsurer relations in general. Collection risk is mitigated from reinsurers by entering into reinsurance arrangements only with reinsurers that have strong credit ratings and statutory surplus above certain levels. The Company’s reinsurance recoverables on paid and unpaid losses were due from reinsurance companies with AM Best ratings of “A” or higher.

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NI Holdings, Inc.

Notes to Unaudited Consolidated Financial Statements (Unaudited)

(dollar amounts in thousands, except per share amounts)

A reconciliation of direct to net premiums on both a written and an earned basis is as follows:

	Three Months Ended June 30, 2022						Six Months Ended June 30, 2022
	Premiums Written			Premiums Earned			Premiums Written			Premiums Earned
Direct premium	$	144,962		$	94,251		$	220,495		$	167,650
Assumed premium		3,226			1,691			5,087			3,552
Ceded premium		(20,175	)		(11,446	)		(25,835	)		(17,119	)
Net premiums	$	128,013		$	84,496		$	199,747		$	154,083

	Three Months Ended June 30, 2021						Six Months Ended June 30, 2021
	Premiums Written			Premiums Earned			Premiums Written			Premiums Earned
Direct premium	$	125,552		$	87,059		$	197,972		$	155,802
Assumed premium		3,576			3,516			5,026			4,964
Ceded premium		(26,203	)		(14,294	)		(33,317	)		(21,350	)
Net premiums	$	102,925		$	76,281		$	169,681		$	139,416

A reconciliation of direct to net losses and loss adjustment expenses is as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Direct losses and loss adjustment expenses	$	110,670		$	76,599		$	156,165		$	114,177
Assumed losses and loss adjustment expenses		1,535			1,960			1,545			2,908
Ceded losses and loss adjustment expenses		(3,610	)		(15,641	)		(8,986	)		(17,278	)
Net losses and loss adjustment expenses	$	108,595		$	62,918		$	148,724		$	99,807

If 100% of our ceded reinsurance was cancelled as of June 30, 2022, or December 31, 2021, no ceded commissions would need to be returned to the reinsurers. Reinsurance contracts are typically effective from January 1 through December 31 each year.