SecProbe.io

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Mail Stop 3-09

									October 22, 2004

Michael Schroeder
Vice President, Secretary and General Counsel
National Interstate Corporation
3250 Interstate Drive
Richfield, OH 44286-9000

Re:	National Interstate Corporation
		Registration Statement on Form S-1
	File Number 333-119270

Dear Mr. Schroeder:

We have reviewed your filing and have the following comments.  Where
indicated, we think you should revise your document in response to
these comments.  If you disagree, we will consider your explanation
as to why our comment is inapplicable or a revision is unnecessary.
Please be as detailed as necessary in your explanation.  In some of
our comments, we may ask you to provide us with supplemental
information so we may better understand your disclosure.  After
reviewing this information, we may or may not raise additional
comments.

Please understand that the purpose of our review process is to assist
you in your compliance with the applicable disclosure requirements
and to enhance the overall disclosure in your filing.  We look
forward to working with you in these respects.  We welcome any
questions you may have about our comments or on any other aspect of
our review.  Feel free to call us at the telephone numbers listed at
the end of this letter.

General
1. Please complete all of the non-pricing-related blank sections of
your filing prior to filing the next amendment.

2. Please note that when you file a pre-effective amendment
containing pricing-related information, we may have additional
comments.  As you are likely aware, you must file this amendment
prior to circulating the prospectus.
3. Please note that when you file a pre-effective amendment that
includes your price range, it must be bone fide. We interpret this to
mean that your range may not exceed $2 if you price below $20 and 10%
if you price above $20.
4. Please provide us with a copy of all graphic materials or artwork
you intend to include in your prospectus.  We may have comments,
which you should address before printing your preliminary prospectus
for distribution.
5. Regarding your directed share program, please provide us with any
material you intend to sell to potential purchasers such as a
"friends and family" letter.  Tell us when you intend to send them to
these potential purchasers.  Tell us whether the sale will be handled
by you directly or by the underwriting syndicate.  Tell us the
procedures you or the underwriter will employ in making the offering
and how you will assure that this offer will meet the requirements of
Section 5 of the Securities Act and Rule 134.  We may have further
comments.
6. Please note that where we provide examples to illustrate what we
mean by our comments, they are examples and not complete lists.  If
our comments are applicable to portions of the filing that we have
not cited as examples, please make the appropriate changes in
accordance with our comments.

Table of Contents, page i
7. You should retain only the Table of Contents on this page.  All
other information should be disclosed after the Risk Factors section.

Prospectus Summary, page 1
Overview, page 1
8. You state that unless otherwise indicated, insurance industry data
and your market share or ranking in the industry were derived from
data compiled by A.M. Best Company, Inc.  Please provide us with
marked copies of the A.M. Best Company reports supporting all such
statements.  In addition, please provide us with the most recent A.M.
Best company reports regarding your company.
9. We note your disclosure regarding "an uninterrupted record of
profitability," and CAGRs in shareholders` equity, net income,
shareholders` equity per share and gross written premiums.  You
should make the following changes to this paragraph.
* Expand the disclosure to explain that your results of operation
have varied over the five-year period to which you have referred and
that your historical growth rates are not likely to accurately
reflect your future growth rates or your growth potential.
* Highlight the fact that your year-over-year profits declined at
certain times during this five-year period and that you had
underwriting losses at times during the period.
* Eliminate the shareholders` equity data as the shareholders` equity
per share data is a more meaningful and balanced performance measure.
* Expand the disclosure to note the wide variation in your return on
equity during the five-year period.
10. In the second paragraph, you state that you believe you are the
second largest underwriter of insurance for the passenger
transportation industry in the United States.  Supplementally,
provide us with independent third-party support for this assertion,
and name the largest underwriter in the prospectus.
11. You state here and throughout the prospectus that you focus on
niche markets and offer products, services and programs not generally
available in the insurance marketplace.  Other than your insurance
program relating to RV owners, which you state is more comprehensive
than that of your competitors, it appears you are really just
providing auto and workers` compensation insurance coverage, and that
you happen to concentrate on customers in the transportation
business.  Please revise here and throughout to explain what makes
your offerings unique and better articulate what constitutes your
niche.  We believe that many companies, including those you mention
in the prospectus` competition section, would write property and
casualty insurance for transportation companies.
12. We note your disclosure regarding your four business components.
Please provide more detailed disclosure for each of these businesses
in MD&A.  Specifically, discuss results of operations for each
business separately, in more detail.
13. Disclose the names of all customers that provided 10% or more of
the respective revenue of your transportation and alternative risk
transfer businesses in the past 12 months.
14. Here, and in more detail in the business section, explain the
difference between owning and renting the group captives you
describe.
15. In MD&A, please quantify the financial resources that you
currently expect to devote to the development of the new business
lines you mention.
Our Strategy, page 3
16. You state here that you price you expect a combined ratio no
higher than 96%.  You should state here what your combined ratio was
for each of the last five years; the periods for which you have
disclosed selected financial statements.
17. You state that you distribute your products using independent
agents and brokers, agents employed by your wholly owned agency
subsidiaries and via the Internet.  In the business section, state
the percentage of revenue or policies written from each of these
three distribution channels.

Our Competitive Strengths, page 3
18. You state that the characteristics listed distinguish you from
your competitors.  We do not understand how using product line
managers, staffing your business with experienced and well-trained
personnel, and having excellent ratings distinguishes you.  Do you
have evidence indicating that your competitors do not use product
managers or their equivalent, or that their staffs are not as
experienced and well trained as yours?  Are your A.M. Best ratings
better than your competitors?  We note that you state later in the
prospectus that many of your competitors have higher ratings than you
do.  You should expand the disclosure here and in more detail in the
Competitive Strengths section of the prospectus on page 40 to explain
the basis for these assertions and provide us supplemental support
for them.  Alternatively consider modifying the disclosure
accordingly.
19. You should note that the preceding comment also applies to the
more expansive disclosure regarding competitive strengths in the
"Business" section.
Risks Relating to National Interstate, page 4
20. Please consider whether you face other material challenges that
would justify the inclusion of additional bullets. Additional bullets
might be related to, among other factors, the risks of reinsurance
arrangements, the heavily regulated environment within which you must
function, how your holding company structure and regulatory
restrictions on the up-streaming of cash affects your ability to pay
dividends and how changes in interest rates could affect your
profitability.
21. Please expand the first bullet to state that you may experience
high losses during the time you begin a new product offering and note
the 2001 high losses you experienced in connection with the truck
insurance product you introduced.
22. In the last bullet relating to your relationship with American
Financial, you should state that American Financial would also likely
be able to control who comprises management of the registrant going
forward.
Recent Developments, page 5
23. Please update this disclosure to provide your claims experience
regarding the recent hurricanes to the latest practicable date.
Selected Historical Financial Information, page 7
24. Please provide us with the A.M. Best report you mention in
footnote 9.

Risk Factors, page 9
25. You state in the preamble, "Additional risks and uncertainties
not currently known to us or risks that we currently deem immaterial
may also impact our business operations."  Delete this sentence and
state that all material risks are discussed in this section.

Because we are primarily a transportation insurer, conditions in that
industry could adversely affect our business, page 9
26. You state that the transportation insurance industry is cyclical
and go on to describe the conditions that emerge during the periods
comprising this cycle.  Please expand the disclosure here, and in the
Business and MD&A sections, as appropriate, to describe what part of
the cycle the registrant believes exists currently and how it is
affecting your operations and profitability.  Compare current
conditions with conditions during the past three fiscal years.  If
you believe your profitability has in the past been adversely
affected by negative developments and cyclical changes in the
industry, please provide appropriate disclosure.

Our growth strategy includes..., page 9
27. When you enter a new business line, do you increase your reserves
to account for the novelty and your lack of experience in that new
line?  If you do not, so state, and disclose that you do not take
your inexperience into account and that this may result in
underestimation of reserves.  If you do, so state, and state that the
increased reserves will affect statutorily available capital, net
income and dividends.

If we are not able to attract and retain independent agents..., page
10
28. Disclose the percentage of revenue derived from your 10 largest
producers during the referenced time periods.

We are subject to comprehensive regulation, and our ability to earn
profits may be restricted by these regulations. In addition,
regulation may become more restrictive in the future, which could
make it more expensive to conduct our business and adversely affect
our profitability, page 10
29. Consider creating separate risk factors for the various items in
the bullet list embedded within this risk factor.
30. You state that state insurance department examiners perform
periodic financial, market conduct and other examinations of your
insurance companies.  Please disclose the date of your last
examination and disclose whether as a result of these examinations or
otherwise, you were or are in violation of any of the applicable laws
and regulations to which you refer.
Our insurance subsidiaries are subject to minimum capital and surplus
requirements. Our failure to meet these requirements could subject us
to regulatory action. page 11
31. Quantify the minimum capital and surplus requirements to which
you refer.

We may not be successful in reducing our risk and increasing our
underwriting capacity through reinsurance arrangements, which could
adversely affect our business, financial condition and results of
operations, page 13
32. We note that the reinsurance industry is currently in a "hard"
pricing market.  Please disclose this fact here and state that these
increased prices could adversely affect your ability to obtain
reinsurance.  We note your disclosure on page 25 regarding rising
reinsurance costs.

Future sales of shares of our common shares . . .,  pages 16
33. Please state how many shares may be offered for sale under the
registration rights agreement and under the Form S-8. You should also
briefly discuss the potential negative effect the sale of restricted
shares under these registration statements could have on the trading
market for the common stock.

Use of Proceeds, page 21
34. To the extent you can, please specify which general corporate
purposes the proceeds you do not contribute to your operating
subsidiaries will be used for.
35. Please provide the approximate dollar amount that you plan to use
for the purposes you identify pursuant to the previous comment.

Management`s Discussion and Analysis of Financial Condition and
Results of Operations, page 24

Overview, page 24
36. Currently, your MD&A overview discusses your business and your
source of revenues and expenses.  In a recent release called
"Commission Statement about Management`s Discussion and Analysis of
Financial Condition and Results of Operations," the staff stated that
"the development of MD&A disclosure should begin with management`s
identification and evaluation of what information, including the
potential effects of known trends, commitments, events, and
uncertainties, is important to providing investors and others an
accurate understanding of the company`s current and prospective
financial position and operating results." Release Nos. 33-8056; 34-
45321; FR-61.  Accordingly, the MD&A overview should be a more
focused discussion that highlights the key points that are covered in
greater detail in the MD&A section, with emphasis on the key trend
and analytical points.  We may have further comments on your
revisions.
37. We note that gross premiums in your Alternative Risk Transfer
business as a percentage of total gross premiums has grown
dramatically over the past three years.  In fact, this business`
gross premiums exceeded those derived from the Transportation segment
of your business for the first six months of 2004.  Please describe
known trends or uncertainties that would impact your revenue mix, and
discuss how this change and other material changes in your revenue
mix have affected and are expected to affect your overall revenues,
margins and results of operations.  Include a discussion of any
expected change in the relationship between revenues and expenses
from the different businesses in which you are engaged and plan to
engage.
38. Here, and in greater detail in the Business section, explain more
clearly your Alternative Risk Transfer Business.  Here, explain how
premiums, revenues, expenses, claim payments, etc. compare to those
in your other lines of business.  Investors need to better understand
how this business compares to your other, more traditional types of
businesses, and how it impacts your overall financial results, as
compared to your other businesses.
39. In the third paragraph, you mention that the property and
casualty insurance industry is cyclical.  You go on to mention
several factors that affect cost trends that negatively impact
profitability, such as vehicle repair inflation, vehicle replacement
parts costs, used vehicle prices and medical care costs.  You also
mention more generally, severe weather, explosions, etc.  For each of
these factors, discuss how they have affected your results of
operations in the past, may affect them going forward, and describe
any known trends or uncertainties related to them which could affect
your operating results going forward.

Critical Accounting Policies

Loss and Loss Adjustment Expenses