Exhibit 10.2

                              CONSULTING AGREEMENT
                              --------------------

     This  memorandum  sets  forth  the terms and  conditions  of the  agreement
(hereinafter  referred to as "Consulting  Agreement") for consulting services to
be provided by Steven G. Fauth (the  "Consultant")  to Tower  Group,  Inc.,  its
parent, subsidiary and affiliated corporations, and their successors and assigns
(collectively, "Tower").

     1. The term of this  Consulting  Agreement  will be for a period of six (6)
months  beginning on July 1, 2007 and ending on December 31, 2007 (the  "Term").
Notwithstanding  anything to the  contrary in this  Consulting  Agreement,  this
Consulting  Agreement  will be  signed  contemporaneously  with  the  Separation
Agreement  between  Consultant  and Tower dated June 30,  2007 (the  "Separation
Agreement"),  and this Consulting Agreement will not become effective unless and
until Consultant has signed and has not revoked (as set forth in paragraph 16 of
the Separation Agreement) the Separation Agreement.

     2. During the Term,  Consultant  will, as an independent  contractor,  make
himself available for all projects and meetings as reasonably requested by Tower
in order to assist Tower with the transition of its claims and legal departments
and to provide Tower with technical claims expertise on pending claims or suits.
Consultant's  responsibilities  will be  limited to matter in which he worked on
while  employed  by Tower and is  intended  only to provide  services  for which
Consultant is uniquely qualified due to his prior work for Tower.

     3. As payment for the provision of the consulting services,  Tower will pay
to Consultant the lump sum of $190,378.50 on or before July 1, 2007.

     4. Nothing in this Consulting  Agreement shall be construed as creating any
partnership,  joint venture or agency between Tower and  Consultant.  Consultant
shall act solely as an independent contractor and, as such, is not authorized to
bind Tower to third parties. Consultant agrees that he will not, without written
consent  of  Tower  in  each   instance  (1)  send  any  written  or  electronic
correspondence on behalf of Tower, or any affiliate of Tower, or any employee of
Tower, nor use any trade name, trademark,  trade device, service mark, symbol or
any  abbreviation,  contraction  or  simulation  thereof  owned  by Tower or its
affiliates,  or (2) represent,  directly or indirectly,  that Consultant has any
authority to act on behalf of Tower.  Tower shall issue a form 1099 with respect
to the payment  made  pursuant  to  paragraph  3 of this  Consulting  Agreement.
Neither federal, state, nor local taxes of any kind shall be withheld or paid by
Tower on behalf of Consultant in connection with the payment made by Tower under
paragraph 3 hereof.  Consultant shall be responsible for determining the amounts
of and making all such payments.  Consultant  shall  indemnify,  defend and hold
Tower, its officers, directors, agents, employees,  contractors and shareholders
harmless  from and  against any and all claims,  liabilities,  losses,  damages,
costs and expenses (including, without limitation, attorneys' fees and expenses)
arising out of or relating to the foregoing responsibility of Consultant.

<PAGE>

     5. Consultant is not an employee of Tower and, except as expressly provided
in the  Separation  Agreement,  is not entitled to  participate  in any of Tower
employee benefit plans including,  but not limited to, any retirement,  pension,
profit sharing,  group  insurance,  health  insurance or similar plans that have
been or may be instituted by Tower for the benefit of its employees.  Consultant
will be  responsible  for all expenses  incurred by him in  connection  with his
performance of services under this Consulting Agreement.

     6. All proposals,  research,  records, reports,  recommendations,  manuals,
findings,  evaluations,  forms, reviews, information, data and written materials
originated  or  prepared  by  Consultant  for  and  in  the  performance  of the
consulting  services hereunder shall become the exclusive property of Tower, and
shall be  considered  to be works for hire  belonging to Tower,  and  Consultant
shall  relinquish and hereby assigns any and all right,  title,  and interest in
and to  such  material  to  Tower.  Consultant  agrees  to  execute  any and all
documents  prepared  by Tower and to do any and all other  lawful acts as may be
required by Tower to establish, document and protect such rights of Tower.

     7. Consultant agrees not to disclose,  nor use for Consultant's  benefit or
the benefit of any other person or entity,  any information  received from Tower
which is  confidential  or  proprietary  and (i)  which  has not been  disclosed
publicly by Tower,  (ii) which is otherwise not a matter of public  knowledge or
(iii) which is a matter of public  knowledge but Consultant  knows or has reason
to know that such  information  became a matter of public  knowledge  through an
unauthorized  disclosure.  Proprietary or confidential information shall include
information the  unauthorized  disclosure or use of which would reduce the value
of such information to Tower.  Such information  includes,  without  limitation,
Tower's client lists, its trade secrets, any confidential  information about (or
provided by) any client or  prospective  or former client of Tower,  information
concerning  Tower's  business  or  financial  affairs,  including  its books and
records,  commitments,  procedures,  plans and prospects,  products developed by
Tower, securities positions, or current or prospective  transactions or business
of Tower.  Consultant  hereby  confirms  that, on or the conclusion of the Term,
Consultant will deliver to Tower and retain no copies of any written  materials,
records and documents  (including those that are electronically  stored) made by
Consultant or coming into Consultant's  possession during the Term which contain
or refer to any such proprietary or confidential information. Consultant further
confirms that, on or before the conclusion of the Term,  Consultant will deliver
to  Tower  any and  all  property  and  equipment  of  Tower,  including  laptop
computers, etc., which may have been in Consultant's possession. Nothing in this
Agreement,  however, shall be construed as a limitation on your right to work or
consult for any other employer or entity.

     8. Except for matters  covered under  paragraphs 6 and/or 7 hereof,  in the
event of any dispute or difference  between Tower and Consultant with respect to
the subject matter of this  Consulting  Agreement and the  enforcement of rights
hereunder,  either  Consultant  or Tower may,  by  written  notice to the other,
require  such  dispute  or  difference  to  be  submitted  to  arbitration.  The
arbitrator or  arbitrators  shall be selected by agreement of the parties or, if
they cannot agree on an arbitrator or arbitrators  within 30 days after the date
arbitration  is required by either party,  then the  arbitrator  or  arbitrators
shall be selected by the American  Arbitration  Association upon the application
of Consultant or Tower. The  determination  reached in such arbitration shall be
final and  binding  on both  parties  without  any  right of  appeal or  further
dispute. Execution of the determination by such arbitrator or arbitrators may be
sought in any court of competent  jurisdiction.  The  arbitrator or  arbitrators
shall not be bound by judicial  formalities  and may abstain from  following the
strict rules of evidence and shall  interpret  this  Consulting  Agreement as an
honorable  engagement  and not merely as a legal  obligation.  Unless  otherwise
agreed by the parties,  any such  arbitration  shall take place in New York, New
York.

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<PAGE>

     9. If any of the provisions,  terms or clauses of this Consulting Agreement
are declared  illegal,  unenforceable  or  ineffective  in a legal forum,  those
provisions,  terms and clauses  shall be deemed  severable,  such that all other
provisions,  terms and clauses of this  Consulting  Agreement shall remain valid
and binding upon both parties.

     10. All notices and other communications  hereunder shall be in writing and
shall be mailed by first class,  registered or certified  mail,  return  receipt
requested,  or postage prepaid or personally  delivered  (including  delivery by
overnight couriers such as Federal Express), addressed as follows:

     If to Tower:

     Tower Group, Inc.
     120 Broadway, 31st Floor
     New York, NY  10271-1699
     Attention: General Counsel


     If to Consultant:

     Steven G. Fauth
     130 Beekman Street
     Apartment 2MC
     New York, NY  10038

Each party hereto may designate in writing a new address to which any notice or
other communication may thereafter be so given, served or sent. Each notice or
other communication that shall be mailed in the manner described above shall be
deemed sufficiently given, served, sent or received for all purposes at such
time as it is delivered to the addressee or at such time as delivery is refused
by the addressee upon presentation.

     11.  This  Consulting  Agreement  may  not  be  assigned,   transferred  or
subcontracted, in whole or in part, by Consultant.

     12.  This  Consulting  Agreement  shall be  governed  by and  construed  in
accordance with the laws of the State of New York without regard to conflicts of
law principles.

     13. This  Consulting  Agreement and the Separation  Agreement set forth the
entire  understanding  of  the  parties  hereto  relating  to the  retention  of
Consultant by Tower, and all other previous and  contemporaneous  understandings
and agreements relating to the retention of Consultant by Tower, whether written
or oral, are hereby superseded.  None of the terms or provisions hereof shall be
modified  or  waived,  and  this  Consulting  Agreement  may not be  amended  or
terminated,  except by a written  instrument  signed by the party  against which
modification,  waiver,  amendment or termination is to be enforced. No waiver of
any one provision shall be construed as a waiver of any other provision and the
fact that an  obligation  is waived for a period of time shall not be considered
to be a continuous waiver.

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<PAGE>

     If the foregoing  accurately sets forth our understanding,  please indicate
your  agreement  by signing  the  originally  executed  copy of this  Consulting
Agreement where indicated.

                                    Very truly yours,

                                    TOWER GROUP, INC.


                                    By:    /s/ Michael H. Lee
                                           ------------------
                                    Name:  Michael H. Lee
                                    Title: Chairman of the Board,
                                           President and Chief Executive Officer
                                           (Principal Executive Officer)
ACCEPTED AND AGREED:

/s/ Steven G. Fauth
-------------------        ------------
Steven G. Fauth                Date


This Consulting Agreement shall be executed contemporaneously with the
Separation Agreement between Tower and Consultant dated June 30, 2007. This
Consulting Agreement and the Separation Agreement shall not become effective
unless and until Consultant has signed and not revoked (as set forth in
paragraph 16 of the Separation Agreement) the Separation Agreement.


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