Exhibit 10.25


                              EMPLOYMENT AGREEMENT


     This  Employment  Agreement (the  "Agreement") is made as of the 1st day of
January, 1997, by and between Triad Guaranty Insurance Corporation,  an Illinois
insurance corporation (the "Company"), and Ken N. Lard ("Employee").


                                   WITNESSETH:


     WHEREAS,  the Company desires to employ Employee and Employee is willing to
accept such employment, all upon the terms and conditions hereinafter set forth.

     NOW,  THEREFORE,  in  consideration of the mutual covenants and obligations
hereinafter set forth, the parties hereto agree as follows:

1. EMPLOYMENT AND TERM. The Company hereby employs Employee and Employee accepts
employment  with the  Company  as Vice  President  -  National  Accounts  of the
Company,  on the terms and conditions  herein set forth, for a period commencing
on January 1, 1997,  and  expiring on December  31,  1997,  and  thereafter  for
successive  six-month  periods  unless either party gives written  notice of the
nonrenewal of this Agreement at least one year prior to the  commencement of any
such additional six-month period. Employee's duties and responsibilities in this
position shall be determined by the Company's  Board of Directors (the "Board"),
consistent with Employee's qualifications and the best interests of the Company.
Employee  shall also  perform such other or  additional  duties on behalf of the
Company and its parent corporation,  Triad Guaranty Inc., a Delaware corporation
("TGI"), as may be assigned to him by the Board from time to time.

2. EXTENT OF SERVICES.  During the term hereof, Employee shall devote his entire
attention  and energy to the  business  and  affairs of the Company and TGI on a
full-time  basis and  shall  not be  engaged  in any  other  business  activity,
regardless  of whether  such  business  activity is pursued for gain,  profit or
other pecuniary advantage, unless the Company otherwise consents; but this shall
not be construed as preventing  Employee from  investing his assets in such form
or  manner as will not  require  any  services  on the part of  Employee  in the
operation of the affairs of the companies in which such investments are made and
will not otherwise conflict with the provisions of this Agreement. Full-time, as
used above,  shall mean a forty (40) hour work week, or such longer work week as
the Board shall from time to time adopt.  The  foregoing  shall not be deemed to
prevent  Employee  from   participating  in  any  charitable  or  not-for-profit
organization  to a reasonable  extent,  provided  however that Employee does not
receive any salary or other  remuneration  from such  charity or  not-for-profit
organization.


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3. COMPENSATION.

     (a)  SALARY.  During  the term of this  Agreement,  the  Company  shall pay
Employee  an  annual  salary  of  $100,000.00  ("Annual  Salary"),   payable  in
accordance with the Company's regular payroll procedures.  During each year that
this  Agreement  is in effect,  the Company  will review  possible  increases in
Employee's salary at least annually.

     (b) BONUS. In addition to his Annual Salary,  Employee shall be eligible to
receive an annual bonus  pursuant to a bonus plan which may then be in effect or
otherwise.

4.  BENEFITS.  Employee  shall be entitled to a  participate  in all medical and
other  employee plans of the Company and TGI, if any, on the same basis as other
executives of the Company,  subject in all cases to the respective terms of such
plans.

5.  VACATION.  Employee  shall be entitled to  vacation in  accordance  with the
Company's  vacation  policy in effect at the time the vacation is taken.  In the
event that the full  vacation is not taken by Employee,  no vacation  time shall
accrue for use in future  years,  except in accordance  with the Company's  then
existing policy for the carry forward of accrued vacation.

6.  EXPENSES.  Employee  shall  be  entitled  to  prompt  reimbursement  for all
reasonable  expenses  incurred  by him in  furtherance  of the  business  of the
Company and TGI in connection with his performance of his duties  hereunder,  in
accordance with the policies and procedures  established for executive  officers
of the  Company  and TGI,  and  provided  Employee  properly  accounts  for such
expenses.

7. TERMINATION.

     (a)  DEATH.  This  Agreement  and  Employee's  employment  hereunder  shall
terminate immediately upon Employee's death. In such event, the Company shall be
obligated  to pay  Employee's  salary  only to the end of the  month in which he
dies.

     (b)  INCAPACITY.  If Employee is absent from his  employment for reasons of
illness or other  physical  or mental  incapacity  which  renders  him unable to
perform the  essential  functions of his  position,  with or without  reasonable
accommodation,  for more than an aggregate  number of days  totally  twelve (12)
weeks,  whether or not  consecutive,  in any period of twelve  (12)  consecutive
months,  then upon at least thirty (30) days' prior written  notice to Employee,
if such is  consistent  with  applicable  law,  the Company may  terminate  this
Agreement and Employee's employment hereunder.  In such event, the Company shall
be  obligated to pay Employee his salary to the earlier of (i) the date on which
coverage commences under the long-term disability insurance policy maintained by
the  Company for the  benefit of  Employee,  if any, or (ii) the date two months
after the date of termination.

     (c) TERMINATION BY THE COMPANY.

     (i) The Company may  terminate  this  Agreement and  Employee's  employment
hereunder at any time for Cause. As used herein, "Cause" shall mean:

          (A)  a material  breach by  Employee  of his  duties  and  obligations
               hereunder,  including but not limited to gross  negligence in the
               performance of his duties and  responsibilities or the failure to

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               follow the Board's  directions;  provided he shall be entitled to
               reasonable notice of, and if feasible a reasonable opportunity to
               cure, any such breach;

          (B)  willful misconduct by Employee which may be materially  injurious
               to the reputation or business of the Company or TGI;

          (C)  any  act  of  fraud,  misappropriation  or  other  dishonesty  by
               Employee; or

          (D)  Employee's conviction of a felony.

     In the event of termination  for Cause,  the Company shall pay Employee his
salary up to the date of the delivery of the notice of  termination,  which date
shall be for all purposes of this Section 7(c)(i) the date of termination of his
employment.

     (ii) Notwithstanding anything contained herein to the contrary, the Company
also may terminate this Agreement and  Employee's  employment  hereunder for any
reason  whatsoever,  upon no less than thirty (30) days' prior to written notice
to Employee. In the event that the Company terminates this Agreement pursuant to
the provisions of this Section  7(c)(ii),  Employee shall be entitled to receive
his salary up to the date of termination  set forth in the notice of termination
and a severance  payment  equal to the total annual salary and cash bonuses paid
to Employee by the Company and/or TGI during the calendar year prior to the year
of termination  (the  "Severance  Payment").  At the option of the Company,  the
Severance  Payment  shall be  payable  either in a lump sum cash  payment  or in
twelve  (12)  monthly  installments  commencing  on the  first  day of the month
following termination of this Agreement.  If for any reason any court determines
that any of the restrictions  contained in Section 8 hereof are not enforceable,
the  Company  shall  have no  obligation  to pay the  Severance  Payment  or any
remaining installment thereof to Employee.

     (d) TERMINATION BY EMPLOYEE.  Employee may terminate this Agreement and his
employment  hereunder for any reason  whatsoever,  upon no less than thirty (30)
days' prior written notice to the Company. In the event that Employee terminates
this Agreement  pursuant to the provisions of this Section 7(d),  Employee shall
be entitled to receive his salary up to the date of termination set forth in the
notice of termination.  In such event, Employee shall not receive any previously
unpaid  bonus or bonuses  except any earned but unpaid bonus with respect to any
full calendar year preceding the date of termination.

8. RESTRICTIVE  COVENANT.  During the term of this Agreement and for a period of
one (1) year after the termination of this Agreement by the Company or Employee,
except pursuant to the provisions of Section 1 above, Employee shall not, either
as an individual on his own account;  as a partner,  joint  venturer,  employee,

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agent, or salesman for any person; as an officer, director or stockholder (other
than a beneficial holder of not more than 5% of the outstanding  voting stock of
a company  having at least 250  holders of voting  stock) of a  corporation;  or
otherwise, directly or indirectly:

     (a)  enter  into or  engage  in the  private  mortgage  insurance  business
          within:

          (i) any area of the United  States in which the Company or TGI is then
          doing business;

          (ii) in the event that any court determines that the area set forth in
          the preceding  subparagraph is too broad to be  enforceable,  each and
          every  state of the United  States in which the  Company  had a market
          share,  based on industry  data,  of at least four percent (4%) of net
          new  mortgage  insurance  written  as of the end of the  quarter  next
          preceding the preceding the date of termination of this Agreement; or

          (iii) in the event that any court  determines  that the area set forth
          in the preceding  subparagraphs  is too broad to be enforceable,  each
          and every metropolitan  statistical area of the United States in which
          the Company had a market  share,  based on industry  data, of at least
          four percent (4%) of net new mortgage  insurance written as of the end
          of the  quarter  next  preceding  the  date  of  termination  of  this
          Agreement; or

          (iv) in the event that any court determines that the area set forth in
          the preceding subparagraphs is too broad to be enforceable, the States
          of Florida, Illinois and North Carolina; or

          (v) in the event that any court  determines that the area set forth in
          the preceding subparagraphs is too broad to be enforceable,  the State
          of North Carolina.

     (b)  solicit or attempt to solicit any of the Company's or TGI's  customers
          or  prospective  customers  with whom  Employee  has had contact as an
          employee  of  the  Company  in  the  performance  of  his  duties  and
          responsibilities  hereunder  with the intent or purpose to perform for
          such customer the same or similar services or to sell to such customer
          the same or similar  products which Employee  performed for or sold to
          such customer during the term of his employment hereunder; or

     (c)  solicit or  recruit  any  person  who is an  employee  or agent of the
          Company or TGI,  either now or during such period,  for  employment in
          the  private  mortgage  insurance  business  or  for  the  purpose  of
          soliciting  or  attempting  to solicit any of the  Company's  or TGI's
          customers  or  prospective  customers  as  prohibited  by Section 8(b)
          above.

     Employee and the Company agree and acknowledge  that the Company and TGI do
business on a nationwide  basis,  with customers  located  throughout the United
States,  and that any breach by Employee of the restrictive  covenant  contained
herein would  immeasurably and irreparably  damage the Company and TGI. Employee

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and the Company agree and  acknowledge  that the duration,  scope and geographic
areas  applicable  to the  noncompetition  covenants in this Section 8 are fair,
reasonable and necessary to protect legitimate business interests of the Company
and TGI, and that adequate  compensation  has been received by Employee for such
obligations.

9. CONFIDENTIAL INFORMATION AND DISCOVERIES. Employee acknowledges that he will,
as a result of his duties as an employee of the  Company,  have access to and be
in a position to receive  confidential  information,  including  trade  secrets,
relating  to the  Company and TGI.  Therefore,  Employee  agrees that during his
employment by the Company and  thereafter he will not divulge to, or use for the
benefit  of,  himself  or any  other  person,  any  information  concerning  any
inventions,  discoveries,   improvements,  processes,  methods,  trade  secrets,
research or secret data  (including,  without  limitation,  customer or supplier
lists,  formulas,  computer programs,  software development or executive monitor
systems), or other confidential matters possessed,  owned or used by the Company
or TGI that may be  obtained  or  learned by  Employee  in the course of or as a
result of his employment  hereunder  unless (i) such disclosure is authorized by
the Company, (ii) such confidential information becomes available to Employee on
a  nonconfidential  basis  from a source  other than the  Company,  TGI or their
employees  or agents,  provided  that such  source is not and was not bound by a
confidentiality  agreement with or other obligation of secrecy to the Company or
TGI. The expiration or termination of employment  shall not be deemed to release
Employee  from his duties  hereunder not to convert to his own use or the use of
others the rights or properties of the Company or TGI as described herein.

10. CHANGE IN CONTROL.

     (a) Change in Control Severance Compensation.  Within two years following a
Change in Control (as defined below), in the event of (i) a material and adverse
change in the status or  position  of  Employee  as an  officer  of the  Company
including,   without   limitation,   a   material   diminution   in   duties  or
responsibilities, except in connection with the incapacity of Employee, (ii) the
transfer or  relocation  by the  Company of the office of  Employee  which would
require Employee to be based more than 50 miles distant from the location of his
office  immediately  prior  to  such  transfer  or  relocation,   or  (iii)  the
discontinuance of any bonus or incentive compensation plan for which the Company
or TGI has  determined  Employee to be eligible and which  represents a material
portion of the  Employee's  annual  compensation,  Employee shall be entitled to
terminate  this  Agreement  and his  employment  hereunder  and receive from the
Company a payment  equal to the total  annual  salary and cash  bonuses  paid to
Employee by the Company and/or TGI during the calendar year prior to the year of
termination  (the  "Change  in  Control  Compensation").  At the  option  of the
Company,  the Change in Control  Compensation  shall be payable either in a lump
sum cash payment or in twelve (12) monthly installments  commencing on the first
day of the month following termination of this Agreement.  If for any reason any
court determines that any of the restrictions  contained in Section 8 hereof are
not  enforceable,  the  Company  shall have no  obligation  to pay the Change in
Control Compensation or any remaining installment thereof to Employee.

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     (b) Change in Control. For purposes of this Agreement,  "Change in Control"
shall mean the occurrence of any of the following events:

     (i)  any person or persons acting as a group,  other than a person which as
          of the  date of this  Agreement  is the  beneficial  owner  of  voting
          securities of TGI and its affiliates,  or any employee benefit plan of
          the Company or TGI or Employee or a group  including  Employee,  shall
          become the  beneficial  owner of  securities of TGI  representing  the
          great of (i) at least twenty-five percent (25%) of the combined voting
          power of  TGI's  then  outstanding  securities,  or (ii) at least  the
          combined  voting power of TGI's  outstanding  securities  then held by
          Collateral  Investment Corp., a Delaware  corporation,  and Collateral
          Mortgage,  Ltd.,  an  Alabama  limited  partnership,  and any of their
          affiliates; or

     (ii) individuals  who  constitute  the  board  of  directors  of  TGI  upon
          completion of the initial  public  offering of TGI's common stock (the
          "Incumbent  Board")  cease  for any  reason to  constitute  at least a
          majority  thereof,  provided  that  any  person  becoming  a  director
          subsequent  to the  date  hereof  whose  election  or  nomination  for
          election  was  approved  by a vote of at least  three-quarters  of the
          directors comprising the Incumbent Board (either by a specific vote or
          by  approval  of the proxy  statement  of TGI in which such  person is
          named as a nominee for director, without objection to such nomination)
          shall be, for purposes of this clause (ii)  considered  as though such
          person were a member of the Incumbent Board; or

     (iii)any  consolidation  or merger to which  TGI is a party,  if  following
          such consolidation or merger, stockholders of TGI immediately prior to
          such  consolidation  or merger shall not  beneficially  own securities
          representing at least  fifty-one  percent (51%) of the combined voting
          power  of  the  outstanding  voting  securities  of the  surviving  or
          continuing corporation; or

     (iv) any sale, lease,  exchange or other transfer (in one transaction or in
          a series of related transactions) of all, or substantially all, of the
          assets of TGI,  other than to an entity (or  entities) of which TGI or
          the  stockholders  of  TGI  immediately   prior  to  such  transaction
          beneficially  own securities  representing at least fifty-one  percent
          (51%)  of  the  combined  voting  power  of  the  outstanding   voting
          securities.

11.  ENFORCEMENT.  Both parties recognize that the services to be rendered under
this Agreement by Employee are special,  unique and of  extraordinary  character
and  that in the  event  of the  breach  by  Employee  of any of the  terms  and
conditions  of this  Agreement to be performed by him, then the Company shall be
entitled,  if it so elects, to institute and prosecute  proceedings in any court
of competent jurisdiction, either in law or in equity, to obtain damages for any

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breach hereof, or to enforce the specific  performance  hereof by Employee or to
enjoin Employee from  performing acts prohibited  above during the period herein
covered,  but nothing herein  contained shall be construed to prevent such other
remedy in the courts as the Company may elect to invoke.

12. RETURN OF DOCUMENTS.  Upon the termination of this Agreement for any reason,
Employee shall forthwith  return and deliver to the Company and shall not retain
any original or copies of any books,  papers, price lists or customer contracts,
bids or customer lists,  files, books of account,  notebooks and other documents
and data relating to the performance by Employee of his duties hereunder, all of
which materials are hereby agreed to be the property of the Company.

13. MISCELLANEOUS.

     (a)  NOTICES.  Any notice  required  or  permitted  to be given  under this
Agreement  shall  be  sufficient  if in  writing  and if sent by  registered  or
certified  mail to  Employee or the Company at the address set forth below their
signatures  at the end of this  Agreement or to such other address as they shall
notify each other in writing.

     (b)  ASSIGNMENT.  This  Agreement  shall be  binding  upon and inure to the
benefit of the Company and its  successors  and  assigns  and  Employee  and his
personal  representatives,  heirs, legatees and beneficiaries,  but shall not be
assignable by Employee.

     (c) APPLICABLE  LAW. This Agreement  shall be construed in accordance  with
the laws of the State of North  Carolina in every  respect,  including,  without
limitation, validity, interpretation and performance.

     (d)  HEADINGS.  Section  headings  and  numbers  herein  are  included  for
convenience  of reference  only and this  Agreement is not to be construed  with
reference  thereto.  If there be any conflict  between such numbers and headings
and the text hereof, the text shall control.

     (e) SEVERABILITY.  If for any reason any portion of this Agreement shall be
held invalid or  unenforceable,  it is agreed that the same shall not affect the
validity or enforceability of the remainder hereof. The portion of the Agreement
which is not  invalid  or  unenforceable  shall be  considered  enforceable  and
binding on the parties and the invalid or unenforceable provision(s),  clause(s)
or  sentence(s)  shall be deemed  excised,  modified or restricted to the extent
necessary to render the same valid and  enforceable  and this Agreement shall be
construed  as if such  invalid  or  unenforceable  provision(s),  clause(s),  or
sentences(s)  were omitted.  The  provisions of this Section 13(e) shall survive
the termination of this Agreement for any reason.

     (f) ENTIRE AGREEMENT.  This Agreement  contains the entire agreement of the
parties  with  respect  to  its  subject  matter  and  supersedes  all  previous
agreements between the parties. No officer,  employee,  or representative of the
Company has any  authority to make any  representation  or promise in connection
with this Agreement or the subject  matter hereof that is not contained  herein,
and  Employee  represents  and warrants he has not  executed  this  Agreement in
reliance  upon any such  representation  or  promise.  No  modification  of this
Agreement  shall be valid  unless  made in  writing  and  signed by the  parties
hereto.

     (g)  WAIVER  OF  BREACH.  The  waiver  of the  Company  of a breach  of any
provision of this  Agreement by Employee  shall not operate or be construed as a
waiver of any subsequent breach by Employee.

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     (h)   Counterparts.   This  Agreement  may  be  executed  in  one  or  more
counterparts,  each of which shall be deemed to be an original, but all of which
together shall constitute one agreement.

     IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its duly  authorized  officer and Employee has signed this  Agreement all on the
day and year first above written.

                             TRIAD GUARANTY INSURANCE
                                CORPORATION, an Illinois corporation



                             By:
                                -------------------------------------
                                     Darryl W. Thompson
                                     Chief Executive Officer

                                     Address: 101 South Stratford Road,
                                              Suite 500
                                              Winston-Salem, N. C.   27104


                                EMPLOYEE:



                                --------------------------------------
                                     Ken N. Lard

                                     Address: 219 Country Circle
                                              Advance, N. C.  27006




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