Tower Group Expanding to States Throughout East Coast, Including N.J., Conn., Mass. and Md.

January 18, 2005

Tower Group, Inc. announced that it entered into a stock purchase agreement today to acquire North American Lumber Insurance Company, a shell company with 17 state licenses, nine of which are active in the following states: New Jersey, Connecticut, Massachusetts, Rhode Island, Vermont, Maryland, Delaware, South Carolina and Wisconsin.

Tower Group, Inc. will pay $1.05 million in cash at closing. An additional $75,000 will be paid within one year of the closing date contingent upon license reactivation in each of Pennsylvania and Maine.

NALIC will be initially capitalized with part of the $26 million raised by Tower Group, Inc. through two trust preferred offerings in December 2004.

According to the terms of the agreement, all liabilities and assets of NALIC (which will be renamed) will be transferred to a liquidating trust prior to closing with the exception of its charter and insurance licenses. The transaction is subject to court approval in Massachusetts and is expected to close in the first quarter of 2005.

“This acquisition will allow us to continue executing our plan to expand territorially,”Michael Lee, president and chief executive officer of Tower Group, Inc., stated.

“We plan to promptly begin offering policies in New Jersey after the close of the transaction, followed by expansion into other states. We also expect to make similar shell acquisitions in the future in order to offer products in various market segments in the same territory,” he added.

As noted by Lee, the acquisition is consistent with Tower Group, Inc.’s plan to expand insurance operations territorially through becoming licensed in states other than New York as disclosed in the Registration Statement related to Tower Group, Inc.’s initial public offering in October 2004.

About Tower Group, Inc.

In operation since 1990, Tower Group, Inc. is headquartered in New York City and is the holding company for its two operating subsidiaries, Tower Insurance Company of New York and Tower Risk Management. TICNY, A.M. Best rated A- (Excellent), develops and delivers specialized commercial lines insurance products that provide property, liability, workers’ compensation and automobile insurance to select markets not well served by other carriers. It also offers personal lines products that provide property and liability insurance to homeowners throughout New York State. TRM, a non-risk bearing insurance service company, offers managing general agency services to underwrite risks, adjust claims and negotiate reinsurance terms on behalf of other insurance companies.

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