NEW YORK—Tower Group Inc. said Monday it has agreed to acquire Chicago-based Specialty Underwriters' Alliance Inc. for $107 million.

The all-stock transaction is expected to close at the end of the year after regulatory and shareholder approval.

In a joint statement, New York-based Tower said the addition of SUA enhances its profile in the specialty insurance market. SUA said its affiliation with Tower will allow it to improve its profitability and take advantage of market opportunities by accessing Tower's A- rating by A.M. Best Co. Inc. and strong capitalization.

SUA offers specialty commercial property/casualty insurance coverage through wholesalers for niches as tow trucks, professional employer organizations, public entities and contractors.

Tower offers property/casualty insurance products through subsidiaries Tower Insurance Co. of New York, Tower National Insurance Co., Preserver Insurance Co., Mountain Valley Indemnity Co., North East Insurance Co. and Tower Risk Management Corp.