EXHIBIT 10.7 Service Agreement Amendment Agreement effective March 1, 1997, by and between Penn Independent Corporation, 420 S. York Road, Hatboro, Pennsylvania, 19040 ("PIC") and Penn-America Group, Inc., 420 S. York Road, Hatboro, Pennsylvania,...

                                                                   EXHIBIT 10.7


                           Service Agreement Amendment


         Agreement effective March 1, 1997, by and between Penn Independent
Corporation, 000 X. Xxxx Xxxx, Xxxxxxx, Xxxxxxxxxxxx, 00000 ("PIC") and
Penn-America Group, Inc., 000 X. Xxxx Xxxx, Xxxxxxx, Xxxxxxxxxxxx, 00000
("PAG").

         WHEREAS, the parties hereto are parties to a Service Agreement dated
August 20, 1993, as most recently amended effective March 1, 1996 (the "Service
Agreement"), and

         WHEREAS, the parties wish to amend the Service Agreement effective as
of the effective date of this Agreement.

         NOW, THEREFORE, in consideration of the foregoing, and of the mutual
covenants and agreements contained herein, and intending to be legally bound,
the parties hereto agree that Exhibit A of the Service Agreement is amended to
read in its entirety as set forth on Exhibit A attached hereto and incorporated
herein by reference.

         IN WITNESS WHEREOF, the parties have entered into this Agreement as of
the date first above written.



PENN INDEPENDENT CORPORATION        PENN-AMERICA GROUP, INC.


BY: /s/ Xxxxxx Xxxx                 BY: /s/ Xxxxxxxx Ferrreo



                                    Exhibit A


Penn-Independent Employees:


                                                            Percent of Annual        Total
                                                  Annual    Salary Charged to     Annual Salary
              Name                                Salary           PAG           Charged to PAG
                                                                                 
        Xxxxx Xxxxxxxx                           $254,000          25%                $64,000
        Xxxxx Xxxxxx                               79,000          5%                   4,000
        Xxxxxx X. Xxxx                            224,000          5%                  11,000
        Executive Support                          34,000          5%                   2,000
        Human Resources                          238,500         36.19%                86,000
        Office Supplies                          123,500          40%                  49,000
                                                                                     --------
                                                                                     $216,000


Penn Independent Allocated Overhead and Administrative Support:



                                                                             
                                                           Percent of Annual       Total Annual
                                                              Cost Charged        Cost Charged to
           Description                     Annual Cost           to PAG                 PAG
                                                                                 
        Telephone                               60,000            7.5%                  5,000
        Insurance                               75,500            7.5%                  6,000
        Travel & Entertain.                     25,000            7.5%                  2,000
        Rent                                   104,000            7.5%                  8,000
                                                                                     --------
                                                                                      $21,000

Retirement Packages:                                                                  $53,000
                                                                                     --------
                            Total Annualized Charges to PAG                          $290,000
                                                                                     ========
                            Monthly Charges to PAG                                    $24,167



Assumptions:
Allocated Expenses: Penn Independent 1997 Budget
Salary: Xxxxx Xxxxxxxxx report included FICA & Auto Allowance
Percentages: Individuals estimated time - Human Resources number of employees
Office Supplies: Actual Postage Usage