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                                                                    Exhibit 10.7

                                                              As Amended Through
                                                               February 18, 1997

                               EXECUTIVE RISK INC.

                         NONQUALIFIED STOCK OPTION PLAN

1.       PURPOSE OF THE PLAN.

                  The purpose of the Executive Risk Inc. Nonqualified Stock
Option Plan (the "Plan") is to further the long-term growth in earnings of
Executive Risk Inc. (the "Company") by offering special incentives in the form
of a nonqualified stock option plan for the benefit of those officers or
employees of the Company and of any of its Subsidiaries who will be largely
responsible for such growth. It is the express purpose of this Plan to provide
such officers and employees with the opportunity to acquire or increase their
equity ownership in the Company through the purchase of shares of the Company's
Common Stock under a plan which is not designed to meet the requirements of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").

2.       DEFINITIONS.

                  The singular shall include the plural and vice versa, and the
use of one gender shall be deemed to include the other whenever appropriate.

                  a. Beneficiary - Any person who may, under a Participant's
will or under the laws of descent and distribution, including the Participant's
personal
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representative, succeed to the Participant's right to exercise any Option by
reason of the Participant's death.

                  b. Committee - The Committee appointed by the Board of
Directors of the Company pursuant to Section 3 hereof.

                  c. Option - A Participant's right to purchase one or more
shares of Stock, as granted and determined in accordance with the provisions of
this Plan.

                  d. Option Price - The amount to be paid for the purchase of
shares of Stock on exercise of an Option as determined by the Committee in

accordance with the provisions of this Plan.

                  e. Employee - Any person, including any officer, employed by
the Company or any Subsidiary of the Company.

                  f. Employment - The time period during which any individual is
an Employee.

                  g. Participant - An Employee who becomes eligible to
participate in this Plan under Paragraph 4 hereof.

                  h. Permanent and Total Disability - The inability of a
Participant to engage in his normal employment activity by reason of any
medically determined physical or mental impairment that can be expected to
result in death or that can be expected to last for a continuous period of not
less than 12 months.

                  i. Stock - The Company's $.01 par value common stock.


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                  j. Subsidiary - Any corporation of which 50 percent or more of
the combined voting power of all classes of stock is owned by the Company or a
Subsidiary of the Company.

3.       ADMINISTRATION OF THE PLAN.

                  a. The Plan shall be administered by a Committee comprised of
no fewer than two persons which is a committee of the Board of Directors of the
Company or a subcommittee thereof. Each Committee member shall be ineligible,
and shall have been ineligible for the one-year period prior to appointment
thereto, for selection as a person to whom stock options or other equity
securities of the Company may be granted or awarded pursuant to the Plan or,
solely to the extent necessary to be deemed a "disinterested person" within the
meaning of Rule 16b-3 under the Securities Exchange Act of 1934 (the "Exchange
Act"), pursuant to any similar plan of the Company or any affiliate of the
Company. In addition, each Committee member shall satisfy the requirements of an
"outside director" within the meaning of Section 162(m) of the Code.

                  b. Subject to the provisions of the Plan, the Committee shall
have exclusive power to select the Employees to be granted Options pursuant to
the Plan, to determine the number of shares of Stock to be covered by any
Option, to determine the Option Price for any Stock, and to determine the
conditions subject to which Options may be granted or exercised. Notwithstanding
the foregoing, the maximum


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number of aggregate shares of Common Stock that may be subject to Options
granted to any Participant under the Plan shall be 750,000 shares, subject to
adjustment as provided in Section 12c hereof.

                  c. Decisions and determinations by the Committee shall be
final and binding upon all parties, including stockholders, Participants,
Beneficiaries, and other Employees. The Committee shall have the authority to
interpret the Plan, to establish and revise rules and regulations relating to
the Plan, and to make any other determinations that it believes necessary or
advisable for the administration of the Plan.

                  d. It is the intent of the Company that the Plan comply in all
respects with Section 162(m) of the Code with respect to persons who are or may
become "covered employees" within the meaning of Section 162(m) of the Code,
that any ambiguities or inconsistencies in constructions of the Plan be
interpreted to give effect to such intention and that if any provision of the
Plan is found not to be in compliance with Section 162(m) of the Code, such
provisions shall be deemed null and void to the extent required to permit the
Plan to comply with Section 162(m) of the Code. The Committee may adopt rules
and regulations under the Plan in furtherance of the intent of the foregoing.

4.       PARTICIPATION.

                  Participants in the Plan shall be selected by the Committee
from among the Employees.


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5.       EFFECTIVE DATE AND TERMINATION OF PLAN.

                  a. The Plan shall become effective upon its adoption by the
Board of Directors of the Company.

                  b. The Plan shall terminate ten years after the date on which
it is adopted by the Board of Directors of the Company, but the Board of
Directors may terminate the Plan at any time prior thereto. Termination of the
Plan under this Section 5b shall not alter or impair any of the rights or
obligations under any option previously granted under the Plan without the
consent of the holder of the option.

6.       LIMITATIONS ON NUMBER OF SHARES SUBJECT TO OPTIONS.

                  The number of shares of Stock that may be issued pursuant to
Options granted under this Plan shall not exceed 3,000,000 shares. If any
Options granted under this Plan expire or terminate for any reason without
having been exercised in full, the unpurchased shares subject to such expired or
terminated Options may again be optioned under this Plan, subject to its terms.

7.       DURATION OF OPTIONS.

                  Options granted to Participants shall be exercisable within
121 months after the date of grant or within such shorter period as may be
determined by the Committee.

8.       OPTION PRICE.

                  The Option Price for each share of Stock subject to any Option
granted to Participants shall be determined by the Committee in its sole
discretion.


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9.       TERMS OF EXERCISE.

                  a. Medium of Payment. The Option Price for shares purchased
through the exercise of an Option shall be payable either in cash or in shares
of Stock, as determined by the Committee.

                  b. Transferability of Options. All Options shall be
nontransferable except (i) upon the Participant's death, by the Participant's
will or the laws of descent and distribution or (ii) on a case-by-case basis as
may be approved by the Committee in its discretion, in accordance with the terms
provided below. Each Option Agreement shall provide that the Participant may,
during his lifetime and subject to the prior approval of the Committee at the
time of proposed transfer, transfer all or part of the Option to a Permitted
Transferee (as defined below), provided that such transfer is made by the
Participant for estate or tax planning purposes or for donative purposes and no
consideration (other than nominal consideration) is received by the Participant
therefor. The transfer of an Option shall be subject to such other terms and
conditions as the Committee may in its discretion impose from time to time,
including a condition that the portion of the Option to be transferred be vested
and exercisable by the Participant at the time of transfer. Subsequent transfers
of an Option transferred under this paragraph 9.b. shall be prohibited other
than by will or the laws of descent and distribution upon the death of the
transferee.


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                  For purposes hereof, a "Permitted Transferee" shall be any
member of the Participant's immediate family or a charitable institution (each
as defined below), or a trust for the exclusive benefit of such immediate family
members or charitable institution, or to a partnership, corporation or limited
liability company the equity interests of which are owned exclusively by the
Participant and/or one or more members of his immediate family. For purposes of
the preceding definition, (i) the "immediate family" of the Participant shall
mean and include the Participant's spouse, any descendant of the Participant or
his spouse (including descendants by adoption), and any descendant of either
parent of the Participant (including descendants by adoption), and (ii) a
"charitable institution" shall mean and include any organization described in
each of sections 170(b)(1)(A), 170(c), 2055(a) and 2522(a) of the Code, as well
as any charitable remainder trust created under section 664 of the Code, the
income beneficiary of which is a member of the Participant's immediate family or
a trust or other entity described above in this paragraph (b).

                  c. Transferability of Stock. All Options shall be granted on
the condition that the Participant shall not resell any Stock purchased by the
exercise of an Option except in compliance with all applicable state and federal
securities laws and regulations. Unless there is a registration statement in
effect with respect to the resale of Stock subject to an Option held by the
Participant, each


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Participant shall, prior to the exercise of any Option, deliver to the Company a
written representation in form satisfactory to the Committee that it is his
intention to acquire the shares for investment and not for resale, and each
Participant shall, prior to any transfer of Stock purchased through the exercise
of an Option, advise the Company of the proposed transfer and demonstrate, to
the satisfaction of the Committee, that such transfer is in compliance with such
laws and regulations.

                  d. Waiting period. An Option granted under the Plan shall be
exercisable in installments as follows: to the extent of 20 percent of the
number of shares originally covered thereby on the later of the date the Plan
becomes effective or the date on which the Participant holding such Option
becomes an Employee, and, to the extent of an additional 20 percent of the
number of such shares, on each of the first, second, third and fourth
anniversaries of the date on which such Participant becomes an Employee and such
installments shall be cumulative. Notwithstanding the foregoing, the Committee,
in its sole discretion, may prescribe a different installment exercise provision
in an Option Agreement for an Option granted to a Participant under the Plan.

                  e. Other Terms. The Committee shall have the power to
determine such additional terms for the exercise of Options not inconsistent
with the terms of this Plan as it deems appropriate.


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10.      TERMINATION OF EMPLOYMENT.

                  a. For Reasons Other Than Death, Disability or Retirement. If
any Participant's Employment should terminate for any reason other than his
death, his Permanent and Total Disability or his Retirement (as defined below)
at a time when one or more of the Participant's Options remains outstanding,
then each such Option shall terminate on the earlier to occur of (i) the date of
expiration of the Option provided in the Option Agreement or (ii) the date that
is three months after the date of such termination of Employment.

                  b. Participant's Death, Disability or Retirement. If a
Participant's Employment is terminated by reason of his death, Permanent and
Total Disability or his Retirement (as defined below) at a time when one or more
of his Options remains outstanding, then each such Option shall terminate on the
earlier to occur of (i) the date of expiration of the Option provided in the
Option Agreement or (ii) three years after the date of his death, Permanent and
Total Disability or Retirement. In the event of the Participant's death, the
Option shall be exercisable by the Participant's Beneficiary. For purposes
hereof, "Retirement" means termination of employment with the Company (x) at age
65 or greater or (y) at age 50 or greater so long as the Participant's age plus
his full years of employment (measured based on 12 full calendar months of


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service) by the Company or any Subsidiary equals or exceeds 60.

                  c. Notwithstanding the foregoing provisions of this Section
10, but subject to the provisions of Section 7, the Committee, in its sole
discretion, may provide in an Option Agreement for any shorter or longer
exercise period upon termination of employment for any reason, and may extend
the date upon which any Option may expire in the event of a Participant's
termination of employment for any reason.

11.      OPTION AGREEMENT.

                  Upon the grant of any Option hereunder, the Participant shall
be required to sign an Option Agreement, in such form as shall be prescribed by
the Committee, reflecting the terms and conditions of the Option. Each such
Option Agreement shall refer to this Plan and shall give notice to the
Participant that all Options are subject to the terms and conditions of this
Plan.

12.      MISCELLANEOUS PROVISIONS.

                  a. This Plan shall be governed by, and construed in accordance
with Delaware law.

                  b. No Employee or other person shall have any claim or right
to become a Participant of this Plan. Neither this Plan nor any action taken
hereunder shall be construed as giving to any Employee any right to remain
employed.


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                  c. In the event that there is any change in the Stock through
merger, consolidation, reorganization, recapitalization or otherwise, or if
there shall be any dividend on the Stock payable in such stock or if there shall
be a stock split, combination of shares or other changes in the Company's
capital structure, the number of shares available for option under this Plan
shall be proportionately adjusted by the Committee to reflect any such change
and the shares subject to Options previously granted and the price per share in
each Option shall be proportionately adjusted by the Committee as it deems
equitable, in its absolute discretion, to prevent dilution or enlargement of the
Participant's rights under the Option. The issuance of stock for consideration
and the issuance of stock rights shall not be considered a change in the
Company's capital structure. No adjustment provided for in this paragraph shall
require the issuance of any fractional share.

                  d. The Company shall at all times during the term of this Plan
reserve and keep available an amount of Stock sufficient to satisfy the
requirements of this Plan, and shall pay all fees and expenses necessarily
incurred by the Company in connection with the exercise of Options granted
hereunder. In addition, to the extent that the Stock is registered pursuant to
any Federal or State securities statutes and/or listed on any national, regional
or local stock exchange, the Company shall cause any and all


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Stock issued or to be issued under this Plan to be so registered and/or listed,
at the sole expense of the Company.

                  e. The Board of Directors of the Company may at any time
terminate or amend this Plan in any respect; provided that the approval of the
Company's stockholders will be required for any amendment that (i) changes the
class of persons eligible for the grant of an Option under the Plan, (ii)
increases (other than as described in Section 12c hereof) either the maximum
number of shares of Common Stock subject to Options granted under the Plan (as
described in Section 6 hereof) or the maximum number of shares of Common Stock
that may be subject to Options granted to any Participant (as described in
Section 3.b hereof), (iii) materially increases the benefits accruing to
Participants under the Plan, within the meaning of Rule 16b-3 under the Exchange
Act, or (iv) otherwise requires stockholder approval to comply with the
provisions of Rule 16b-3 under the Exchange Act or Section 162(m) of the Code.
Any such approval shall be by the affirmative votes of the stockholders of the
Company present, or represented, and entitled to vote at a meeting duly held in
accordance with applicable state law and the Certificate of Incorporation and
By-Laws of the Company. Notwithstanding the foregoing, no amendment or
modification of the Plan shall in any manner affect any Option theretofore
granted without the consent of the Optionee or his Beneficiary.


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