Exhibit 10.5


XL CAPITAL LTD

NONSTATUTORY STOCK OPTION AGREEMENT


                    THIS
AGREEMENT, by and between XL Capital Ltd, a Cayman Islands corporation (the “Company”),
and You (the “Employee”), is effective as of _________________. 


WITNESSETH:


                    WHEREAS,
the Board of Directors of the Company believes that the interest of the Company
will be advanced by granting an incentive to employees and by encouraging and
enabling them to acquire stock ownership in the Company and assuring a close
identity of their interests with those of the Company; and


                    WHEREAS,
pursuant to the provisions of the 1991 Performance Incentive Program (the
“Program”) of the Company, the Committee (as defined in the Program) has authorized
and directed the execution and delivery of this Agreement in the name of and on
behalf of the Company;


                    NOW
THEREFORE, the parties hereto agree as follows:


                         a.
    Subject and pursuant to all terms and conditions stated in this Agreement
    and in the Program, which is incorporated by reference into this Agreement
    and made a part hereof as though herein fully set forth, the Company has
    granted on _________________ (the “Grant Date”) to the Employee the right and option to purchase
all or any part of the aggregate number of Ordinary Shares of the Company (the
“Shares”) set forth below, to be issued or transferred as provided in the
Program at the option price per share set forth below. This option shall not be
treated as an incentive stock option as defined in Section 422 of the
Code.


                    Option
to purchase Shares, for $_______ per share.


                    One-third
of such option shall vest and become exercisable on each of the first three
anniversaries of Grant Date; provided, however, that (i) the
option shall be immediately vested and exercisable in full (A) in the
event of a Change of Control (as defined in the Program), or (B) upon
termination of the Employee’s employment due to his or her death or Permanent
Disability (as defined below); (ii) the option shall continue to vest and
become exercisable on the according to the schedule set forth above following
termination of employment of the Employee due to his or her Retirement (as
defined below); and (iii) upon termination of the Employee’s employment by the
Company not for Cause (as defined below), the option will vest and become
exercisable at the time of such termination of employment with respect to the
number of Ordinary Shares, if any, that would have vested in accordance with
the schedule set forth above if the Employee’s employment had continued for an
additional twelve (12) months. 


                    For
purposes hereof, “Permanent Disability” means those circumstances under which
the Employee has been unable to perform his duties and responsibilities with
the Company for at least 60 continuous days because of physical, mental or
emotional incapacity resulting from injury, sickness or disease, and will be
unable to continue to perform his or her duties and respon-





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sibilities for
a total of six (6) months in any twelve (12) month period because of physical,
mental or emotional incapacity resulting from injury, sickness or disease; provided,
however, that with respect to any Employee who has entered into an
employment agreement with the Company, term of which has not expired at the
time a determination concerning Permanent Disability is to be made, Permanent
Disability shall have the meaning attributed in such employment agreement. For
purposes hereof, “Retirement” shall mean the termination of employment by the
Employee if (i) such termination of employment occurs after (x) the Employee
has reached age 55, and (y) the sum of the Employee’s age and full years of
continuous service with the Company equals or exceeds 65, and (ii) a
determination has been made the Committee, in its sole discretion, that it is
appropriate under the circumstances (taking into account, without limitation,
the intention of the Employee with respect to future employment) for this
option to become vested at the time of such termination of employment and be exercisable
for the full term of the option as provided below. The portion of the option,
if any, that is not exercisable immediately following termination of the
Employee’s employment shall be immediately forfeited.


          For
purposes hereof, “Cause” shall mean: (A) conviction of the Employee of a felony
involving moral turpitude or dishonesty; (B) the Employee, in carrying out his
or her duties for the Company, has been guilty of (1) gross neglect or (2)
willful misconduct; provided, however, that any act or failure to
act by the Employee shall not constitute Cause for this purpose if such act or
failure to act was committed, or omitted, by the Employee in good faith and in
a manner reasonably believed to be in the overall best interests of the
Company. The determination of whether the Employee acted in good faith and that
he or she reasonably believed his or her action to be in the Company’s overall
best interest will be in the reasonable judgment of the General Counsel of the
Company or, if the General Counsel shall have an actual or potential conflict
of interest, the Committee; (C) the Employee’s continued willful refusal to
obey any appropriate policy or requirement duly adopted by the Company and the
continuance of such refusal after receipt of notice; or (D) the Employee’s
sustained failure to perform the essential duties of his or her role after
receipt of notice. 


                         b. To
the extent the option herein granted becomes exercisable, it may be exercised
in whole or in part by the Employee giving notice of exercise to the Program
administrator designated from time to time by the Company stating the number of
Shares with respect to which the option is being exercised. Such notice shall
be in the form prescribed by the Company from time to time. Such exercise shall
be effective upon (1) receipt of such notice by the Program administrator
and (2) payment in full of the option price.


                         c. The
Employee agrees (1) not to disclose any trade or secret data or any other
confidential information acquired during employment by the Company or a
subsidiary of the Company, during employment or after the termination of employment
or retirement, (2) to abide by all the terms and conditions of the Program
and such other terms and conditions as may be imposed by the Committee, and
(3) not to interfere with the employment of any other employee of the
Company or a subsidiary of the Company.


                         d. The
options granted under this Agreement shall expire upon the first of the following
events to occur:





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                           (i) The
tenth anniversary of the Agreement;


                          (ii) The
third anniversary of the death or Permanent Disability of the Employee;


                         (iii) Unless
otherwise provided in an Employment Agreement between the Employee and the
Company, the third anniversary of termination of the Employee’s employment by
the Company not for Cause within two years following a Change of Control (the
“Post-Change Period”);


                         (iv) Ninety
days following termination of the Employee’s employment by the Company not for
Cause outside a Post-Change Period;


                          (v) The
last date of employment of the Employee if employment is terminated by the
Company for Cause; or


                         (vi) Thirty
days after the last date of employment of the Employee if employment terminates
(x) other than as set forth in (ii), (iii), (iv) or (v) of this paragraph d and
(y) other than due to Retirement. For the avoidance of doubt, if an Employee’s
employment terminates due to Retirement, the option shall remain exercisable
until the tenth anniversary of this Agreement.


                         e. The
Employee acknowledges that when the Employee is required to recognize income
for any tax purposes as the result of the exercise of an option to purchase
Shares pursuant to this Agreement, that such income may be subjected to the
withholding of tax by the Company. The Employee agrees that the Company may
either withhold an appropriate amount from any compensation or any other
payment of any kind then payable or which may become payable to the Employee,
or the Company may require the Employee to make a cash payment to the Company
equal to the amount of withholding required in the opinion of the Company. In
the event the Employee does not make such payment when requested, the Company
may refuse to issue or cause to be delivered any Shares under this Agreement
entered into pursuant to the Program until such payment has been made or
arrangements for such payment satisfactory to the Company have been made. In
addition, such withholding tax obligations may be satisfied by withholding
Shares upon exercise of the option; provided that the amount of tax withholding
to be satisfied by withholding Shares shall be limited to the minimum amount of
taxes, including employment taxes, required to be withheld under applicable
law.


                         f. The
Employee shall have no rights as a shareholder with respect to any Ordinary
Shares subject to this option prior to the date of exercise of the option by
such Employee.


                         g. The
option herein granted may be assigned or otherwise transferred only in the
following circumstances: (i) by will or the laws of descent and distribution;
(ii) by valid





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beneficiary
designation taking effect at death made in accordance with procedures
established by the Committee; or (iii) by the Employee to members of his or her
“immediate family”, to a trust established for the exclusive benefit of solely
one or more members of the Employee’s “immediate family” and/or the Employee,
or to a partnership, limited liability company or other entity pursuant to
which the only owners are one or more members of the Employee’s “immediate
family” and/or the Employee. Any option held by the transferee will continue to
be subject to the same terms and conditions that were applicable to the option
immediately prior to the transfer, except that the option will be transferable
by the transferee only by will or the laws of descent and distribution. For
purposes hereof, “immediate family” means the Employee’s children,
stepchildren, grandchildren, parents, stepparents, grandparents, spouse,
siblings (including half brothers and sisters), in-laws, and relationships
arising because of legal adoption.


                        h. The
Employee shall comply with the Company’s stock ownership guidelines as in
effect from time to time.


                        i. Notwithstanding
any term of this option to the contrary, the Company reserves the right to
cancel this option or require the return of Shares received under this option
(or the cash value of the Shares, as determined by the Board in its sole
discretion) to the extent provided hereunder, and in accordance with, the
Company’s Clawback Policy as in effect from time to time, such Policy which is
incorporated into this Agreement by reference. As a condition to the grant of
this option, the Employee agrees that he or she will be subject to, and comply
with the terms of, the Company’s Clawback Policy as in effect from time to time
as it applies to any compensation, including equity awards, bonus and other
incentive awards.


                        j. Any
notice required or permitted to be given under this Agreement shall be in
writing and shall be deemed to have been given when delivered personally or by
courier, or sent by certified or registered mail, postage prepaid, return
receipt requested, duly addressed to the party concerned at the address
indicated below or to such changed address as such party may subsequently by
similar process give notice of:


	
  

 	
  

 
	
  

 	
 If to the Company:

 
	
  

 	
  

 
	
  

 	
 XL Capital Ltd

 
	
  

 	
 XL House

 
	
  

 	
 One Bermudiana Road

 
	
  

 	
 Hamilton HM08, Bermuda

 
	
  

 	
  

 
	
  

 	
 Attn.: General Counsel

 
	
  

 	
  

 
	
  

 	
 If to the Employee:

 
	
  

 	
  

 
	
  

 	
 At the Employee’s
 most recent address shown on the Company’s corporate records, or at any other
 address which the Employee
 may specify in a notice delivered to the Company in the manner set forth
 herein.

 









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                         k. This
Agreement shall be binding upon and inure to the benefit of the Company and the
Employee and their respective heirs, representatives and successors.


                         l. The
Employee, by execution of this Agreement, acknowledges receipt of the option
granted on the date shown above, as well as a copy of the Program and the
Program Prospectus.