Exhibit 10.4


PERFORMANCE UNIT AGREEMENT


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


                    WHEREAS,
Grantee is an employee of the Company and/or any of its subsidiaries
(collectively called the “Company”); and 


                    WHEREAS,
the Company regards Grantee as a valuable employee of the Company and has determined
it to be in the interest of the Company to grant to Grantee an award of
Performance Units under the Company’s 1991 Performance Incentive Program;


                    NOW,
THEREFORE, in consideration of the premises and mutual covenants contained
herein, and for other good and valuable consideration, the Company and Grantee
agree as follows:


                    (a)
Grant of Performance Units.  


                    The
Company has granted to Grantee an award (the “Award”) on _________________
(the
“Grant Date”) with a target amount of Performance Units (the “Target Amount”),
subject to the restrictions set forth below (the “Performance Units”). The percentage
of the Award that will be earned will range from 0% to 200% of the Target
Amount, depending on achievement of the performance goals for the Performance
Period established by the Management Development and Compensation Committee of
the Board of Directors (the “Committee”). Notwithstanding the foregoing, the
Committee, in its independent judgment, reserves the authority to increase or
decrease the payout amount, including the authority to make no payout at
all—regardless of the actual achievement of performance goals—in response to economic
conditions at the time of payout, better or lower than expected performance in
other important business/financial measures, or any other reason. The Award is
granted pursuant to the terms of the Company’s 1991 Performance Incentive
Program, which is incorporated by reference herein. Any capitalized terms used
herein and not defined shall have the meanings given to those terms in the 1991
Performance Incentive Program. 


                    (b)
Vesting. 


                    Except
as otherwise provided in paragraph (e) below, (i) the percentage of
the Award that will be earned will be determined following the end of the Performance
Period based on the level of achievement of the performance goals set forth as
adjusted (if applicable) by the Committee (the “Earned Award”), and
(ii) the Earned Award will vest only if Grantee remains continuously employed
by the Company through the Payment Date. The Payment Date will be after
January 1 of the calendar year immediately following the end of the Performance
Period and on or prior to March 15 of such calendar year, as determined by
the Company. Except as otherwise set forth in paragraph (e) below, the portion
of the Award, if any, that is not vested immediately following termination of
Grantee’s employment shall be immediately forfeited. The Performance Period
will begin on January 1, 2010 and end on December 31, 2012. 





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                    (c)
Distribution of Stock. 


                    On
the Payment Date in accordance with paragraph (b) above, the Company shall
distribute to Grantee a number of Ordinary Shares, US$0.01 par value per share,
of the Company (the “Shares”) equal to the number of Performance Units, if any,
that vested. To the extent applicable, Shares shall be distributed as set forth
in paragraph (e) below. Prior to the Company’s delivery of the Shares, Grantee
shall pay to the Company an amount of cash equal to the par value for each of
such Shares delivered. 


                    (d)
Rights and Restrictions.


                    The
Performance Units shall not be transferable other than pursuant to will or the
laws of descent and distribution. Prior to vesting of the Performance Units and
delivery of the Shares to Grantee, Grantee shall not have any rights and
privileges of a shareholder as to the Shares subject to the Award.
Specifically, Grantee shall not have the right to receive dividends or the
right to vote such Shares prior to vesting of the Award and delivery of the
Shares.


                    (e)
Early Termination. 


                         (i)
Death of Grantee. In the event Grantee dies while in the employment of
the Company, the following portion of the Award will vest and Shares equal to
the number of such vested Performance Units will be distributed at the time set
forth in this clause (i) below: (x) the percentage of the Award earned
based upon the extent, if any, of attainment of the performance goals for the
Award as measured at the earlier of the end of the calendar year during which
such death occurs or the end of the Performance Period, multiplied by
(y) a fraction, the numerator of which is the number of days during the
Performance Period ending on the date of Grantee’s death and the denominator of
which is the number of days in the Performance Period. Such Shares will be
distributed to Grantee’s estate or beneficiary on the earlier of: (x) the date
after January 1 of the calendar year immediately following the calendar
year during which such death occurs and on or prior to March 15 of such
calendar year, as determined by the Company, or (y) the Payment Date described
pursuant to paragraphs (b) and (c) above.


                         (ii)
Termination of Employment Due to Permanent Disability. In the event
Grantee’s employment with the Company is terminated by the Company by reason of
Grantee’s Permanent Disability, the following portion of the Award will vest
and Shares equal to the number of such vested Performance Units will be
distributed at the time set forth in this clause (ii) below: (x) the
percentage of the Award earned based upon the extent, if any, of attainment of
the performance goals for the Award as measured at the earlier of the end of
the calendar year during which such termination of employment occurs or the end
of the Performance Period, multiplied by (y) a fraction, the numerator of
which is the number of days during the Performance Period ending on the date of
Grantee’s termination of employment and the denominator of which is the number
of days in the Performance Period. Such Shares will be distributed to Grantee
on the earlier of: (x) the date after January 1 of the calendar year
immediately following the calendar year during which such termination of
employment occurs and on or prior to March 15 of such calendar year, as
determined by the Company, or (y) the Payment Date described pursuant to
paragraphs (b) and (c) above. For purposes hereof, “Permanent Disability” means
those circumstances under which Grantee has been unable to perform his or her
duties and responsibilities with the Company for at least 60 continuous days 





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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
responsibilities 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
Grantee 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.


                         (iii)
Termination of Employment Due to Retirement. In the event Grantee’s
employment with the Company is terminated due to his or her Retirement, the
following portion of the Award will vest and Shares equal to the number of such
vested Performance Units will be distributed at the time set forth in this
clause (iii) below: (x) the percentage of the Award earned based upon the
extent, if any, of attainment of the performance goals for the Award as
measured at the earlier of the end of the calendar year during which such Retirement
occurs or the end of the Performance Period, multiplied by (y) a fraction,
the numerator of which is the number of days during the Performance Period ending
on the date of Grantee’s Retirement and the denominator of which is the number
of days in the Performance Period. Such Shares will be distributed to Grantee
on the earlier of: (x) the date after January 1 of the calendar year immediately
following the calendar year during which such termination of employment occurs
and on or prior to March 15 of such calendar year, as determined by the
Company, or (y) the Payment Date described pursuant to paragraphs (b) and (c)
above. For purposes hereof “Retirement” shall mean the termination of employment
by Grantee if (i) such termination of employment occurs after (x) Grantee has
reached age 55, and (y) the sum of Grantee’s age and full years of continuous
service with the Company equals or exceeds 65, and (ii) a determination has
been made by the Committee, in its sole discretion, that it is appropriate
under the circumstances (taking into account, without limitation, the intention
of Grantee with respect to future employment) for the Performance Units to become
vested at the time of such termination of employment.


                         (iv)
Termination Not For Cause. In the event Grantee’s employment with the
Company is terminated by the Company not for Cause (as defined below), the
following portion of the Award will vest and Shares equal to the number of such
vested Performance Units will be distributed at the time set forth in this
clause (iv) below: (x) the percentage of the Award earned based upon the
extent, if any, of attainment of the performance goals for the Award as
measured at the earlier of the end of the calendar year during which such
termination of employment occurs, or the end of the Performance Period,
multiplied by (y) a fraction, the numerator of which is the number of days
during the Performance Period ending on the date of such termination of
employment and the denominator of which is the number of days in the Performance
Period. Such Shares will be distributed to Grantee on the earlier of: (x) the
date after January 1 of the calendar year immediately following the
calendar year during which such termination of employment occurs and on or
prior to March 15 of such calendar year, as determined by the Company, or
(y) the Payment Date described pursuant to paragraphs (b) and (c) above. For
purposes hereof, “Cause” shall mean (I) conviction of Grantee of a felony
involving moral turpitude or dishonesty; (II) Grantee, in carrying out his or
her duties for the Company, has been guilty of (A) gross neglect or (B) willful
misconduct; provided, however, that any act or failure to act by
Grantee shall not constitute Cause for this purpose if such act or 





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failure to act
was committed, or omitted, by Grantee in good faith and in a manner reasonably
believed to be in the overall best interests of the Company; (III) Grantee’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 (IV) Grantee’s sustained failure to perform the essential
duties of Grantee’s role after receipt of notice. The determination of whether
Grantee 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.


                         (v)
Change of Control. In the event there is a Change of Control of the
Company during the period that Grantee is employed by the Company, the Award
will vest at target (100%) and Shares equal to the number of such vested
Performance Units will be distributed to Grantee at the time of the Change of
Control.


                    (f)
Status of Shares.


                    Upon
issuance, the Shares shall rank equally in all respects with the other outstanding
Shares of the Company and shall be fully paid.


                    (g)
Adjustments for Recapitalizations, Etc.


                    In
the event of stock dividends, stock splits, recapitalizations, mergers, consolidations,
combinations, exchanges of shares, spin-offs, liquidations, reclassifications
or other similar changes in the capitalization of the Company, the number of
Shares subject to this Award shall be proportionately adjusted by the Board on
an equitable basis.


                    (h)
Obligations as to Capital.


                    The
Company agrees that it will at all times maintain authorized and unissued share
capital sufficient to fulfill all of its obligations under this Agreement.


                    (i)
Dividend Equivalents.


                    Dividend
equivalents will not be paid with respect to Grantee’s Performance Unit Award.


                    (j)
Withholding.


                    Grantee
agrees to make appropriate arrangements with the Company for satisfaction of
any applicable income tax withholding requirements or social security or
similar requirements arising out of the Award. Such withholding tax obligations
may be satisfied by withholding Shares from this Award; 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.





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                    (k)
Transfer Restrictions.


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


                    (l)
References.


                    References
herein to rights and obligations of Grantee shall apply, where appropriate, to
the estate or personal representative of Grantee without regard to whether
specific reference to them is contained in a particular provision of this Agreement.


                    (m)
Notice.


                    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 Grantee:

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

 



                    (n)
Section 409A. 


                    It
is intended that this Agreement will comply with Section 409A of the Internal
Revenue Code of 1986, as amended (the “Code”) and any regulations and
guidelines promulgated thereunder (collectively, “Section 409A”), to the extent
the Agreement is subject thereto, and the Agreement shall be interpreted on a
basis consistent with such intent. The parties hereto specifically intend that
any payments and benefits under this Agreement will not be considered deferred
compensation for purposes of Section 409A due to Treas. Reg. Section 1.409A-1(b)(4)
or another applicable exception. However, notwithstanding any provision to the
contrary in this Agreement, if Grantee is deemed on the date of his or her
“separation from service” (within the meaning of Treas. Reg. Section 1.409A-1(h))
with the Company to be a “specified employee” (within the meaning of Treas.
Reg. Section 1.409A-1(i)), then with regard to any payment that is
considered deferred compensation under Section 409A payable on account of a
“separation from service” that is required to be delayed pursuant to Section
409A(a)(2)(B) of the Code (after tak-





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ing into
account any applicable exceptions to such requirement), such payment shall be
made on the date that is the earlier of (i) the expiration of the six (6)-month
period measured from the date of Grantee’s “separation from service,” or (ii)
the date of Grantee’s death (the “Delay Period”). Upon the expiration of the
Delay Period, all payments delayed pursuant to this paragraph (whether they
would have otherwise been payable in a single sum or in installments in the absence
of such delay) shall be paid to Grantee in a lump sum and any remaining payments
due under this Agreement shall be paid in accordance with the normal payment
dates specified for them herein. Notwithstanding any provision of this
Agreement to the contrary, for purposes of any provision of this Agreement providing
for the payment of any amounts upon or following a termination of employment
that are considered deferred compensation under Section 409A, references to Grantee’s
“termination of employment” (and corollary terms) with the Company shall be construed
to refer to Grantee’s “separation from service” (within the meaning of Treas.
Reg. Section 1.409A-1(h)) with the Company. Whenever payments under this
Agreement are to be made in installments, each such installment shall be deemed
to be a separate payment for purposes of Section 409A.


                    (o)
Clawback Policy.


                    Notwithstanding
any term of these Performance Units to the contrary, the Company reserves the
right to cancel these Performance Units or require the return of Shares received
under these Performance Units (or the cash value of the Shares, as determined
by the Board in its sole discretion) to the extent provided under, and in accordance
with, the Company’s Clawback Policy as in effect from time to time, which
Policy is incorporated into this Agreement by reference. As a condition to the
grant of these Performance Units, 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.


                    (p)
Governing Law.


                    This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York without reference to the principles of conflict of laws.