7

<PAGE>
                       MMI COMPANIES, INC.
                     1999 STOCK OPTION PLAN


1.    Purpose.    The purpose of this 1999 Stock Option Plan (the
"Plan")  is  to  benefit MMI Companies, Inc. (the  "Company")  by
offering certain present and future employees and officers of the
Company  and its subsidiaries, as well as non-employee directors,
a  favorable  opportunity to become holders of the common  stock,
$.10 per share par value, of the Company ("Common Stock") over  a
period  of  years, thereby giving them a long-term stake  in  the
growth  and  prosperity  of  the  Company  and  encouraging   the
continuance of their involvement with the Company.

2.    Administration.  The Plan shall be administered  under  the
supervision of a committee (the "Committee"), which shall consist
of  a committee or subcommittee of the Board of Directors of  the
Company  (the  "Board") appointed by the Board and consisting  of
two  or  more  members of the Board, each of whom is an  "outside
director"  as  defined  in Treasury Regulations  1.162-27  issued
under  162(m)  of  the Internal Revenue Code (the  "Code").   The
Committee   shall   have  the  exclusive   right   to   determine
eligibility,  grant options, determine the terms of  options  and
issue  restricted stock, all as provided herein.  The appropriate
officers  of  the  Company  shall have  the  right  to  make  all
determinations  necessary for the routine administration  of  the
Plan, subject to the supervision of the Committee.

3.   Eligibility.  Options may be granted to employees, officers,
directors,  consultants  or  advisors  of  the  Company  or   its
subsidiaries, whose contributions are key to the success  of  the
Company  or  its subsidiaries (collectively, the "Companies")  as
determined by the Committee in its sole discretion; provided that
options may be granted to directors who are not also employees or
consultants solely in accordance with Section 4(a) and (b).   For
purposes  of this Plan, the term "subsidiaries" means any  entity
in  which  the  Company  owns, directly or  through  a  chain  of
subsidiaries, a substantial voting interest, as determined by the
Committee;  provided,  however, that such  term  shall  mean  any
corporation  in  which the Company owns, directly  or  through  a
chain of subsidiaries, 50% of the total combined voting power  of
all  classes  of stock, as determined under 424(f) of  the  Code,
where such alternative definition must be used to comply with any
Code  provision  relating to ISOs (as defined  below).   Eligible
individuals  may  be  selected  individually  or  by  groups   or
categories,  as  determined by the Committee in  its  discretion.
Any  person  who is granted an option under this  Plan  shall  be
referred  to  herein  as  a "Participant."   In  the  case  of  a
Participant who is not an employee, all references in  this  Plan
to "employment" or "termination of employment" shall be deemed to
refer  to  the  relationship between  such  Participant  and  the
Company  or  its  subsidiaries  which  was  the  basis  for  such
Participant's eligibility to receive an option.

4.   Granting of Options.

      (a)  Beginning in 1999, each non-employee director shall be
granted an option for 1,375 shares of Common Stock at each Annual
Meeting  of  Stockholders  of  the  Company  provided  that  such
director  was  serving  as  a  non-employee  director  since  the
preceding Annual Meeting and on the grant date, and that the Plan
is  approved by the Company's stockholders.  Upon approval of the
Plan  by  the Company's stockholders, each person who  thereafter
becomes  a  non-employee director shall, at the time  he  or  she
becomes  a  director, also receive a grant  of  4,125  shares  of
Common Stock.

      (b)  Each director who is not an employee of the Company or
any   of   its  subsidiaries  shall  be  granted  a  nonqualified
Performance  Option on January 1 of each year commencing  January
1, 2000 to purchase 2,500 shares of the Company's common stock at
fair  market  value  on  such  grant date.   Notwithstanding  the
foregoing,   (i)   if  the  minimum  Earnings  Per   Share   goal
incorporated into the Chief Executive Officer's objective for the
target  performance year is not achieved, or (ii) if the director
is  not  also serving as a director on December 31 of the  target
performance year, the Performance Options for that year  will  be
forfeited.
</PAGE>


<PAGE>

      (c)   Options  may be granted to any eligible person  other
than  a  nonemployee director described in Section 4(a)  at  such
times  and  in such amounts and with such terms as the  Committee
shall  determine in its sole discretion, subject to the remaining
provisions of this Plan.

      (d)   The total of shares of Common Stock for which options
may  be  granted pursuant to this Plan shall be 1,500,000 shares,
subject  to adjustment as provided in Section 10.  In  the  event
that  an  option expires or is terminated or canceled unexercised
as  to  any  shares, such released shares may again  be  optioned
(including  a  grant  in  substitution for  a  canceled  option).
Shares subject to options may be made available from unissued  or
reacquired  shares of Common Stock.  No option shall  be  granted
after  the expiration of the term of the Plan pursuant to Section
15.

      (e)   The  maximum number of shares subject to all  options
granted  to a Participant in any calendar year shall in no  event
exceed  400,000 (the "Individual Cap"), subject to adjustment  as
provided  in Section 10.  For purposes of this subparagraph  (e),
an  option that is canceled shall continue to restrict the number
of  shares for which options may be granted in the same year, and
any  modification  to the purchase price of an  option  shall  be
treated as the cancellation of the old option and the grant of  a
new option.

      (f)  Options granted under the Plan to employees may either
be  incentive  stock  options  as defined  in  422  of  the  Code
("ISOs"),  or options that are not ISOs ("nonqualified options"),
as  determined  by the Committee at the time of  grant;  provided
that  the  total value of shares of Common Stock with respect  to
which ISOs may be granted to any Participant in any calendar year
(or,  in  the case of options that are not vested at the time  of
grant,  the value, determined at the date of grant, of shares  of
Common  Stock with respect to which ISOs first become exercisable
in  any  calendar  year), under this Plan  and  all  other  plans
maintained by the Company, its subsidiaries, and any parents  (as
defined  in  424(e)  of the Code) shall not exceed  $100,000.   A
single  option may constitute an ISO with respect to some  shares
and  a  nonqualified option with regard to the remaining  shares.
An  option that meets the requirements of an ISO, in whole or  in
part,  shall constitute an ISO to the extent that it  meets  such
requirements,   unless  otherwise  provided  by  the   Committee.
Options granted to directors or consultants who are not employees
shall  be nonqualified options.  An option granted to an employee
who  owns  more  than 10% of the stock of the Company  shall  not
constitute an ISO unless the purchase price is at least  110%  of
the  fair  market value of the stock and the term of  the  option
does not exceed five years.

      (g)   Each  option shall be evidenced by a  written  option
agreement, in the form as the Company may provide (subject to the
Committee's  approval).  All terms and conditions  of  this  Plan
shall  be  deemed  incorporated into each such option  agreement,
except as otherwise specifically provided therein.

5.    Option  Price.  The options shall be granted at an exercise
  price determined by the Committee which shall only be equal to or
  greater  than the fair market value at the time the  option  is
  granted, of the shares of Common Stock subject to the option.  If
  not  otherwise  specified by the Committee, the exercise  price
  shall  be  the fair market value.  The exercise price  for  all
  options granted to nonemployee directors pursuant to Section 4(a)
  and  (b) shall only be the fair market value.  The fair  market
  value  of the Common Stock shall be determined by the price  at
  which the Common Stock trades on the principal exchange or over-
  the-counter market in which the Common Stock is traded, using a
  method  determined by the Committee, and without regard to  any
  restriction  that  may be imposed on the sale  of  stock  by  a
  Participant under the securities laws or otherwise.  After  the
  date  of  grant,  the option price of an option  shall  not  be
  decreased except as may be permitted by the adjustment provisions
  of Section 10.
</PAGE>
<PAGE>
6.    Duration of Options and Vesting.  Subject to the provisions
of  Section  8  hereof, each option shall be for a  term  of  ten
years, or such shorter duration as the Committee may determine at
the  time of grant.  Unless otherwise determined by the Committee
as provided in the following sentence, all options shall be fully
vested  one year after the date of grant and may be exercised  in
whole  or  in part at any time during their term after the  first
year.   The  Committee may, at the time of grant  of  any  option
(other  than an option granted to a nonemployee director pursuant
to  Section 4(a) and (b)) provide that the Participant's right to
exercise such option  in whole or in part is subject to
conditions  precedent, which may be based upon the  Participant's
continued  employment  for  a  specified  period  of  time,   the
achievement  of specified performance goals by the  Company,  the
Participant,  or both, or such other conditions as the  Committee
may determine.  For all purposes of this Plan, an option which is
subject  to  such  conditions shall be referred to  as  "vested",
either  in whole or with respect to certain shares, and shall  be
exercisable,  only when the conditions have been  satisfied,  and
until   vested  shall  be  considered  forfeitable.   Performance
options  granted to a non-employee director pursuant  to  Section
4(b)  shall  be  vested  only when the  conditions  described  in
Section 4(b) have been satisfied.

7.    Exercise  of  Option.  An option  that  is  vested  may  be
exercised by giving written notice to the Company, specifying the
number  of  shares  to  be  purchased, accompanied  by  the  full
purchase price for the shares to be purchased which may  be  paid
in  any  combination  of  the following  methods,  provided  that
payment  in  any form other than cash or check shall only  be  as
permitted  by the Committee in its sole discretion: in  cash,  by
check, by surrendering other shares of Common Stock owned by  the
Participant equal in fair market value (as of the exercise  date)
to  the  purchase price (which surrender of shares  shall  comply
with  16(b) of the Exchange Act), by withholding such  number  of
shares  of Common Stock from the number purchased (which withheld
shares  shall  be  treated  as  having  been  purchased  by   the
Participant and sold back to the Company) or by a promissory note
in a form and on terms specified by the Committee.  A Participant
may  also  arrange  for a "cashless exercise",  subject  to  such
restrictions as the Company may determine.  The Participant shall
pay  at  the  time of exercise, by any combination  of  the  same
methods,  an amount equal to any tax that the Company is required
to  withhold from the Participant upon exercise (less any  amount
withheld   from   the  Participant's  regular   compensation   in
connection with such exercise).  The Participant shall be  solely
responsible  for any tax which is due as a result of  the  grant,
exercise or expiration of an option.  The Participant also  shall
execute such agreements or documents as the Company may determine
to  be necessary or appropriate to comply with any securities  or
other applicable laws or regulations.

8.   Termination of Relationship -- Exercise Thereafter.

     (a)  In the event a Participant's employment with any of the
       Companies  is terminated for any reason other than  death,
       permanent disability, or retirement and such Participant no
       longer  is  employed by any of the other  Companies,  such
       Participant's option shall expire and all rights to purchase
       shares  pursuant thereto shall terminate on  the  date  of
       termination of employment, except that, unless the termination is
       for cause, such option, to the extent vested and exercisable on
       the date of termination, may be exercised for a period of thirty
       days after termination of employment (or until the scheduled
       termination of the option, if earlier); provided, however, that
       with respect to all or any portion of any option held by such
       Participant,  the  Committee may, in its sole  discretion,
       accelerate exercisability or permit such option to  remain
       exercisable for a term after the thirty-day period specified
       above (but in no event beyond its specified term), subject to
       such terms and conditions, if any, as determined by the Committee
       in its sole discretion.  The Committee may also accelerate
       exercisability or permit such option to remain exercisable in the
       event  of  a change of control or other material corporate
       transaction, as determined by the Committee  in  its  sole
       discretion.  A person receiving an option as a nonemployee
       director pursuant to Section 4(a) or (b) shall not be subject to
       the termination provisions of this Section 8(a).
</PAGE>
<PAGE>
      (b)  In the event the employment of a Participant with  any
of  the  Companies is terminated for cause, or that  the  Company
determines  that  grounds for termination  for  cause  exist  but
permits the Participant to resign, or discovers after termination
but  before  an option is exercised that such grounds existed  at
the  time  of  termination,  all  unexercised  options  shall  be
forfeited,  regardless of whether they were otherwise  considered
vested and exercisable at the time of termination, and any notice
of exercise that has been given, but as to which the Common Stock
has  not  been issued, shall be rescinded.  For purposes of  this
paragraph (b), "cause" shall include theft or misappropriation of
property (including intellectual and intangible property) of  any
of  the  Companies, commission of any crime involving any of  the
Companies,  violation of (or manifestation of a clear  intent  to
violate)  the  terms  of  any noncompetition  or  confidentiality
agreement  to  which  the  Participant  is  a  party,  or   gross
insubordination  or  dereliction  of  the  Participant's  duties.
"Cause"  shall  be  determined by the Committee,  whose  decision
shall be final, and in the case of cause that involves commission
of  a  crime  shall not require arrest or conviction.   Temporary
absence  from  employment  because  of  illness,  vacation,   and
approved leaves of absence and transfer among the Companies shall
not  be  considered  to  terminate  employment  or  to  interrupt
continuous employment.

      (c)   In the event of termination of employment because  of
death  or  permanent disability (as that term is defined  in  the
Company's long term disability plan for which the Participant  is
eligible,  if any, and otherwise as defined in  22(e)(3)  of  the
Code),  the  option may be exercised in full (to the  extent  not
previously  exercised)  without regard  to  the  vesting  of  the
option, by the Participant or, if he or she is not living, by his
or  her heirs, legatees, or legal representative, as the case may
be, during its specified term prior to one year after the date of
death or permanent disability.

      (d)   In the event of termination of employment because  of
early, normal or deferred retirement under the retirement program
of  the Company for which the Participant is eligible, if any (or
such  other  plan  or  arrangement as  may  be  approved  by  the
Committee,  in its discretion, for this purpose), the option  may
be exercised by the Participant (or, if he or she dies after such
retirement,   by   his   or  her  heirs,   legatees,   or   legal
representative,  as  the case may be), to  the  extent  that  any
portion  thereof  would  be  exercisable  on  the  date  of  such
retirement (or with respect to such greater portion as determined
by the Committee), at any time during its specified term prior to
one year after the date of such retirement.

      (e)   The  Committee will have authority to  determine  the
circumstances   under  which  options  will  be  forfeited   upon
termination  of  employment of the Participant.  Such  provisions
will  be contained in the Participant's option agreement or  will
otherwise be communicated in writing to the Participant.

9.    Non-Transferability of Options.  During the lifetime  of  a
Participant,   options   shall  be  exercisable   only   by   the
Participant,  and options shall not be assignable or transferable
by  the  Participant otherwise than by will or  by  the  laws  of
descent and distribution.  The Committee, in its discretion,  may
permit  the  assignment or transfer of a nonqualified  option  to
members  of  the  Participant's family, to  a  trust  for  family
members, to a nonprofit organization, or to such other transferee
as  the Committee may approve, on such terms and subject to  such
conditions as the Committee may deem necessary or appropriate.

10.  Adjustment.  The number of shares subject to the Plan and to
options granted under the Plan (and the Individual Cap) shall  be
adjusted  as  follows:   (a) in the event  that  the  outstanding
shares  of  Common Stock of the Company are changed by any  stock
dividend,  stock split or combination of shares,  the  number  of
shares subject to the Plan and to options granted thereunder  and
the  Individual Cap shall be proportionately adjusted; (b) in the
event  of  any  merger,  consolidation or reorganization  of  the
Company  with any other corporation or corporations, there  shall
be  substituted,  on  an equitable basis  as  determined  by  the
Committee,  for  each share of Common Stock then subject  to  the
Plan,  whether or not at the time subject to outstanding options,
and for each share of Common Stock included in the Individual Cap
the  number  and kind of shares of stock or other  securities  to
which  the holders of shares of Common Stock of the Company  will
be  entitled pursuant to the transaction; and (c) in the event of
any  other relevant change in the capitalization of the  Company,
the Board shall provide for an equitable adjustment in the number
of  shares  of Common Stock then subject to the Plan, whether  or
not  then  subject to outstanding options, and in the  Individual
Cap.  In the event of any such adjustment the purchase price  per
share shall be proportionately adjusted.   </PAGE>
<PAGE>

11.   Amendment or Termination of Plan.  The Board may  amend  or
discontinue the Plan at any time, except, that:

      (a)   no amendment or discontinuance shall change or impair
any  options  previously  granted  without  the  consent  of  the
Participant;

      (b)   no amendment shall cause Options to be repriced at  a
price  lower than their original exercise price unless  otherwise
permitted by Section 10; and

     (c)  no amendment shall, without the affirmative vote of the
holders  of  a majority of the outstanding shares of all  of  the
classes  of stock of the Company present and voting in person  or
by  proxy,  and  entitled  to vote at a  duly  held  stockholders
meeting,  or  without the written consent of  the  holders  of  a
majority of the outstanding shares of all of the classes of stock
present  and  entitled  to  vote,  (i)  increase  the  number  of
securities  which may be issued under the Plan, (ii)  modify  the
requirements  as to eligibility for participation  in  the  Plan,
(iii)  extend  the  term  of  the Plan  beyond  the  latest  date
specified  in  Section 15, or (iv) cause any  option  that  would
otherwise have qualified for an exception under Rule 16b-3  under
the  Exchange  Act  or  that would otherwise  have  qualified  as
incentive  compensation under 162(m) of the Code to  fail  to  so
qualify.

12.   Stock  Appreciation Rights.  At the time  of  granting  any
option  (other than an option to a nonemployee director  pursuant
to  Section  4(a)  or (b)), the Committee may  also  grant  stock
appreciation  rights  in tandem with such  options,  which  shall
provide that the Participant has the right, in lieu of purchasing
Common  Stock pursuant to such option, to require the Company  to
pay  an  amount equal to the difference between the  fair  market
value  of  the number of shares of Common Stock with  respect  to
which  such  right is exercised and the exercise price  therefor,
subject  to  such  terms  and conditions  as  the  Committee  may
determine.

13.   Restricted Stock.   Subject to the limitations of the Plan,
the  Committee may grant awards of Restricted Stock to employees,
shall  determine the time when each such awards shall be  granted
and  whether  shares  of  Common  Stock  covered  by  awards   of
Restricted  Stock will be issued at the beginning or the  end  of
the  Restriction Period, and shall designate (or  set  forth  the
basis for determining) the vesting date or vesting dates for each
award  of  Restricted Stock and may prescribe other restrictions,
terms  and  conditions  applicable to such  Restricted  Stock  in
addition  to  those  provided in the Plan.  The  Committee  shall
determine  the  price, if any, to be paid by the holder  for  the
Restricted  Stock.   All  determinations made  by  the  Committee
pursuant  to this Section 13 shall be specified in the  Agreement
relating   to   such   Restricted  Stock.   Notwithstanding   the
foregoing,  in  no  event  shall  more  than  500,000  shares  of
Restricted  Stock  be issued under the Plan  and  all  Restricted
Stock  shall be issued with a minimum vesting period  of  i)  not
less  than one year, if performance-based, and ii) not less  than
three  years,  which may be either cliff vesting or equal  annual
installments, if not performance-based.

      The  vesting of any award of Restricted Stock may,  in  the
Committee's discretion, be conditioned in whole or in  part  upon
the  attainment, or the extent of attainment, by the  Company,  a
division  or unit of the Company, or the Participant of objective
performance goals pre-established by the Committee, based on  one
or   more  of  the  following  criteria:   (a)  return  on  total
shareholder equity; (b) earnings per share of Common  Stock;  (c)
net income (before or after taxes); (d) earnings before interest,
taxes, depreciation and amortization; (e) revenues; (f) return on
assets;  (g)  market share; (h) cost reduction  goals;  (i)  cash
flow; (j) stock price; (k) margins; (l) increase in revenues  and
(m)  any combination of, or a specified increase in, any  of  the
foregoing;  in  each  case,  as  determined  in  accordance  with
generally accepted accounting principles.  Such performance goals
shall be established by the Committee prior to the expiration  of
25% of the time period to which the performance goal relates, and
the  vesting  of  any award of Restricted Stock subject  to  such
performance goals shall be conditioned upon certification by  the
Committee that the performance goals have been attained.   Awards
that  are  made  subject to performance goals described  in  this
Section are intended to qualify as performance based compensation
under  162(m)  of  the Code, and the provisions of  this  Section
shall be so interpreted and applied.
</PAGE>

<PAGE>
14.  Employment and Consulting Agreements.  Anything contained in
the  Plan to the contrary notwithstanding, in the event  that  an
employment  agreement entered into by the Company or a subsidiary
of  the Company provides that options shall be granted under  the
Plan to an employee on terms and conditions that differ from  the
terms  and  conditions set forth herein, the terms and conditions
set forth in such employment agreement shall control.

15.   Approval  and Term.  The Plan was adopted by the  Board  on
February  25,  1999,  and shall be effective  as  of  such  date,
subject  to  the following.  The Plan shall be submitted  to  the
stockholders  for  approval at the first annual  meeting  of  the
stockholders held subsequent to its effective date, and no option
may  be  exercised until the Plan has been so approved.   If  the
Plan  for any reason is not approved by the stockholders  by  the
first  anniversary  of  its effective date,  the  Plan,  and  all
options granted pursuant to the Plan, shall be null and void  and
neither the Company nor any Participant shall have any rights  or
obligations  with  respect thereto. The Plan, if  not  previously
terminated  by the Board pursuant to Section 11, shall  terminate
on  February 24, 2009, and no options shall be granted after such
date.

16.  Miscellaneous Provisions.

      (a)  Nothing contained in the Plan or in any option granted
pursuant  thereto shall confer upon any Participant any right  to
be  continued  in the employment of the Company, or interfere  in
any  way  with the right of the Company to terminate his  or  her
employment at any time.

      (b)   No  employee or other person shall have any claim  or
right  to  be  granted an option under the Plan.   Determinations
made by the Committee under the Plan need not be uniform and  may
be  made  selectively among eligible individuals under the  Plan,
whether or not such eligible individuals are similarly situated.

      (c)   No  Participant or other person shall have any  right
with  respect to the Plan, the Common Stock reserved for issuance
under the Plan or any option, contingent or otherwise, until  all
the  terms, conditions and provisions of the Plan and the  option
applicable to such recipient (and each person claiming  under  or
through him) have been met.

      (d)   No  shares of Common Stock shall be issued  hereunder
with  respect to any option unless counsel for the Company  shall
be  satisfied  that  such issuance will  be  in  compliance  with
applicable  federal, state, local and foreign  legal,  securities
exchange and other applicable requirements.

      (e)   It  is the intent of the Company that options granted
under  the Plan to Participants who are subject to 16(b)  of  the
Exchange  Act  comply in all respects with Rule 16b-3  under  the
Exchange  Act,  and that options granted to persons  who  may  be
subject  to  162(m) of the Code comply in all respects  with  the
restrictions  on payments of incentive compensation  in  Treasury
Regulations    1.162-27,   and   that    any    ambiguities    or
inconsistencies  in construction 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 such  requirements,
such  provision  shall  be deemed null and  void  to  the  extent
required to permit the Plan to comply with such requirement.

     (f)  The expenses of the Plan shall be borne by the Company.

     (g)  By accepting any option or other benefit under the Plan,
       each Participant and each person claiming under or through such
       person shall be conclusively deemed to have indicated  his
       acceptance and ratification of, and consent to, any action taken
       under the Plan by the Company or the Committee.



Adopted:  February 25, 1999 (Board of Directors); April 22,  1999
(Stockholders)
Amended:  April 22, 1999
</PAGE>