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                                                                   EXHIBIT 10.26

                          DELPHI FINANCIAL GROUP, INC.

                AMENDED AND RESTATED DIRECTORS STOCK OPTION PLAN

                                  INTRODUCTION

Delphi Financial Group, Inc. (the "Company") adopted the Delphi Financial Group,
Inc. 1994 Directors Stock Option Plan effective April 12, 1994. Effective as of
March 20, 1997, the Company amended and restated such plan (subject to the
approval of the stockholders of the Company) to incorporate provisions whereby
the eligible members of its Board of Directors may receive stock options in lieu
of their annual cash retainers, to increase the number of shares subject to
nonqualified stock options available for issuance under such plan, and to effect
certain further amendments. Such plan, as so amended and restated, is as
follows:

1.  PURPOSE

This Amended and Restated Directors Stock Option Plan (the "Plan") is intended
to increase the proprietary interest in Delphi Financial Group, Inc. (the
"Company") of outside directors of the Company, i.e., directors who are not
officers or employees of the Company or its subsidiaries, whose continued
services are important to the continued success of the Company, thereby
providing them with additional incentive to continue to serve as directors. The
Plan provides for the issuance of nonqualified stock options ("Options"). The
Plan shall be effective upon its approval by the stockholders of the Company (as
provided in Section 10 below).

2.  ADMINISTRATION

The Plan shall be substantially self-executing. To the extent, however, that any
administrative determinations regarding the Plan are required to be made, they
shall be made pursuant to the affirmative vote of a majority of the members of a
committee consisting of the members of the Company's Board of Directors (the
"Committee"). All ministerial matters relating to the Plan shall be performed by
or at the direction of the Committee.

3.  ELIGIBILITY

The persons who shall receive Options (the "Optionees") shall be members of the
Company's Board of Directors who are not officers or employees of the Company or
any of its subsidiaries ("Subsidiaries"), as that term is defined by Section
424(f) of the Internal Revenue Code of 1986, as amended from time to time (the
"Code"). Persons eligible to be Optionees are sometimes referred to herein as
"Outside Directors."

4.  STOCK

The stock subject to the Options shall be shares (the "Shares") of the Company's
authorized but unissued or reacquired Class A common stock, par value $.01 per
share). The aggregate number of Shares as to which Options may be granted shall
not exceed 120,000. The limitation established by the preceding sentence shall
be subject to adjustment as provided in Section 5(B)(ix) of the Plan. In the
event that any outstanding Option under the Plan for any reason expires,
terminates or is canceled, the Shares allocable to the unexercised portion of
such Option will again be subject to Options thereafter awarded under the Plan.

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5.  TERMS AND CONDITIONS OF OPTIONS

    A. Options shall automatically be granted under the Plan as follows:

        (i) On the day immediately following the date on which the Plan is
    approved by the stockholders of the Company (as provided in Section 10
    below), and thereafter on the first business day immediately following the
    each date on which the Company holds its annual meeting of stockholders
    (commencing with the 1997 meeting), each Outside Director then in office
    will automatically be awarded as of such date Options exercisable for a
    number of Shares determined pursuant to the following formula: Number of
    Option Shares = 2,000 multiplied by [1 + (.125 multiplied by the number of
    years of continuous service of such Outside Director to that point,
    including any portion of a year of service, which shall be treated as a full
    year)].

        (ii) Each Outside Director shall, on the first business day following
    each date on which such director is elected, re-elected or appointed, as
    applicable, to the Company's Board of Directors (the "Election Date"),
    commencing with the elections to occur at the 1997 annual meeting of
    stockholders, be awarded Options in lieu of the cash amount (the "Retainer
    Amount") that such director would be entitled to receive for serving as such
    in the period from the Election Date up to the date of the Company's next
    following annual meeting of stockholders, exclusive of meeting fees, fees
    for serving on any committee of the Board, or fees associated with any other
    services provided to the Company or its Subsidiaries. Such Options will be
    exercisable for the nearest number of whole Shares determined pursuant to
    the following formula: Number of Option Shares = (Retainer Amount multiplied
    by 3), divided by (Fair Market Value, as that term is defined in Section
    5(B) (ii) hereof, as of the award date). Notwithstanding the foregoing,
    Options will not be awarded pursuant to this Section 5(A)(ii) if the Outside
    Director files with the Secretary of the Company, on or prior to the
    commencement of the calendar year in which the applicable Election Date is
    to occur, a written election not to receive Options in lieu of the Retainer
    Amount (other than the Election Date on which such director is first elected
    or appointed, in which case such election may be made at any time prior to
    such Election Date).

    B. Promptly after each award pursuant to Section 5(A), a Notice of Award of
Stock Option (an "Option Notice") shall be given to each Optionee, which notice
shall comply with and be subject to the following terms and conditions:

        (i) Number of Shares.  Each Option Notice shall state the number of
    Shares to which it pertains.

        (ii) Option Price. Each Option Notice shall state the Option price per
    Share, which shall be 100% of the Fair Market Value of a Share on the date
    of the grant of the Option (the "Option Price"). For purposes hereof, "Fair
    Market Value" shall be the closing price on the applicable date of a Share,
    as reported on the New York Stock Exchange (the "NYSE"), or, if the Shares
    are not then listed for trading on the NYSE, the closing price of the Shares
    as reported on another recognized securities exchange or on the NASDAQ
    National Market System if the Shares shall then be listed on such exchange
    or system. If the Shares did not trade on the award date on the NYSE or such
    other applicable exchange or system, the Fair Market Value for purposes
    hereof shall be the reported closing price on the last business day on which
    the Shares were traded preceding the award date.

        (iii) Option Price. The Option Notice may provide that the Optionee may
    make payment of the Option Price in cash, Shares or such other consideration
    as may be specified therein or as may be acceptable to the Committee, or any
    combination thereof, in an amount or having an aggregate value, as the case
    may be, equal to the total Option Price. Such payment shall be made upon
    exercise of the Option.

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        (iv) Term, Transferability and Exercisability of Options.

           (a) Each Option Notice shall state the date on which the Option shall
       expire (the "Expiration Date"), which shall be ten years from the date on
       which the Option is awarded. Options are not assignable or transferable
       by an Optionee other than by will or the laws of descent and
       distribution, or pursuant to a qualified domestic relations order as
       defined by the Code or by Title I of the Employee Retirement Income
       Security Act, or the rules thereunder. Notwithstanding the foregoing, if
       provided in the applicable Option Notice (at the time of grant or at any
       time thereafter), an Option granted hereunder may be transferred for no
       consideration by the Optionee to members of his or her immediate family,
       to a trust or trusts established for the exclusive benefit only of one or
       more members of his or her immediate family or to a partnership in which
       his or her immediate family members are the only partners. 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 Optionee's children, stepchildren,
       grandchildren, parents, stepparents, grandparents, spouse, siblings
       (including half brothers and sisters), in-laws, and relationships arising
       because of legal adoption.

           (b) Options granted pursuant to Section 5(A)(i) hereof shall become
       exercisable in five equal annual installments of twenty percent (20%) per
       year. Options granted pursuant to Section 5(A)(ii) hereof shall become
       exercisable in four substantially equal installments (without taking into
       account any fractional share) on the dates which follow the date of the
       grant by 90, 180, 270 and 360 days, respectively. Once Options with
       respect to Shares become exercisable as aforesaid, they may be exercised
       in whole or in part from time to time through the applicable Expiration
       Date, subject to the terms and conditions hereof. Upon or in connection
       with a Change of Ownership, each Optionee shall have the right,
       immediately prior to such Change of Ownership, to exercise his or her
       Options without regard to the foregoing installment provisions as to
       exercisability. For purposes of this Plan, a "Change of Ownership" shall
       be deemed to have occurred (1) if individuals who, as of the effective
       date of this Plan, constitute the Board of Directors of the Company (the
       "Board of Directors" generally and as of the date hereof the "Incumbent
       Board") cease for any reason to constitute at least a majority of the
       directors constituting the Board of Directors, provided that any person
       becoming a director subsequent to the effective date of this Plan whose
       election, or nomination for election by the Company's shareholders, was
       approved by a vote of at least three-quarters (3/4) of the then directors
       who are members of the Incumbent Board (other than an election or
       nomination of an individual whose initial assumption of office is (A) in
       connection with the acquisition by a third person, including a "group" as
       such term is used in Section 13(d)(3) of the Securities and Exchange Act
       of 1934, as amended (the "1934 Act"), of beneficial ownership, directly
       or indirectly, of 20% or more of the combined voting securities
       ordinarily having the right to vote for the election of directors of the
       Company (unless such acquisition of beneficial ownership was approved by
       a majority of the Board of Directors who are members of the Incumbent
       Board), or (B) in connection with an actual or threatened election
       contest relating to the election of the directors of the Company, as such
       terms are used in Rule 14a-11 of Regulation 14A promulgated under the
       1934 Act) shall be, for purposes of this Plan, considered as though such
       person were a member of the Incumbent Board; or (2) if the stockholders
       of the Company approve a merger, consolidation, recapitalization or
       reorganization of the Company, reverse split of any class of voting
       securities of the Company, or an acquisition of securities or assets by
       the Company, or the sale or disposition by the Company of all or
       substantially all of the Company's assets, or if any such transaction is
       consummated without stockholder approval, other than any such transaction
       in which the

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       holders of outstanding Company voting securities immediately prior to the
       transaction receive, with respect to such Company voting securities,
       voting securities of the surviving or transferee entity representing more
       than 60 percent of the total voting power outstanding immediately after
       such transaction, with the voting power of each such continuing holder
       relative to other such continuing holders not substantially altered in
       the transaction; or (3) if the stockholders of the Company approve a plan
       of complete liquidation of the Company.

           (c) At any time and from time to time when any Option or portion
       thereof is exercisable, such Option or portion thereof may be exercised
       in whole or in part, as applicable; provided, however, that the Company
       shall not be required to issue fractional Shares.

        (v) Termination of Service Except by Death, Disability, Retirement or
    Removal for Cause. In the event that the Optionee shall cease to be an
    Outside Director for any reason other than death, disability, retirement or
    removal for cause as further provided herein, Options may be exercised only
    within three (3) months after such termination of service or such longer
    period as may be established by the Committee at the time of grant or
    thereafter, but only to the extent such Option was exercisable on the last
    day on which the Optionee was an Outside Director, and in no event may an
    Option be exercised after its Expiration Date. Any portion of the Option
    which was not exercisable on such last day shall expire immediately.

        (vi) Death or Disability of Optionee. In the event an Optionee shall die
    or become disabled while a director of the Company, Options may be exercised
    at any time within one (1) year after the Optionee's death or disability or
    such longer period as may be established by the Committee at the time of
    grant or thereafter, but only to the extent that such Option was exercisable
    by the Optionee on the last day on which the Optionee was an Outside
    Director, and in no event may an Option be exercised after its Expiration
    Date. During such one-year period, the Option may be exercised by the
    Optionee or a representative, or in the case of death, by the executors or
    administrators of the Optionee or by any person or persons who shall have
    acquired the Option directly from the Optionee by bequest or inheritance.
    Whether an Optionee shall have become disabled for the purposes of the Plan
    shall be determined by the Committee, which determination shall be final and
    conclusive.

        (vii) Removal for Cause. If an Optionee is removed as a director of the
    Company on account of any act of (a) fraud or intentional misrepresentation
    or (b) embezzlement, misappropriation or conversion of assets or
    opportunities of the Company, or any unauthorized disclosure or confidential
    information or trade secrets of the Company, all unexercised Options shall
    terminate as of the date of such Optionee's removal.

        (viii) Retirement. To the extent an Option was exercisable on the last
    date of service as a director of the Company, such Option may be exercised
    up to one (1) year following the Optionee's retirement at or after age 75 or
    such longer period as may be established by the Committee at the time of
    grant or thereafter, but in no event may an Option be exercised after its
    Expiration Date.

        (ix) Recapitalization, Reorganization, Etc., of Company.

           (a) Subject to any required action by the stockholders, the number of
       Shares covered by each outstanding Option, and the price per Share so
       covered, shall automatically be proportionately adjusted for any increase
       or decrease in the number of issued shares of Class A Common Stock of the
       Company resulting from a subdivision or consolidation of Shares or the
       payment of a stock dividend or any other increase or decrease in the
       number of such shares effected without receipt of consideration by the
       Company.

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           (b) If, pursuant to any reorganization, recapitalization, sale or
       exchange of assets, consolidation or merger, outstanding Class A Common
       Stock of the Company is or would be exchanged for other securities of the
       Company or of another corporation which is a party to such transaction,
       or for property, whether or not any such transaction gives rise to a
       Change of Ownership, any Options under the Plan theretofore granted shall
       apply to the securities or property into which the Class A Common Stock
       covered thereby shall be so changed or for which such Class A Common
       Stock shall be exchanged. In any of such events, the total number and
       class of Shares then remaining available for issuance under the Plan
       (including Shares reserved for outstanding Options and Shares available
       for future grant of Options under the Plan) shall likewise be adjusted so
       that the Plan shall thereafter cover the number and class of shares
       equivalent to the Shares covered by the Plan immediately prior to such
       event.

           (c) In the event of a change in the Class A Common Stock of the
       Company as presently constituted, which is limited to a change of all of
       its authorized shares with par value into the same number of shares with
       a different par value or without par value, the shares resulting from any
       such change shall be deemed to be the Class A Common Stock within the
       meaning of the Plan.

           (d) Adjustments pursuant to Section 5(B)(ix)(b) hereof shall be made
       by the Committee, whose determination as to which shall be final, binding
       and conclusive.

           (e) Except as hereinbefore expressly provided in this Section
       5(B)(ix), an Optionee shall have no rights by reason of any subdivision
       or consolidation of shares of stock of any class or the payment of any
       stock dividend or any other increase or decrease in the number of shares
       of stock of any class or by reason of any dissolution, liquidation,
       merger or consolidation or spin-off of assets or stock of another
       corporation, and any class, or securities convertible into shares of
       stock of any class, shall not affect, and no adjustment by reason thereof
       shall be made with respect to, the number or price of shares of Class A
       Common Stock subject to the Option.

           (f) The grant of an Option pursuant to the Plan shall not affect in
       any way the right or power of the Company to make adjustments,
       reclassifications, mergers, reorganizations or changes of its capital or
       business structure, to merge or to consolidate, to dissolve or liquidate
       or to sell or transfer all or any part of its business or assets.

        (x) Rights as a Stockholder. No person shall have any rights as a
    stockholder with respect to any Shares covered by an Option until the date
    of the issuance of the Shares to such person. No adjustments shall be made
    to outstanding Options for dividends (ordinary or extraordinary, whether in
    cash, securities or other property) or distributions or other rights, except
    as provided in Section 5(B)(ix) hereof.

        (xi) Modification, Extension and Renewal of Options. Subject to the
    terms and conditions and within the limitations of the Plan, the Committee
    may modify, extend or renew outstanding Options granted under the Plan, or
    accept the surrender of outstanding Options (to the extent not theretofore
    exercised). Notwithstanding the foregoing, however, no modification of an
    Option shall, without the consent of the Optionee, alter or impair any
    rights or obligations under any Option theretofore granted under the Plan.

        (xii) Investment Purpose. Each Option under the Plan shall be granted on
    the condition that the purchases of Shares hereunder shall be for investment
    purposes and not with a view to resale or distribution, except that in the
    event the Shares subject to such Option are registered under the Securities
    Act of 1933, as amended (the "Act"), or in the event a resale of such Shares
    without such registration would otherwise be permissible, such condition
    shall be inoperative if, in the opinion of counsel for the Company, such

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    condition is not required under the Act, or any other applicable law,
    regulation or rule of any governmental agency.

        (xiii) Other Provisions. The Option Notice shall comply with and be
    subject to the terms and conditions of the Plan, and shall contain such
    other terms, conditions and provisions as the Committee shall deem
    advisable.

6.  TERM OF PLAN

Options shall be granted pursuant to the Plan from time to time within the
period of ten years from the earlier of the date of adoption of the Plan and the
date on which the Plan is approved by the stockholders of the Company.

7.  AMENDMENT OF THE PLAN

The Board of Directors may, insofar as permitted by law, from time to time, with
respect to any Shares not then subject to Options, suspend or discontinue the
Plan or revise or amend it in any respect whatsoever, subject to the approval of
the stockholders of the Company where such approval is required by law or
regulation or pursuant to the rules of the NYSE or, if the Shares are not listed
on the NYSE, the rules of any other exchange or market on which the Shares may
be traded.

8.  APPLICATION OF FUNDS

The proceeds received by the Company from the sale of shares pursuant to Options
will be used for general corporate purposes.

9.  NO OBLIGATION TO EXERCISE OPTION

The granting of an Option shall impose no obligation upon the Optionee to
exercise such Option.

10.  APPROVAL OF STOCKHOLDERS

This Plan shall be effective upon its approval by the stockholders of the
Company.

11.  NO RIGHT TO NOMINATION

Neither the Plan nor any action taken hereunder shall be construed as giving any
director any right to be nominated for reelection to the Company's Board of
Directors.

12.  EFFECT OF PLAN UPON OTHER OPTIONS AND COMPENSATION PLANS

The adoption of this Plan shall not affect any other compensation or incentive
plans in effect for the Company or any Subsidiary. Nothing in this Plan shall be
construed to limit the right of the Company or any Subsidiary to (a) establish
any other forms of incentives or compensation for employees or directors of or
persons associated with the Company or any Subsidiary, or (b) grant or assume
options otherwise than under this Plan in connection with any proper corporate
purpose, including, but not by way of limitation, the grant or assumption of
options in connection with the acquisition by purchase, lease, merger,
consolidation or otherwise, of the business, stock or assets of any corporation,
firm or association.

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