Document:

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                                                                   EXHIBIT 10.17

                               AMERIN CORPORATION

                       Second Amendment and Restatement of

                       1992 Long-Term Stock Incentive Plan

                           (as of September 24, 1998)

SECTION 1. Purpose. The purposes of this Amerin Corporation 1992 Long-Term Stock
Incentive Plan are to promote the interests of Amerin Corporation and its
stockholders by (i) attracting and retaining exceptional executive personnel and
other key employees of the Company and its Affiliates, as defined below; (ii)
motivating such employees by means of performance-related incentives to achieve
longer-range performance goals; and (iii) enabling such employees to participate
in the long-term growth and financial success of the Company.

SECTION 2. Definitions. As used in the Plan, the following terms shall have the
meanings set forth below:

"Affiliate" shall mean (i) any entity that, directly or indirectly, is
controlled by the Company and (ii) any entity in which the Company has a
significant equity interest, in either case as determined by the Committee.

"Award" shall mean any Option, Stock Appreciation Right, Restricted Stock Award,
Performance Award or Other Stock-Based Award.

"Award Agreement" shall mean any written agreement, contract, or other
instrument or document evidencing any Award, which may, but need not, be
executed or acknowledged by a Participant.

"Board" shall mean the Board of Directors of the Company.

"Code" shall mean the Internal Revenue Code of 1986, as amended from time to
time.

"Committee" shall mean any committee or subcommittee of the Board designated by
the Board to administer the Plan and composed solely of not less than the
minimum number of persons from time to time required by Rule 16b-3 and Section
162(m), each of whom, to the extent necessary to comply with Rule 16b-3 and
Section 162(m) only, is both a "non-employee director" within the meaning of
Rule 16b-3 and an "outside director" within the meaning of Section 162(m). In
its sole discretion, the Board may at any time and from time to time exercise
any and all rights and duties of the Committee under the Plan, except with
respect to matters which under Rule 16b-3 or Section 162(m) are required to be
determined in the sole discretion of the Committee.

"Company" shall mean Amerin Corporation, together with any successor thereto.

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"Employee" shall mean an employee or prospective employee of the Company or of
any Affiliate.

"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.

"Fair Market Value" shall mean the fair market value of the property or other
item being valued, as determined by the Committee in its sole discretion.

"Incentive Stock Option" shall mean a right to purchase Shares from the Company
that is granted under Section 6 of the Plan and that is intended to meet the
requirements of Section 422 of the Code or any successor provision thereto.

"Non-Qualified Stock Option" shall mean a right to purchase Shares from the
Company that is granted under Section 6 of the Plan and that is not an Incentive
Stock Option.

"Option" shall mean an Incentive Stock Option or a Non-Qualified Stock Option.

"Other Stock-Based Award" shall mean any right granted under Section 10 of the
Plan.

"Participant" shall mean any Employee selected by the Committee to receive an
Award under the Plan.

"Performance Award" shall mean any right granted under Section 9 of the Plan.

"Person" shall mean any individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization, government or political
subdivision thereof or other entity.

"Plan" shall mean this Amerin Corporation 1992 Long-Term Stock Incentive Plan.

"Restricted Stock" shall mean any Share granted under Section 8 of the Plan.

"Restricted Stock Unit" shall mean any unit granted under Section 8 of the Plan.

"Rule 16b-3" shall mean Rule 16b-3 as promulgated and interpreted by the SEC
under the Exchange Act, or any successor rule or regulation thereto as in effect
from time to time.

"SEC" shall mean the Securities and Exchange Commission or any successor thereto
and shall include the Staff thereof.

"Section 162(m)" shall mean Section 162(m) of the Code and the regulations
thereunder, each as may be amended from time to time.

"Shares" shall mean the common shares of the Company, $.01 par value, or such
other securities of the Company as may be designated by the Committee from time
to time.

"Stock Appreciation Right" shall mean any right granted under Section 7 of the
Plan.

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"Substitute Awards" shall mean Awards granted in assumption of, or in
substitution for, outstanding awards previously granted by a company acquired by
the Company or with which the Company combines.

SECTION 3. Administration.

(a) The Plan shall be administered by the Committee. Subject to the terms of the
Plan and applicable law, and in addition to other express powers and
authorizations conferred on the Committee by the Plan, the Committee shall have
full power and authority to: (i) designate Participants; (ii) determine the type
or types of Awards to be granted to an eligible Employee; (iii) determine the
number of Shares to be covered by, or with respect to which payments, rights, or
other matters are to be calculated in connection with, Awards; (iv) determine
the terms and conditions of any Award; (v) determine whether, to what extent,
and under what circumstances Awards may be settled or exercised in cash, Shares,
other securities, other Awards or other property, or canceled, forfeited, or
suspended and the method or methods by which Awards may be settled, exercised,
canceled, forfeited, or suspended; (vi) determine whether, to what extent, and
under what circumstances cash, Shares, other securities, other Awards, other
property, and other amounts payable with respect to an Award shall be deferred
either automatically or at the election of the holder thereof or of the
Committee; (vii) interpret and administer the Plan and any instrument or
agreement relating to, or Award made under, the Plan; (viii) establish, amend,
suspend, or waive such rules and regulations and appoint such agents as it shall
deem appropriate for the proper administration of the Plan; and (ix) make any
other determination and take any other action that the Committee deems necessary
or desirable for the administration of the Plan.

(b) Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations, and other decisions under or with respect to
the Plan or any Award shall be within the sole discretion of the Committee, may
be made at any time and shall be final, conclusive, and binding upon all
Persons, including the Company, any Affiliate, any Participant, any holder or
beneficiary of any Award, any shareholder and any Employee.

SECTION 4. Shares Available for Awards.

(a) Shares Available. Subject to adjustment as provided in Section 4(b), the
number of Shares with respect to which Awards may be granted under the Plan
shall be 8,300,000, and the maximum number of Shares with respect to which
Awards may be granted under the Plan to any Participant shall be 5,125,000 with
respect to Awards granted before September 19, 1995 and 400,000 with respect to
Awards granted during any four-year period beginning on or after September 15,
1995. Except as otherwise required by Section 162(m), if, after the effective
date of the Plan, any Shares covered by an Award granted under the Plan, or to
which such an Award relates, are forfeited, or if an Award is settled for cash
or otherwise terminates or is canceled without the delivery of Shares, then the
Shares covered by such Award, or to which such Award relates, or the number of
Shares otherwise counted against the aggregate number of Shares with respect to
which Awards may be granted, to the extent of any such settlement, forfeiture,
termination or cancellation, shall again be, or shall become, Shares with
respect to which Awards may be granted. In the event that any Option or other
Award granted hereunder is exercised

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through the delivery of Shares, the number of Shares available for Awards under
the Plan shall be increased by the number of Shares surrendered, to the extent
permissible under Rule 16b-3.

(b) Adjustments. In the event that the Committee determines that any dividend or
other distribution (whether in the form of cash, Shares, other securities, or
other property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Shares or other securities of the Company, issuance
of warrants or other rights to purchase Shares or other securities of the
Company, or other similar corporate transaction or event affects the Shares such
that an adjustment is determined by the Committee to be appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan, then the Committee shall, in such manner as
it may deem equitable, adjust any or all of (i) the number of Shares or other
securities of the Company (or number and kind of other securities or property)
with respect to which Awards may be granted, (ii) the number of Shares or other
securities of the Company (or number and kind of other securities or property)
subject to outstanding Awards, and (iii) the grant or exercise price with
respect to any Award or, if deemed appropriate, make provision for a cash
payment to the holder of an outstanding Award; provided, in each case, that with
respect to Awards of Incentive Stock Options no such adjustment shall be
authorized to the extent that such authority would cause the Plan to violate
Section 422(b)(1) of the Code, as from time to time amended.

(c) Substitute Awards. Any Shares underlying Substitute Awards shall not, except
in the case of Shares with respect to which Substitute Awards are granted to
Employees who are officers or directors of the Company for purposes of Section
16 of the Exchange Act or any successor section thereto, be counted against the
Shares available for Awards under the Plan.

(d) Sources of Shares Deliverable Under Awards. Any Shares delivered pursuant to
an Award may consist, in whole or in part, of authorized and unissued Shares or
of treasury Shares.

SECTION 5. Eligibility. Any Employee, including any officer or employee-director
(or prospective officer or employee-director) of the Company or any Affiliate
shall be eligible to be designated a Participant.

SECTION 6. Stock Options.

(a) Grant. Subject to the provisions of the Plan, the Committee shall have sole
and complete authority to determine the Employees to whom Options shall be
granted, the number of Shares to be covered by each Option, the option price
therefor and the conditions and limitations applicable to the exercise of the
Option. The Committee shall have the authority to grant Incentive Stock Options,
or to grant Non-Qualified Stock Options, or to grant both types of options. In
the case of Incentive Stock Options, the terms and conditions of such grants
shall be subject to and comply with such rules as may be prescribed by Section
422 of the Code, as from time to time amended, and any regulations implementing
such statute.

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(b) Exercise Price. The Committee shall establish the exercise price at the time
each Option is granted, which price, except in the case of Options that are
Substitute Awards, shall not be less than 100% of the per Share Fair Market
Value on the date of grant.

(c) Exercise. Each Option shall be exercisable at such times and subject to such
terms and conditions as the Committee may, in its sole discretion, specify in
the applicable Award Agreement or thereafter. The Committee may impose such
conditions with respect to the exercise of Options, including without
limitation, any relating to the application of federal or state securities laws,
as it may deem necessary or advisable.

(d) Payment. No Shares shall be delivered pursuant to any exercise of an Option
until payment in full of the option price therefor is received by the Company.
Such payment shall be made in cash, or its equivalent; provided, however, that
the Committee may in its sole discretion (i) allow a delay in payment up to
thirty (30) days from the date the Option, or portion thereof, is exercised;
(ii) allow payment, in whole or in part, by exchanging Shares owned by the
optionee (which are not the subject of any pledge or other security interest);
(iii) allow payment, in whole or in part, by the surrender of Shares then
issuable upon exercise of the Option; (iv) allow payment, in whole or in part,
by the delivery of a notice that the Participant has placed a market sell order
with a broker with respect to the Shares then issuable upon exercise of the
Option, and that the broker has been directed to pay a sufficient portion of the
net proceeds of the sale to the Company in satisfaction of the Option exercise
price, provided that payment of such proceeds is then made to the Company upon
settlement of such sale; (v) allow payment, in whole or in part, by the delivery
of property of any kind which constitutes good and valuable consideration; (vi)
allow payment, in whole or in part, by the delivery of a full recourse
promissory note bearing interest (at no less than such rate as shall then
preclude the imputation of interest under the Code) and payable upon such terms
as may be prescribed by the Committee; or (vii) allow payment by any combination
of cash and cash equivalents and the foregoing subparagraphs (ii), (iii), (iv),
(v) and (vi) so long as the combined value of all such payments is at least
equal to the applicable option price. In the case of a promissory note, the
Committee may also prescribe the form of such note and the security, if any, to
be given for such note. The Option may not be exercised, however, by delivery of
a promissory note or by a loan from the Company when or where such loan or other
extension of credit is prohibited by law.

SECTION 7. Stock Appreciation Rights.

(a) Grant. Subject to the provisions of the Plan, the Committee shall have sole
and complete authority to determine the Employees to whom Stock Appreciation
Rights shall be granted, the number of Shares to be covered by each Stock
Appreciation Right Award, the grant price thereof and the conditions and
limitations applicable to the exercise thereof. Stock Appreciation Rights may be
granted in tandem with another Award, in addition to another Award, or
freestanding and unrelated to another Award. Stock Appreciation Rights granted
in tandem with or in addition to an Award may be granted either at the same time
as the Award or at a later time. Except for Stock Appreciation Rights which are
Substitute Awards, Stock Appreciation Rights shall have an exercise price of not
less than 100% of the Fair Market Value of the Shares on the date of grant or,
in the case of a Stock Appreciation Right granted in tandem with or in addition
to another Award, at the time of grant of such related Award.

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(b) Exercise and Payment. A Stock Appreciation Right shall entitle the
Participant to receive an amount equal to the excess of the Fair Market Value of
a Share on the date of exercise of the Stock Appreciation Right over the grant
price thereof. The Committee shall determine whether a Stock Appreciation Right
shall be settled in cash, Shares or a combination of cash and Shares.

(c) Other Terms and Conditions. Subject to the terms of the Plan and any
applicable Award Agreement, the Committee shall determine, at or after the grant
of a Stock Appreciation Right, the term, methods of exercise, methods and form
of settlement, and any other terms and conditions of any Stock Appreciation
Right. Any such determination by the Committee may be changed by the Committee
from time to time and may govern the exercise of Stock Appreciation Rights
granted or exercised prior to such determination as well as Stock Appreciation
Rights granted or exercised thereafter. The Committee may impose such conditions
or restrictions on the exercise of any Stock Appreciation Right as it shall deem
appropriate.

SECTION 8. Restricted Stock and Restricted Stock Units.

(a) Grant. Subject to the provisions of the Plan, the Committee shall have sole
and complete authority to determine the Employees to whom Shares of Restricted
Stock and Restricted Stock Units shall be granted, the number of Shares of
Restricted Stock and/or the number of Restricted Stock Units to be granted to
each Participant, the duration of the period during which, and the conditions
under which, the Restricted Stock and Restricted Stock Units may be forfeited to
the Company, and the other terms and conditions of such Awards.

(b) Transfer Restrictions. Shares of Restricted Stock and Restricted Stock Units
may not be sold, assigned, transferred, pledged or otherwise encumbered, except,
in the case of Restricted Stock, as provided in the Plan or the applicable Award
Agreements. Certificates issued in respect of Shares of Restricted Stock shall
be registered in the name of the Participant and deposited by such Participant,
together with a stock power endorsed in blank, with the Company. Upon the lapse
of the restrictions applicable to such Shares of Restricted Stock, the Company
shall deliver such certificates to the Participant or the Participant's legal
representative.

(c) Payment. Each Restricted Stock Unit shall have a value equal to the Fair
Market Value of a Share. Restricted Stock Units shall be paid in cash, Shares,
other securities or other property, as determined in the sole discretion of the
Committee, upon the lapse of the restrictions applicable thereto, or otherwise
in accordance with the applicable Award Agreement. Dividends paid on any Shares
of Restricted Stock may be paid directly to the Participant, or may be
reinvested in additional Shares of Restricted Stock or in additional Restricted
Stock Units, as determined by the Committee in its sole discretion.

SECTION 9. Performance Awards.

(a) Grant. The Committee shall have sole and complete authority to determine the
Employees who shall receive a "Performance Award", which shall consist of a
right which is (i) denominated in cash or Shares, (ii) valued, as determined by
the Committee, in accordance with the achievement of such performance goals
during such performance periods as the

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Committee shall establish, and (iii) payable at such time and in such form as
the Committee shall determine.

(b) Terms and Conditions. Subject to the terms of the Plan and any applicable
Award Agreement, the Committee shall determine the performance goals to be
achieved during any performance period, the length of any performance period,
the amount of any Performance Award and the amount and kind of any payment or
transfer to be made pursuant to any Performance Award.

(c) Payment of Performance Awards. Performance Awards may be paid in a lump sum
or in installments following the close of the performance period or, in
accordance with procedures established by the Committee, on a deferred basis.

SECTION 10. Other Stock-Based Awards.

(a) General. The Committee shall have authority to grant to eligible Employees
an "Other Stock-Based Award", which shall consist of any right which is (i) not
an Award described in Sections 6 through 9 above and (ii) an Award of Shares or
an Award denominated or payable in, valued in whole or in part by reference to,
or otherwise based on or related to, Shares (including, without limitation,
securities convertible into Shares), as deemed by the Committee to be consistent
with the purposes of the Plan; provided that any such rights must comply, to the
extent deemed desirable by the Committee, with Rule 16b-3 and applicable law.
Subject to the terms of the Plan and any applicable Award Agreement, the
Committee shall determine the terms and conditions of any such Other Stock-Based
Award. Except in the case of an Other Stock-Based Award that is a Substitute
Award, the price at which securities may be purchased pursuant to any Other
Stock-Based Award granted under this Plan, or the provision, if any, of any such
Award that is analogous to the purchase or exercise price, shall not be less
than 100% of the Fair Market Value of the securities to which such Award relates
on the date of grant.

(b) Dividend Equivalents. In the sole and complete discretion of the Committee,
an Award, whether made as an Other Stock-Based Award under this Section 10 or as
an Award granted pursuant to Sections 6 through 9 hereof, may provide the
Participant with dividends or dividend equivalents, payable in cash, Shares,
other securities or other property on a current or deferred basis.

SECTION 11. Amendment and Termination.

(a) Amendments to the Plan. The Board may amend, alter, suspend, discontinue, or
terminate the Plan or any portion thereof at any time; provided that no such
amendment, alteration, suspension, discontinuation or termination shall be made
without shareholder approval if such approval is necessary to comply with any
tax or regulatory requirement, including for these purposes any approval
requirement which is a prerequisite for exemptive relief from Section 16(b) of
the Exchange Act. Notwithstanding anything to the contrary herein, the Committee
may amend the Plan in such manner as may be necessary so as to have the Plan
conform with local rules and regulations in any jurisdiction outside the United
States.

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(b) Amendments to Awards. The Committee may waive any conditions or rights
under, amend any terms of, or alter, suspend, discontinue, cancel or terminate,
any Award theretofore granted, prospectively or retroactively; provided that any
such waiver, amendment, alteration, suspension, discontinuance, cancellation or
termination that would impair the rights of any Participant or any holder or
beneficiary of any Award theretofore granted shall not to that extent be
effective without the consent of the affected Participant, holder or
beneficiary.

(c) Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring
Events. The Committee is hereby authorized to make adjustments in the terms and
conditions of, and the criteria included in, Awards in recognition of unusual or
nonrecurring events (including, without limitation, the events described in
Section 4(b) hereof) affecting the Company, any Affiliate, or the financial
statements of the Company or any Affiliate, or of changes in applicable laws,
regulations, or accounting principles, whenever the Committee determines that
such adjustments are appropriate in order to prevent dilution or enlargement of
the benefits or potential benefits intended to be made available under the Plan.

(d) Cancellation. Any provision of this Plan or any Award Agreement to the
contrary notwithstanding, the Committee may cause any Award granted hereunder to
be canceled in consideration of a cash payment or alternative Award made to the
holder of such canceled Award equal in value to the Fair Market Value of such
canceled Award.

SECTION 12. General Provisions.

(a)  Nontransferability.

     (i) Except as otherwise provided by Section 12(a)(iii), each Award, and
     each right under any Award, shall be exercisable only by the Participant
     during the Participant's lifetime, or, if permissible under applicable law,
     by the Participant's guardian or legal representative or by a transferee
     receiving such Award pursuant to a qualified domestic relations order
     ("QDRO"), as determined by the Committee.

     (ii) Except as otherwise provided by Section 12(a)(iii), no Award that
     constitutes a "derivative security" for purposes of Section 16 of the
     Exchange Act may be assigned, alienated, pledged, attached, sold or
     otherwise transferred or encumbered by a Participant otherwise than by will
     or by the laws of descent and distribution or pursuant to a QDRO, and any
     such purported assignment, alienation, pledge, attachment, sale, transfer
     or encumbrance shall be void and unenforceable against the Company or any
     Affiliate; provided that the designation of a beneficiary shall not
     constitute an assignment, alienation, pledge, attachment, sale, transfer or
     encumbrance.

     (iii) Notwithstanding the foregoing provisions of this Section 12(a), the
     Committee, in its sole discretion, may determine to grant to any
     Participant an Award, or modify any existing Award, such that the Award, by
     its terms as set forth in the applicable Award Agreement, may be
     transferred by the Participant, in writing and with prior written notice to
     the Committee, by gift, without the receipt of any consideration, to a
     member of the Participant's immediate family, as defined in Rule 16a-1
     under the Exchange Act, or to a

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     trust for the exclusive benefit of, or any other entity owned solely by,
     such members, provided, that an Award that has been so transferred shall
     continue to be subject to all of the terms and conditions of the Award as
     applicable to the original Participant, and that the Committee may, in its
     sole discretion, condition the transfer, exercise, lapse of restrictions or
     payment with respect to such Award upon the receipt by the Committee from
     the transferee of any additional documents requested by the Committee in
     connection with the transfer, exercise, lapse of restrictions or payment,
     including, without limitation, legal opinions and documents to evidence the
     transfer, exercise, lapse of restrictions or payment and to satisfy any
     requirements for an exemption under applicable federal and state securities
     laws.

(b) No Rights to Awards. No Employee, Participant or other Person shall have any
claim to be granted any Award, and there is no obligation for uniformity of
treatment of Employees, Participants, or holders or beneficiaries of Awards. The
terms and conditions of Awards need not be the same with respect to each
recipient.

(c) Share Certificates. All certificates for Shares or other securities of the
Company or any Affiliate delivered under the Plan pursuant to any Award or the
exercise thereof shall be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the Plan or the rules,
regulations, and other requirements of the Securities and Exchange Commission,
any stock exchange upon which such Shares or other securities are then listed,
and any applicable Federal or state laws, and the Committee may cause a legend
or legends to be put on any such certificates to make appropriate reference to
such restrictions.

(d) Delegation. Subject to the terms of the Plan and applicable law, the
Committee may delegate to one or more officers or managers of the Company or any
Affiliate, or to a committee of such officers or managers, the authority,
subject to such terms and limitations as the Committee shall determine, to grant
Awards to, or to cancel, modify or waive rights with respect to, or to alter,
discontinue, suspend, or terminate Awards held by, Employees who (i) are not
officers or directors of the Company for purposes of Section 16 of the Exchange
Act, or any successor section thereto, or who are otherwise not subject to such
Section 16, and (ii) are not "covered employees" within the meaning of Section
162(m), or any successor section thereto, or who are otherwise not subject to
Section 162(m).

(e) Withholding. A participant may be required to pay to the Company or any
Affiliate and the Company or any Affiliate shall have the right and is hereby
authorized to withhold from any Award, from any payment due or transfer made
under any Award or under the Plan or from any compensation or other amount owing
to a Participant the amount (in cash, Shares, other securities, other Awards or
other property) of any applicable withholding taxes in respect of an Award, its
exercise, or any payment or transfer under an Award or under the Plan and to
take such other action as may be necessary in the opinion of the Company to
satisfy all obligations for the payment of such taxes. The Committee may provide
for additional cash payments to holders of Awards to defray or offset any tax
arising from the grant, vesting, exercise or payments of any Award.

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(f) Award Agreements. Each Award hereunder shall be evidenced by an Award
Agreement which shall be delivered to the Participant and shall specify the
terms and conditions of the Award and any rules applicable thereto, including
but not limited to the effect on such Award of the death, retirement or other
termination of employment of a Participant and the effect, if any, of a change
in control of the Company.

(g) No Limit on Other Compensation Arrangements. Nothing contained in the Plan
shall prevent the Company or any Affiliate from adopting or continuing in effect
other compensation arrangements, which may, but need not, provide for the grant
of options, restricted stock, Shares and other types of Awards provided for
hereunder (subject to shareholder approval if such approval is required), and
such arrangements may be either generally applicable or applicable only in
specific cases.

(h) No Right to Employment. The grant of an Award shall not be construed as
giving a Participant the right to be retained in the employ of the Company or
any Affiliate. Further, the Company or an Affiliate may at any time dismiss a
Participant from employment, free from any liability or any claim under the
Plan, unless otherwise expressly provided in the Plan or in any Award Agreement.

(i) No Rights as Stockholder. Subject to the provisions of the applicable Award,
no Participant or holder or beneficiary of any Award shall have any rights as a
stockholder with respect to any Shares to be distributed under the Plan until he
or she has become the holder of such Shares. Notwithstanding the foregoing, in
connection with each grant of Restricted Stock hereunder, the applicable Award
shall specify if and to what extent the Participant shall not be entitled to the
rights of a stockholder in respect of such Restricted Stock.

(j) Governing Law. The validity, construction, and effect of the Plan and any
rules and regulations relating to the Plan and any Award Agreement shall be
determined in accordance with the laws of the State of Illinois.

(k) Severability. If any provision of the Plan or any Award is or becomes or is
deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any
Person or Award, or would disqualify the Plan or any Award under any law deemed
applicable by the Committee, such provision shall be construed or deemed amended
to conform the applicable laws, or if it cannot be construed or deemed amended
without, in the determination of the Committee, materially altering the intent
of the Plan or the Award, such provision shall be stricken as to such
jurisdiction, Person or Award and the remainder of the Plan and any such Award
shall remain in full force and effect.

(l) Other Laws. The Committee may refuse to issue or transfer any Shares or
other consideration under an Award if, acting in its sole discretion, it
determines that the issuance or transfer of such Shares or such other
consideration might violate any applicable law or regulation or entitle the
Company to recover the same under Section 16(b) of the Exchange Act, and any
payment tendered to the Company by a Participant, other holder or beneficiary in
connection with the exercise of such Award shall be promptly refunded to the
relevant Participant, holder or beneficiary. Without limiting the generality of
the foregoing, no Award granted hereunder shall

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be construed as an offer to sell securities of the Company, and no such offer
shall be outstanding, unless and until the Committee in its sole discretion has
determined that any such offer, if made, would be in compliance with all
applicable requirements of the U.S. federal securities laws.

(m) No Trust or Fund Created. Neither the Plan nor any Award shall create or be
construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company or any Affiliate and a Participant or any other
Person. To the extent that any Person acquires a right to receive payments from
the Company or any Affiliate pursuant to an Award, such right shall be no
greater than the right of any unsecured general creditor of the Company or any
Affiliate.

(n) No Fractional Shares. No fractional Shares shall be issued or delivered
pursuant to the Plan or any Award, and the Committee shall determine whether
cash, other securities, or other property shall be paid or transferred in lieu
of any fractional Shares or whether such fractional Shares or any rights thereto
shall be canceled, terminated, or otherwise eliminated.

(o) Headings. Headings are given to the Sections and subsections of the Plan
solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.

SECTION 13. Term of the Plan.

(a) Effective Date. The Plan shall be effective as of the date of its approval
by the shareholders of the Company.

(b) Expiration Date. No Award shall be granted under the Plan after December 31,
2005. Unless otherwise expressly provided in the Plan or in an applicable Award
Agreement, any Award granted hereunder may, and the authority of the Board or
the Committee to amend, alter, adjust, suspend, discontinue, or terminate any
such Award or to waive any conditions or rights under any such Award shall,
continue after December 31, 2005.

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                                                                   EXHIBIT 10.18

                      ENHANCE FINANCIAL SERVICES GROUP INC.

                   LONG-TERM INCENTIVE PLAN FOR KEY EMPLOYEES
                     Amended and Restated as of June 6, 1996

<PAGE>

                      ENHANCE FINANCIAL SERVICES GROUP INC.

                   LONG-TERM INCENTIVE PLAN FOR KEY EMPLOYEES

1.   Purposes

     The purposes of the Plan are to provide through the grant of Long-Term
Incentives under the Plan a means to attract and retain key personnel and to
provide to participating officers and other key employees long-term incentives
for sustained high levels of performance and for unusual efforts to improve the
financial performance of the Company.

2.   Definitions

     Unless otherwise required by the context, the following terms, when used in
this Plan, shall have the meanings set forth in this Section 2.

     AWARD: A Restricted Stock Award or a Stock Bonus Award.

     BENEFICIARY: A person or entity (including a trust or estate), designated
in writing by a Participant on such forms and in accordance with such terms and
conditions as the Board may prescribe, to whom the Participant's rights under
the Plan shall pass in the event of the death of the Participant or, if there be
no such person or entity so designated, or if such person or entity is not alive
or in existence at the time of the Participant's death, such other person to
whom such Participant's rights under the Plan shall pass by will or by the laws
of descent or distribution.

      BOARD OF DIRECTORS or BOARD: The Board of Directors of Enhance. If the
Plan is being administered by a committee appointed by the Board pursuant to the
provisions of paragraph 11(a) below, the terms "Board" and "Board of Directors"
shall include such committee, except for purposes of paragraph 11(a) and Section
13.

     CODE: The Internal Revenue Code of 1986, as amended and in effect from time
to time.

     COMMITTEE: Such committee of the Board of Directors as may be designated to
administer the Plan pursuant to the provisions of paragraph 11(a) below.

     COMMON STOCK: The common stock of Enhance, par value $.10 per share, or
such other class of shares or other securities or property as maybe applicable
pursuant to the provisions of Section 9.

     COMPANY: Enhance and its present and future Subsidiaries.

     ENHANCE: Enhance Financial Services Group Inc., a New York corporation, its
successors and assigns.

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     FAIR MARKET VALUE: The fair market value of a share of Common Stock
determined in accordance with any reasonable method approved by the Board of
Directors; provided that in the case of a Non-Statutory Stock Option intended to
be performance-based for purposes of Section 162(m) of the Code or an Incentive
Stock Option, such method shall comply with, and be subject to, any applicable
requirements of the Code and the Treasury Regulations thereunder.
Notwithstanding the foregoing, if the Board so provides, fair market value shall
be determined by reference to a formula based on book value, earnings per share
or such other measure as the Board may prescribe.

     INCENTIVE COMPENSATION: Bonuses, and other extra compensation payable in
addition to a salary or other base amount, whether contingent or not, whether
discretionary or required to be paid pursuant to a plan, agreement, resolution
or arrangement, and whether payable currently or on a deferred basis, in cash,
Common Stock or other property awarded by Enhance or a Subsidiary prior or
subsequent to the date of the approval and adoption of this Plan.

     INCENTIVE STOCK OPTION: An option, including an Option as the context may
require, intended to meet the requirements of Section 422 of the code and the
regulations thereunder applicable to incentive stock options, or intended to
meet the requirements of a successor provision of the Code.

     KEY EMPLOYEE: An employee of Enhance or of a Subsidiary regularly employed
on a full-time basis, including a director if he is such an employee, or an
officer of Enhance or a Subsidiary not so employed, in either event, who, in the
opinion of the Board, is in a position to make significant contributions to the
success of Enhance or of a Subsidiary.

     LONG-TERM INCENTIVE: A long-term incentive granted under this Plan in one
of the forms provided for in Section 3.

     NON-STATUTORY STOCK OPTION: An option, including an Option as the context
may require, which is not intended to be an Incentive Stock Option.

     OPTION: An option granted under this Plan to purchase shares of Common
Stock.

     PARTICIPANT: A Key Employee elected to receive one or more Long-Term
Incentives.

     PERFORMANCE UNIT: A right granted pursuant to Section 8 to receive a fixed
dollar amount or an amount equivalent to the Fair Market Value of one share of
Common Stock (or a designated percentage thereof) in cash or shares if specific
performance goals are attained within the time prescribed by the Board therefor
and any other applicable terms and conditions of the award are satisfied.

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     PLAN: The Enhance Financial Services Group Inc. Long-Term Incentive Plan
for Key Employees herein set forth as the same may from time to time be amended.

     RESTRICTED STOCK AWARD: Shares of Common Stock which are issued or
transferred to a Key Employee subject to restrictions precluding a sale or other
disposition for a period of time and requiring as a condition to retention
compliance with any other terms and conditions (relating to continued employment
and/or achievement of pre-established performance objectives and/or other
matters) that may be imposed by the Board.

     RULE 16b-3: As applied on a specific date, Rule 16b-3 of the General Rules
and Regulations under the Securities Exchange Act of 1934 as then in effect or
any comparable provision that may have replaced such Rule and then be in effect.

     STOCK APPRECIATION RIGHT or SAR: A right granted pursuant to Section 7 to
receive a number of shares of Common Stock or cash, or a combination of such
shares and cash, based on the increase in Fair Market Value of the shares
subject to such right and determined in accordance with the Plan.

     STOCK BONUS AWARD: Shares of Common Stock which are issued or transferred
to a Key Employee (including an undertaking to issue or transfer such shares in
the future) in lieu of, or as a supplement to, Incentive Compensation that has
been earned by services rendered prior to the date the award is made.

     SUBSIDIARY: A corporation or other form of business association of which
shares (or other ownership interests) having more than 50% of the voting power,
or representing more than 50% of the net shareholders' equity interest
determined in accordance with generally accepted accounting principles, are
owned or controlled, directly or indirectly, by Enhance; provided, however, that
in the case of an Incentive Stock Option, the term "Subsidiary" shall mean a
Subsidiary (as defined by the preceding clause) which is a "subsidiary
corporation" as defined in Section 424(f) of the Code and the regulations
thereunder, or any provisions that may be adopted to amend or replace such
Section or regulation or both.

3.   Grants of Long-Term Incentives

     (a) Subject to the provisions of this Plan, the Board of Directors may at
any time or from time to time grant Long-Term Incentives to Key Employees.

     (b) Long-Term Incentives maybe granted in any of the following forms:

          (i)  a Stock Bonus Award,

          (ii) a Restricted Stock Award,

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          (iii)an Option, with or without a related Stock Appreciation Right,

          (iv) an independent Stock Appreciation Right, or

          (v)  a Performance Unit.

     (c) The Board may amend a Long-Term Incentive at any time or from time to
time after the date on which it is granted, provided that no such amendment
shall affect such Long-Term Incentive adversely without the consent of the
holder thereof

4.   Stock Subject to this Plan

     (a)(1) General Limitation Subject to the provisions below of paragraph 4(c)
and of Section 9, the maximum number of shares of Common Stock which may be
issued or transferred, and are hereby reserved for issuance or transfer pursuant
to Long-Term Incentives shall not exceed 3,600,000 shares of Common Stock.

          (2) Individual Limitations The maximum number of shares of Common
Stock which may be subject to any Option that may be granted to any Key
Employees elected to participate hereunder shall not exceed 75,000 shares of
Common Stock (subject to any increase or decrease pursuant to Section 9) for
each calendar year during the entire term of the Plan. The maximum number of
Stock Appreciation Rights that may be granted to any Key Employee selected to
participate hereunder shall not exceed 75,000 (subject to any increase or
decrease pursuant to Section 9) for each calendar year during the entire term of
the Plan. To the extent that the maximum number of shares of Common Stock with
respect to which Options or SARs may be granted are not granted in a particular
year to a Key Employee, such ungranted Options or SARs for any year shall
increase the maximum number of shares of Common Stock available to be granted to
such Key Employee in subsequent calendar years during the term of the Plan until
used.

     (b) Authorized but unissued shares of Common Stock and shares of Common
Stock held in the treasury, whether acquired by Enhance specifically for use
under this Plan or otherwise, may be used, as the Board of Directors may from
time to time determine, for purposes of this Plan, provided, however, that any
shares acquired or held by Enhance for the purposes of this Plan shall, unless
and until transferred to a Participant in accordance with the terms and
conditions of a Long-Term Incentive, be and at all times remain treasury shares
of Enhance, irrespective of whether such shares are entered in a special account
for purposes of this Plan, and shall be available for any corporate purpose.
Notwithstanding the foregoing, in order to comply with Section 162(m) of the
Code, the Committee shall take into account that (i) if an Option or SAR is
canceled, the canceled Option or SAR continues to be counted against the maximum
number of shares of Common Stock for which Options or SARs may be granted to a
Key Employee under Section 4(a)(2) of the Plan, and (ii) if after the grant of
an Option or SAR, the Committee or the Board reduces the exercise price or
purchase price, the transaction is treated as a cancellation of the Option or
SAR and a grant of a new

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Option or SAR, and in such case, both the Option or SAR that is deemed to be
cancelled and the Option or SAR that is deemed to be granted, reduce the maximum
number of shares of Common Stock for which Options or SARs may be granted to a
Key Employee under the Plan.

     (c) Subject to the provisions of paragraph 7(e), if any shares of Common
Stock subject to a Long-Term Incentive shall not be issued or transferred and
shall cease to be issuable or transferable because of the termination, in whole
or in part, of such Long-Term Incentive or for any other reason, or if any such
shares shall, after issuance or transfer, be reacquired by Enhance or a
Subsidiary because of the Participant's failure to comply with the terms and
conditions of the Long-Term Incentive granted to him, the shares not so issued
or transferred, or the shares so reacquired by Enhance or a Subsidiary, shall no
longer be charged against the limitations provided for in paragraph (a) above of
this Section 4 and shall again be available for grant in the form of or pursuant
to Long-Term Incentives.

     (d) Any Long-Term Incentive granted under this Plan may contain such
provisions requiring or permitting the Participant (or his successor in
interest) to resell to the Company any shares issued or transferred under such
Long-Term Incentive at such time or times, under such circumstances and for such
consideration as the Board may prescribe.

5.   Stock Bonus Awards and Restricted Stock Awards

     Long-Term Incentives in the form of Stock Bonus Awards or Restricted Stock
Awards shall be subject to the following provisions:

     (a) A Key Employee may be granted a Stock Bonus Award or Restricted Stock
Award whether or not he is eligible to receive Incentive Compensation under any
other plan or arrangement of the Company.

     (b) Shares of Common Stock subject to a Stock Bonus Award may be issued or
transferred to the Participant at the time such Award is granted, or at any time
subsequent thereto, or in installments from time to time, as the Board of
Directors shall determine. In the event that any such issuance or transfer shall
not be made to the Participant at the time such Award is granted, the Board of
Directors may but need not provide for payment to such Participant, either in
cash or shares of Common Stock, from time to time or at the time or times such
shares shall be issued or transferred to such Participant, of amounts equal to
the dividends which would have been payable to such Participant in respect of
such shares (as adjusted under Section 9) if such shares had been issued or
transferred to such Participant at the time such Award was granted.

     (c) Any amount payable in shares of Common Stock under the terms of a Stock
Bonus Award may, in the discretion of the Board, be paid in cash, on each date
on which delivery of shares would otherwise have been made, in an amount equal
to the Fair Market Value of such date of the shares which would otherwise have
been delivered.

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     (d) Stock Bonus Awards and Restricted Stock Awards shall be subject to such
terms and conditions, including, without limitation, restrictions on the sale or
other disposition of the Award or of the shares issued or transferred pursuant
to such Award, and conditions calling for forfeiture of the Award or the shares
issued or transferred pursuant thereto in designated circumstances, as the Board
of Directors shall determine; provided, however, that upon the issuance or
transfer of shares pursuant to any such Award, the Participant shall, with
respect to such shares, be and become a shareholder of Enhance fully entitled to
receive dividends, to vote and to exercise all other rights of a shareholder
except to the extent otherwise provided in the Award. All or any portion of a
Stock Bonus Award may but need not be made in the form of a Restricted Stock
Award. In the case of a Restricted Stock Award, the Board may but need not
require the Participant to pay the par value of the shares to be issued or
transferred pursuant thereto. Each Stock Bonus Award and Restricted Stock Award
shall be evidenced by a written instrument in such form as the Board of
Directors shall determine and shall be deemed to incorporate this Plan by
reference, provided that such instrument is consistent with this Plan.

6.   Options

     Long-Term Incentives in the form of Options shall be subject to the
following provisions:

     (a) Subject to the provisions of Section 9, the purchase price per share
shall be, in the case of an Incentive Stock Option, not less than 100% of the
Fair Market Value of a share of Common Stock on the date the Incentive Stock
Option is granted (or in the case of a Participant who, at the time such
Incentive Stock Option is granted, owns (after applying the constructive
ownership rules of Section 424(d) of the Code) stock possessing more than ten
percent of the total combined voting power of all classes of stock of his
employer corporation or of its parent or subsidiary corporation (as those terms
are defined in Sections 424(e) and (f) of the Code) (a "10% Shareholder"), not
less than 110% of the Fair Market Value of a share of Common Stock on the date
the Incentive Stock Option is granted) and, in the case of a Non-Statutory Stock
Option, not less than 85% of the Fair Market Value of a share of Common Stock on
the date the Non-Statutory Stock Option is granted. The purchase price shall be
paid in cash or, if so provided in the Option (and subject to such terms and
conditions as are specified in the Option), in shares of Common Stock or other
property surrendered to Enhance or in a combination of cash and such shares or
other property. Shares of Common Stock thus surrendered shall be valued at their
Fair Market Value on the date of exercise. Any such other property thus
surrendered shall be valued at its fair market value on the date of exercise on
any reasonable basis established or approved by the Board. If so provided in the
Option (and subject to such terms and conditions as are specified in the
Option), in lieu of the foregoing methods of payment, any portion of the
purchase price of the shares to be issued or transferred may be paid by full
recourse promissory note in such form and containing such provisions (which may
but need not provide for interest, for pledging of the shares purchased, and for
payment of the note at the election of the Participant in cash or in shares of
Common Stock or other property surrendered to Enhance) as the Board may approve;
provided that (i) if the Board permits any such note to be paid by surrender of
shares of Common Stock, such shares shall be valued at their Fair Market Value
on the date of such surrender, and (ii) if the Board permits any such note to be
paid by surrender of other

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property, such other property shall be valued at its fair market value on any
reasonable basis established or approved by the Board, and (iii) in the case of
an Incentive Stock Option, any such note shall bear interest at the maximum rate
required to avoid imputation of unstated interest under federal income tax laws
applicable at the time of exercise.

     (b) Each Option may be exercisable in full at the time of grant or may
become exercisable in one or more installments and at such time or times and
subject to such terms and conditions, as the Board of Directors shall determine.
Unless otherwise provided in the Option, an Option, to the extent it is or
becomes exercisable, may be exercised at any time in whole or in part until the
expiration or termination of the Option. No fractional shares shall be issued
pursuant to the exercise of an Option, and no cash payment shall be made in lieu
of fractional shares.

     (c) Each Option shall be exercisable during the life of the optionee only
by him or his guardian or legal representative, and after death only by his
Beneficiary. Notwithstanding the foregoing provisions of this paragraph (c) or
any other provision of this Plan, (i) no Non-Statutory Stock Option shall be
exercisable after the expiration of a period of ten years and one month from the
date the Option is granted, (ii) no Incentive Stock Option shall be exercisable
after the expiration of ten years from the date such Option is granted, and
(iii) no Incentive Stock Option which is granted to a 10% shareholder shall be
exercisable after the expiration of five years from the date such Option is
granted. If a Non-Statutory Stock Option is granted for a term of less than ten
years and one month, the Board of Directors may, at any time prior to the
expiration of the Option, extend its term for a period ending not later than ten
years and one month from the date the Option was granted.

     (d) Options shall be granted for such lawful consideration as may be
provided in the Option or as the Board of Directors may determine.

     (e) No Option or any right thereunder may be assigned or transferred except
to a Beneficiary of the Participant.

     (f) To the extent that the aggregate Fair Market Value (determined as of
the time a particular Option is granted) of the stock with respect to which
Incentive Stock Options are exercisable for the first time by any individual
during any calendar year (under all plans, including this Plan, of his employer
corporation and its parent and subsidiary corporations (as those terms are
defined in Section 424(e) or (f) of the Code)) exceeds $100,000, such Incentive
Stock Options shall be treated as Non-Statutory Stock Options, notwithstanding
any provision thereof to the contrary. The next preceding sentence shall be
applied by taking options into account in the order in which they were granted.

     (g) Each Option shall be evidenced by a written instrument, which shall
contain such terms and conditions, and shall be in such form, as the Board of
Directors shall determine and shall be deemed to incorporate this Plan by
reference, provided the instrument is consistent with this Plan. An Option, if
so approved by the Board of Directors, may include terms, conditions,
restrictions and

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limitations in addition to those provided for in this Plan including, without
limitation, terms and conditions providing for the transfer or issuance of
shares on exercise of an Option, which may be non-transferable and forfeitable
to Enhance in designated circumstances, or providing for the transfer or
issuance of shares on a date subsequent to the date of exercise of the Option.

     (h) An Option may, but need not, be granted in connection with related
Stock Appreciation Rights.

7.   Stock Appreciation Rights

     Long-Term Incentives granted as Stock Appreciation Rights shall be subject
to the following provisions:

     (a) Stock Appreciation Rights may be granted in connection with any Option
either at the time of the grant of such Option or, if the Option is not an
Incentive Stock Option, at any time thereafter during the term of the Option, or
may be granted independently of an Option. Notwithstanding the foregoing, in the
event the Committee grants an Option which is intended to be "performance based"
for purposes of Section 162(m) of the Code, the purchase price per share shall
be not less than 100% of the Fair Market Value of a share of Common Stock on the
date the Option is granted. Stock Appreciation Rights may also be granted in
connection with any option heretofore or hereafter granted under any other stock
option plan or arrangement of the Company.

     (b) (i) If granted in connection with an option, a Stock Appreciation Right
shall require the holder of the related option, upon exercise of such Stock
Appreciation Right, to surrender the option, or any portion thereof, to the
extent unexercised and entitle him to receive a number of shares of Common
Stock, or cash, or both, determined pursuant to clause (iii) of paragraph 7(c).
Such option shall, to the extent so surrendered, thereupon cease to be
exercisable.

          (ii) If granted independently of an option, Stock Appreciation Rights
shall entitle the holder to receive a number of shares of Common Stock, or cash,
or both, determined pursuant to clause (iii) of paragraph 7(c).

     (c) Stock Appreciation Rights shall be further subject to the following
terms and conditions and to such other terms and conditions, not inconsistent
with the Plan, as the Board shall from time to time approve:

          (i) If granted in connection with an option, Stock Appreciation Rights
may be exercisable only at such time or times and to the extent that the option
to which they relate shall be exercisable.

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          (ii) if granted independently of an option, Stock Appreciation Rights
shall be exercisable at such time or times as shall be determined by the Board
at the time of grant of the Stock Appreciation Rights, provided that in no event
shall the Stock Appreciation Rights be exercisable more than ten years after the
date such Stock Appreciation Rights are granted.

          (iii) Upon exercise of Stock Appreciation Rights, the holder thereof
shall be entitled to receive a number of shares of Common Stock, or cash, or a
combination of such shares and cash, as the Board shall determine in its sole
discretion in each case or by rule of general application or otherwise, equal in
value on the date of exercise to an amount prescribed by the Board, which shall
in no event exceed the amount by which the Fair Market Value of one share of
Common Stock on the date of such exercise exceeds the Fair Market Value of one
share of Common Stock on the date of grant of such Stock Appreciation Rights as
specified in the award or, in the case of Stock Appreciation Rights granted in
connection with an option, on the date of grant of such option, multiplied by
the number of shares in respect of which the Stock Appreciation Rights are
exercised. If full payment is to be made in shares of Common Stock and the
amount payable results in a fractional share, payment for the fractional share
shall be made in cash.

          (iv) An Incentive Stock Option granted together with Stock
Appreciation Rights shall be subject to such additional limitations as may be
required by Section 422 of the Code and the regulations thereunder which are
necessary or appropriate to cause Options granted to Key Employees as Incentive
Stock Options to so qualify under such section of the Code.

     (d) Stock Appreciation Rights may be granted for such lawful consideration
as may be provided in the Rights or as the Board may determine.

     (e) To the extent that Stock Appreciation Rights shall be exercised, an
Option in connection with which such Stock Appreciation Rights shall have been
granted shall be deemed to have been exercised for the purpose of the maximum
limitations set forth in paragraph 4(a). In the case of Stock Appreciation
Rights granted independently of an Option, any shares of Common Stock issued or
transferred in payment of such Stock Appreciation Rights shall be charged
against such maximum limitations.

     (f) Stock Appreciation Rights may provide that, upon exercise of such Stock
Appreciation Rights, the shares, or cash, or both, as the case may be, which the
holder of such Stock Appreciation Rights shall be entitled to receive shall be
distributed or paid in such installments and over such number of years as the
Board may direct, with distribution or payment of each such installment
contingent, to the extent determined by the Board, upon continued services of
the employee to the Company until the time for distribution or payment of such
installment.

     (g) The Board may, upon the grant of Stock Appreciation Rights, and if
Enhance is then a reporting company under the Securities Exchange Act of 1934,
impose such conditions on the exercise thereof as may, in its sole discretion,
be required to satisfy the requirements of Rule 16b-3. Without limiting the
generality of the foregoing, the Board may, in such event, determine that (i)

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Stock Appreciation Rights may be exercised only during the period beginning on
the third business day and ending on the twelfth business day following the
publication of the company's quarterly and annual summarized financial data, and
(ii) no Stock Appreciation Rights granted to a director or executive officer of
the Company may be exercised during the first six months after the date of
grant, except in the event of the death or disability of such Participant during
such period.

     (h) Stock Appreciation Rights shall not be transferable other than to a
Beneficiary, and during a Participant's lifetime shall be exercisable only by
him or by his guardian or legal representative.

8.   Performance Units

     Long-Term Incentives granted as Performance Units shall be subject to the
following provisions:

     (a) The performance period for the attainment of performance goals shall be
not less than two nor more than five fiscal years of the Company, as determined
by the Board.

     (b) The Board shall establish a dollar value for each Performance Unit
(which may be a fixed dollar amount or an amount equivalent to the Fair Market
Value of one share of Common Stock form time to time during the performance
period), the performance goals to be attained in respect of the Performance
Unit, the various percentages of the Performance Unit value to be paid out upon
the attainment, in whole or in part, of the performance goals and such other
Performance Unit terms, conditions and restrictions as the Board deems
appropriate. As soon as practicable after the termination of the performance
period, the Board shall determine what, if any, payment is due on the
Performance Unit in accordance with the terms thereof.

     (c) Performance Units shall be cancelled automatically if the Participant's
employment with the Company shall be terminated for any reason prior to the
expiration of the performance period, except that if the Participant's
employment terminates by reason of death, retirement, disability or for other
reasons beyond his control, the Board may, in its sole discretion and subject to
such limitations and at such time or times as it may deem advisable, make full
or partial payment with respect to such Performance Units.

     (d) Payment with respect to any Performance Unit may be made, in the sole
discretion of the Board, in cash or in shares of Common Stock valued at their
Fair Market Value on the date of payment, or in both cash and such shares. Any
shares issued or transferred in payment of a Performance Unit shall be charged
against the maximum number of shares available under the Plan. If full payment
is to be made in shares of Common Stock and the amount payable results in a
fractional share, payment for the fractional share shall be made in cash.

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     (e) Performance Units shall not be transferable other than to a
Beneficiary, and during a Participant's lifetime payments in respect thereof
shall be made only to the Participant or his guardian or legal representative.

9.   Adjustment Provisions

     (a) In the event that any recapitalization, reclassification, split-up or
consolidation of shares of Common Stock shall be effected, or the outstanding
shares of Common Stock shall be effected, or the outstanding shares of Common
Stock shall, in connection with a merger or consolidation of Enhance or a sale
by Enhance of all or a part of its assets, be exchanged for a different number
or class of shares of stock or other securities or property of Enhance or any
other entity or person, or a record date for determination of holders of Common
Stock entitled to receive a dividend payable in Common Stock shall occur, (a)
the number and class of shares or other securities or property that may be
issued or transferred pursuant to Long-Term Incentives thereafter granted, (b)
the number and class of shares or other securities or property that may be
issued or transferred under outstanding Long-Term Incentives, (c) the purchase
price (if any) to be paid per share under outstanding and future Long-Term
Incentives, and (d) the price (if any) to be paid per share by Enhance or a
Subsidiary for shares or other securities or property issued or transferred
pursuant to Long-Term Incentives which are subject to a right of Enhance or a
Subsidiary to reacquire such shares or other securities or property, shall in
each case be equitably adjusted.

     (b) Upon any merger or consolidation in which Enhance is not the surviving
corporation or a dissolution or liquidation of Enhance, all outstanding Options
and SARs shall terminate provided that all holders of outstanding Options and
SARs shall be furnished with written notice of the proposed merger,
consolidation, dissolution or liquidation contemporaneously with the mailing to
stockholders of Enhance of notice of the meeting of stockholders at which such
proposed transaction is to be considered. The foregoing shall be of no effect in
the case of such a merger or consolidation if provision is made in writing in
connection therewith for the continuance of the Plan and for the assumption of
Options and SARs theretofore granted or the substitution for such Options and
SARs of new options and stock appreciation rights covering the shares of the
successor corporation, or a parent or subsidiary thereof, with appropriate
adjustments, in which event the Plan and the Options and SARs theretofore
granted or the new options and stock appreciation rights covering the shares of
the successor corporation, or a parent or subsidiary thereof, with appropriate
adjustments, in which event the Plan and the Options and SARs theretofore
granted or the new options and stock appreciation rights substituted therefor,
shall continue in the manner and under the terms so provided.

     (c) At the discretion of the Board, any Long-Term Incentive may provide
that, upon the occurrence of any of certain specified events determined by the
Board, including a certain specified events determined by the Board, including a
change in control of the company (as such may be defined by the Board in its
discretion in any agreement granting a Long-Term Incentive, which definition
need not be identical for all such agreements), such Long-Term Incentive shall,
to the extent not theretofore exercisable, payable or free from restrictions, as
the case may be, become immediately exercisable, payable, or free from
restrictions, as the case may be, in its entirety and any

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shares of Common Stock acquired pursuant to a Long-Term Incentive which are not
fully vested shall immediately become fully vested, notwithstanding any other
provision of the Long-Term Incentive or the Plan.

     (d) Each Long-Term Incentive shall provide that, in the event of a merger
or consolidation of Enhance with a third party which is proposed to be accounted
for as a pooling of interests, the Participant shall, if so requested by the
Company and notwithstanding any other provision of such Long-Term Incentive,
agree, as a condition to the exercisability, payment, or lapsing of
restrictions, as the case may be, of such Long-Term Incentive, not to sell,
assign, or gift or in any other way reduce his or her risk relative to the share
of Common Stock issuable pursuant to such Long-Term Incentive and all other
shares of Common Stock owned by such Participant for such period after the
consummation of such merger or consolidation as the Company shall, upon the
advice of its outside accountants, conclusively determine as necessary to ensure
that such merger or consolidation may be validly accounted for as a pooling of
interests.

     (e) Adjustments under paragraphs 9(a) and 9(b) shall be made by the Board,
whose determination as to what adjustments will be made and the extent thereof
shall be final, binding, and conclusive. No fractional interests shall be issued
under the Plan resulting from any such adjustments. The Board shall give prompt
notice to each Participant affected thereby of the occurrence of any event
giving rise to any adjustment, which notice shall set forth the new purchase
price after giving effect to the adjustment, provided that such adjustment shall
be effective whether or not such notice is given.

10.  Term

     The Plan shall become effective upon the date of its adoption by the Board,
subject, however, to approval by the shareholders of Enhance within twelve
months next following such adoption. Prior to such approval, the Board may in
its sole discretion grant or authorize the granting of Long-Term Incentives,
including Options and SARs, provided the exercisability thereof shall be
deferred until, and expressly subject to the condition that the Plan shall have
been so approved. If the Plan is not so approved by the shareholders of Enhance,
the Plan and all Long-Term Incentive granted hereunder shall be automatically
cancelled and any shares of Common Stock or cash previously issued or paid under
all Long-Term Incentives shall promptly be returned to the Company in return for
any money or property it received therefor. The Plan shall terminate at the
close of business on December 10, 1997, and no Long-Term Incentives may
thereafter be granted, but such termination shall not affect any Long-Term
Incentives theretofore granted. No Long-Term Incentive shall be granted under
this Plan after the number of shares authorized for issuance or transfer
hereunder have been exhausted, but the Plan shall continue in effect thereafter
with respect to Long-Term Incentives theretofore granted.

                                       12

<PAGE>

11.  Administration

     (a) The Plan shall be administered by the Board. If and to the extent the
Board so directs, the Plan shall be administered by a Committee of three or more
persons selected by the Board from its own membership. Each member of the Board
or the Committee shall (i) by virtue of administering the Plan as a member of
the Board or the Committee, as applicable, be ineligible to receive Long-Term
Incentive and (ii) during such time as Enhance is a reporting company under the
Securities Exchange Act of 1934, as a prerequisite qualification to
administering the Plan as a member of the Board or of the Committee, as
applicable, have been ineligible throughout the twelve months preceding his
election to the Board or appointment to the Committee, as applicable, to receive
a Long-Term Incentive or an allocation of shares of Common Stock or a grant of
stock options, stock appreciation rights or similar rights pursuant to any other
plan of the company such as to disqualify such member of the Board or of the
Committee as a "disinterested person" for purposes of Rule 16b-3 each director
appointed to such Committee shall quality (i) during such time as Enhance is a
reporting company under the Securities Exchange Act of 1934, as a "disinterested
person" as defined in Rule 16b-3 promulgated under Section 16(b) of the
Securities Exchange Act of 1934 to the extent then required, and (ii) as an
"outside director" as defined under Section 162(m) of the Code."

     (b) The Board may establish such rules and regulations, not inconsistent
with the provisions of this Plan, as it may deem necessary for the proper
administration of this Plan, and may amend or revoke any rule or regulation so
established. The Board shall, subject to the provisions of the Plan, have full
power to interpret and administer the Plan and full authority to select the
Participants in the Plan and determine the number of shares (if any) to be made
subject to each Long-Term Incentive, the type of Long-Term Incentive to be
granted and the terms and conditions of each Long-Term Incentive (which need not
be identical). The interpretation by the Board of the terms and provisions of
the Plan and the administration thereof and all action taken by the Board, shall
be final, binding and conclusive on Enhance, its stockholders, Subsidiaries, all
Participants and employees, and upon their respective Beneficiaries, successors
and assigns, and upon all other persons claiming under or through any of them.

     (c) Members of the board of Directors and members of the Committee acting
under this Plan shall be fully protected in relying in good faith upon the
advice of counsel and shall incur no liability except for gross or willful
misconduct in the performance of their duties.

     (d) The Plan is intended to comply with the exception for performance-based
compensation under Section 162(m) of the Code and the regulations thereunder
with respect to Stock Options and SARs, and grants of Options and SARs shall be
limited, construed and interpreted in a manner so as to comply therewith unless
determined otherwise by the Board or the committee with respect to a particular
grant of an Option or SAR.

                                       13

<PAGE>

12.  General Provisions

     (a) Nothing in this Plan or in any instrument executed pursuant hereto
shall confer upon any person any right to continue in the employment of Enhance
or a Subsidiary, or shall affect the right of Enhance or a Subsidiary to
terminate the employment of any person at any time with or without cause.

     (b) No shares of Common Stock shall be issued or transferred pursuant to a
Long-Term Incentive unless and until all legal requirement applicable to the
issuance or transfer, of such shares have, in the opinion of counsel to Enhance,
been complied with. In connection with any such issuance or transfer, the person
acquiring the shares shall, if requested by Enhance and whether or not otherwise
required by the terms of the Participant's Long-Term Incentive, give assurances
satisfactory to counsel to Enhance, in respect of such matters as Enhance or a
Subsidiary may deem desirable to assure compliance with all applicable legal
requirements and take any reasonable action to comply with such requirements.

     (c) No provision of this Plan shall be interpreted or construed to obligate
Enhance to register the shares issuable or transferable hereunder under the
Securities Act of 1933 or disposition of shares of Common Stock issued or
transferred under any Long-Term Incentive may be made unless and until Enhance's
counsel is satisfied that the shares have been registered under the Securities
Act of 1933 and any other applicable federal or state securities laws or that an
exemption from such registration is available. Certificates evidencing any
shares of Common Stock issued or transferred under any Long-Term Incentive shall
be legended in such manner as Enhance's counsel may deem to be necessary or
appropriate to reflect the provisions of this paragraph 12(c).

     (d) No person (individually or as a member of a group) and no Beneficiary
or other person claiming under or through him, shall have any right, title or
interest in or to any shares of Common Stock allocated or reserved for the
purposes of this Plan or subject to any Long-Term Incentive except as to such
shares of Common Stock, if any, as shall have been issued or transferred to him.

     (e) In the case of a grant of a Long-Term Incentive to a Key Employee of a
Subsidiary, such grant may, if the Board of Directors so approves, be
implemented by Enhance entering into an agreement with the Subsidiary containing
such terms and provisions as the Board of Directors may authorize, including,
without limitation, a provisions as the Board of Directors may authorize,
including, without limitation, a provision for the issuance or transfer of the
shares covered by the Long-Term Incentive to the Subsidiary, for such
consideration as the Board of Directors may approve, upon the condition or
understanding that the Subsidiary will transfer the shares to the Key Employee
in accordance with the terms of the Long-Term Incentive.

     (f) Enhance or a Subsidiary may make such provisions as it may deem
appropriate for the withholding of any taxes which Enhance or a Subsidiary
determines it is required to withhold in connection with any Long-Term
Incentive. The Board may, in its sole discretion and subject to such rules as it
may adopt, permit a Participant to elect to satisfy any such withholding
obligation, in whole

                                       14

<PAGE>

or in part, by having the Company withhold shares of Common Stock that are
otherwise issuable in connection with such Long-Term Incentive and have a Fair
Market Value equal to the amount required to be withheld, or by surrendering to
the Company previously-acquired shares of Common Stock that have such a Fair
Market Value. Each holder of an Incentive Stock Option shall give prompt notice
to the Company in the event of the disposition by him of any shares where such
disposition occurs within two years after the date of the grant of such Option
or within one year after the date of the such exercise.

     (g) Nothing in this Plan is intended to be a substitute for, or shall
preclude or limit the establishment or continuation of, any other plan, practice
or arrangement for the payment of compensation or fringe benefits to directors,
officers, employees or consultants generally, or to any class or group of such
persons, which Enhance or any Subsidiary now has or may hereafter lawfully put
into effect, including, without limitation, any incentive compensation,
retirement, pension, group insurance, stock purchase, stock bonus or stock
option plan.

     (h) In no event shall Long-Term Incentives be considered compensation to a
Participant for purposes of any other plan of the Company (including any
pension, profit-sharing, severance pay or other employee benefit plans) in
determining benefits to which such Participant may be entitled under such plan.

     (i) By accepting any benefits under the Plan, each Participant, and each
person claiming under or through him, shall be conclusively deemed to have
indicated his acceptance and ratification of, and consent to, all provision of
the Plan and any action or decision under the Plan by enhance, its agents and
employees and the Board.

     (j) The validity, construction, interpretation and administration of the
Plan and of any determinations or decisions made thereunder, and the rights of
all persons having or claiming to have any interest therein or thereunder, shall
be governed by, and determined exclusively in accordance with, the laws of the
State of New York, the state in which Enhance is incorporated, but without
giving effect to the principles of conflicts of laws thereof Without limiting
the generality of the foregoing, the period within which any action arising
under or in connection with the Plan must be commenced, shall be governed by the
laws of the State of New York, without giving effect to the principles of
conflicts of laws thereof; irrespective of the place where the act or omission
complained of took place and of the residence of any party to such action and
irrespective of the place where the action may be brought.

     (k) The use of the masculine gender shall also include with it a meaning
the feminine. The use of the singular shall include within its meaning the
plural and vice versa.

13.  Amendment and Termination

     (a) This Plan may be amended or terminated by the Board of Directors at any
time and in any respect, including without limitation to permit or facilitate
qualification of Options theretofore

                                       15

<PAGE>

or thereafter granted as Incentive Stock Options under the code, provided that,
without the approval of the shareholders of the Company, no amendment shall be
made which (i) increases the maximum number of shares of Common Stock that may
be issued or transferred pursuant to Long-Term Incentives, as provided in
paragraph (a)( 1) of Section 4 or increases the maximum number of shares of
Common Stock that may be granted as Options or SARs to any Key Employee selected
to participate in the Plan as provided in paragraph (a)(2) of Section 4, (ii)
except as may be required or desirable to conform this Plan to the federal or
state securities laws and regulations that may apply to it from time to time,
withdraws the administration of this Plan from the Board or Committee, (iii)
transfers the administration of this Plan to any person who is not a
"disinterested administrator" under Rule 16b-3, if Enhance is then a reporting
company under the Securities Exchange Act of 1934, (iv) permits any person who
is not a Key Employee to be granted a Long-Term Incentive, (v) changes the
minimum exercise price of any Option or any SAR or extends the maximum exercise
term of any Option or any SAR or otherwise materially increases the benefits
accruing to participants in the Plan, (vi) amends this Section 13, or (vii)
requires shareholder approval in order for the Plan to continue to comply with
the exception for performance-based compensation under Section 162(m) of the
Code.

     (b) No amendment or termination of this Plan by the Board of Directors or
the shareholders of Enhance shall affect adversely any Long-Term Incentive
theretofore granted without the consent of the holder thereof.

                                       16

<PAGE>

                                                              Certificate 10.2.2

                            OPTION GRANT CERTIFICATE

     ENHANCE FINANCIAL SERVICES GROUP INC., a New York corporation (the
"Company"), hereby grants to                (the "Executive") an Incentive Stock
                             --------------
Option (the "Option") to purchase        shares (the "Option Shares") of common
                                  ------
stock, par value $.10 per share ("Common Stock"), pursuant to the Company's 1987
Long-Term Incentive Plan for Key Employees (as such may he amended from time to
time, the "Plan")

1.   Basic Terms of Option.

(a)  Term of Option. The option shall expire December 31, 2006.

(b)  Exercise Price. The exercise price shall be $34.00 per Option Share (the
     "Purchase Price").

(c)  Vesting. The Option shall become exercisable in equal installments in
     accordance with Article 3.

(d)  Method of Exercise. The Option may be exercised by the Executive in
     accordance with the terms hereof and of the Plan for any and all Option
     Shares by written notice (the "Exercise Notice") from the Executive to the
     Company substantially in the form of Annex A hereto. Payment of the
     Purchase Price may be made in the form of cash or shares of Common Stock,
     as permitted by the Plan, and shall accompany the Exercise Notice to the
     Company; provided that, if such Exercise Notice indicates that the
     Executive is simultaneously using the stock option exercise program of
     Merrill Lynch Pierce Fenner & Smith Incorporated or other brokerage concern
     approved by the Company, the Purchase Price shall be payable on the fifth
     business day following the date of delivery of the Exercise Notice.

2.   Option Shares.

(a)  Status of Option Shares. Effective upon the exercise of the Option in whole
     or in part and the receipt by the Company of the Purchase Price for the
     Option Shares being purchased, the Executive shall be the holder of record
     of such shares and shall have all of the rights of a shareholder with
     respect thereto (including the right to vote such shares at any meeting at
     which the holders of the Common Stock may vote, the right to receive all
     dividends declared and paid upon such shares and the right to exercise any
     rights or warrants issued in respect of any such shares). The Company
     shall, upon receipt of the Purchase Price, issue in the name of the
     Executive a certificate representing the Option Shares purchased from time
     to time.

<PAGE>

(b)  Option Shares Unregistered. As of the date of grant of the Option, the
     Option Shares have not been registered under the Securities Act of 1933, as
     amended (the "Act"), and the Company has no obligation to effect or
     maintain the effectiveness of the registration of the Option Shares under
     the Act. Unless the Option Shares issuable upon a given exercise are then
     subject to an effective registration statement under the Act, the
     certificate representing such shares shall bear the following legend or
     such other legend as the Company's counsel may deem appropriate:

               "The shares represented by this certificate have not been
          registered under the Securities Act of 1933, as amended, and may in no
          event be offered, sold, transferred or assigned unless and until the
          shares have been so registered or, in the opinion of counsel to
          Enhance Financial Services Group Inc., an exemption from such
          registration is available."

(c)  Investment Intent. If the certificate representing the Option Shares
     issuable upon a given exercise is required to bear the legend set forth
     above (or a legend to like effect), the Executive shall, by such exercise
     of the Option, be deemed conclusively to represent and to agree with the
     Company that he or she is acquiring the Option Shares then being purchased
     for his or her own account and not for the account of others, for
     investment only and not with a view to public sale or distribution.

(d)  Restriction Relating to Certain Mergers. In the event of a merger or
     consolidation of the Company with a third party which is proposed to he
     accounted for as a pooling of interests, the Executive shall, if so
     requested by the Company and notwithstanding any other provision of this
     Certificate, agree not to sell, assign, or gift or in any other way reduce
     his or her risk relative to the Option Shares and all other shares of
     Common Stock owned by the Executive for such period after the consummation
     of such merger or consolidation as the Company shall, upon the advice of
     its outside accountants, conclusively determine as necessary to ensure that
     such merger or consolidation may be validly accounted for as a pooling of
     interests.

(e)  Prior Conditions. The Company shall not be required to issue or deliver any
     certificate representing Option Shares prior to (i) the admission of such
     shares to listing on any stock exchange on which the Common Stock may then
     be listed, (ii) the completion of any registration or any other
     qualification of such shares under any federal or state law or any rulings
     or regulations of any governmental regulatory body, (iii) the obtaining of
     any consent or approval or other clearance from any governmental agency
     which the Company shall, in its sole discretion, determine to be necessary
     or advisable, and (iv) the payment to the Company, upon its request, of any
     amount requested by the Company for the purposes of satisfying its
     liability, if any, to withhold taxes of any kind or any other applicable
     assessment (plus interest or penalties thereon, if any, caused by a delay
     in making such payment) incurred by reason of the exercise of the Option

                                       -2-

<PAGE>

3.   Vesting of Option.

(a)  Vesting Conditions. If the Executive remains in the continuous employ of
     the Company or a Subsidiary through the close of business on each date
     indicated in Column I below the Option shall thereupon vest (on a
     cumulative basis) as to the portion of the Option Shares indicated opposite
     such date in Column II below:

                                  (II)
                                  the %
            (I)            (or additional %)
       If employment         of the Option
     continuous through   then which vests is
     ------------------   -------------------

     December 31, 1997            25%
     December 31, 1998            25%
     December 31, 1999            25%
     December 31, 2000            25%

(b)  Effect of Termination of Employment. If the Executive's employment with the
     Company and its Subsidiaries is terminated for any reason whatsoever before
     all installments of the Option shall have vested pursuant to Paragraph 3
     (a), then any portion of the Option which is not vested at the time of such
     termination shall automatically terminate on the date of the termination of
     employment, and all rights and interests of the Executive in and to such
     unvested portion of the Option shall thereupon terminate. Should the
     Executive's employment be terminated before any given date set forth in
     Paragraph 3(a) upon his or her death, Disability or Retirement, then the
     installments of the Option which are vested at the time of such termination
     shall remain exercisable in accordance with the terms hereof as if such
     termination of employment shall not have occurred. Should the Executive's
     employment be terminated by the Company or a Subsidiary before any given
     date set forth in Paragraph 3(a) other than for Cause, the vested portion
     of the Option not subsequently exercised on or before the 90th day after
     such termination shall thereupon automatically terminate. Should the
     Executive's employment be terminated before any given date set forth in
     Paragraph 3(a) under any other circumstances, the vested portion of the
     Option shall thereupon automatically terminate.

(c)  Effect of Leave of Absence. A leave of absence from the Company or any
     Subsidiary which is approved by the President shall not be considered a
     termination of the Executive's employment with the Company for purposes of
     this Article 3 or any other provision of this Certificate, provided that
     each date set forth in the table in Paragraph 3(a) which shall follow the
     commencement of the leave of absence shall be automatically deferred for a
     period equal to the period of the leave of absence.

                                       -3-

<PAGE>

(d)  Board's Right to Waiver or Acceleration. Any provision of this Article 3 to
     the contrary notwithstanding, the Board reserves the right, in its sole
     discretion, to waive any condition to the vesting of the Option and
     accelerate the date on which any installment of the Option shall vest in
     the event of a change in control of the Company or a public offering of
     shares of Common Stock or otherwise.

4.   Definitions.

     Unless defined below or elsewhere in this Certificate, the capitalized
terms used in this Certificate shall have the meanings ascribed thereto in the
Plan.

(a)  "Cause" shall consist of, the failure of the Executive to perform or
     observe the provisions of any employment agreement with the Company or a
     Subsidiary, dishonesty or insubordination in the performance of his or her
     duties, misappropriation of funds, material and willful misconduct,
     habitual insobriety or conviction of a crime involving moral turpitude.

(b)  "Disability" means a disability which entitles the Executive to benefits
     under the long-term disability insurance program of the Company or a
     Subsidiary applicable to the Executive, or which would entitle the
     Executive to such benefits after any applicable waiting period.

(c)  "Retirement" means termination of the Executive's employment with the
     Company and its Subsidiaries (other than for Cause or upon death or
     Disability) on or after the later to occur of (i) the conclusion of ten
     continuous years of employment by the Company or any Subsidiary or (ii) the
     date on which the Executive attains age 55.

5.   General Provisions.

(a)  Administration and Construction. The provisions hereof shall be
     administered and construed by the Board (or any authorized committee
     thereof), whose decisions shall be conclusive and binding on the Company,
     the Executive and anyone claiming under or through either of them. Without
     limiting the generality of the foregoing, any determination as to whether
     or not an event has occurred or failed to occur which causes any unvested
     portion of the Option to be forfeited or become vested pursuant hereto,
     shall be made in the good faith but otherwise absolute discretion of the
     Board. By the Executive's acceptance of this Certificate, the Executive and
     each person claiming under or through the Executive irrevocably consents
     and agrees to all actions, decisions and determinations to be taken or made
     by the Board in good faith pursuant to this Certificate and the Plan.

                                       -4-

<PAGE>

(b)  Option Not Assignable or Transferable. The Option is not assignable or
     transferable other than by will or the laws of descent and distribution,
     either voluntarily, or, to the full extent permitted by law, involuntarily,
     by way of encumbrance, pledge, attachment, levy or charge of any nature.
     Any rights of the Executive hereunder shall be exercisable during the
     Executive's lifetime only by him or her or by his or her guardian or legal
     representative.

(c)  No Employment Rights. No provision of this Certificate or of the Plan shall
     confer upon the Executive any right to continue in the employ of the
     Company or a Subsidiary or shall in any way affect the right of the Company
     or a Subsidiary to dismiss, or otherwise terminate the employment of, the
     Executive at any time for any reason or no reason, or shall impose upon the
     Company or any Subsidiary any liability for any forfeiture of any unvested
     portion of the Option which may result under this Certificate if the
     Executive's employment is so terminated.

(d)  Recapitalization. If the Executive receives, with respect to the Option,
     any other option or warrant to purchase securities of the Company, of a
     Subsidiary or of any other entity as a result of any recapitalization,
     merger, consolidation, combination, or exchange of shares or a similar
     corporate change, any such other option or warrant received by the
     Executive shall likewise be subject to the terms and conditions of this
     Certificate and shall be included in the term "Option." Similarly, any
     securities or other property as to which such other option or warrant is
     exercisable shall be included in the term "Option Shares." In the event of
     any such corporate change, the Purchase Price set forth in Paragraph 1(b)
     shall be appropriately adjusted by the Board such that the aggregate price
     for all such Option Shares is not changed.

(e)  Legal Representative. In the event of the Executive's death or a judicial
     determination of his or her incompetence, reference in this Certificate to
     the Executive shall be deemed to refer to his or her legal representative
     or, where appropriate, to the Beneficiary.

(f)  Holidays. If any event provided for in this Certificate is scheduled to
     take place on a legal holiday, such event shall take place on the next
     succeeding day that is not a legal holiday.

(g)  Notices to the Company. Any notice or other communication to the Company
     pursuant to any provision of this Certificate shall be deemed to have been
     delivered when delivered in person to the Corporate Secretary of the
     Company or when deposited in the United States mail, first class postage
     prepaid, addressed to the Corporate Secretary of the Company at 335 Madison
     Avenue, New York, New York 10017 or at such other address of which the
     Company may from time to time give the Executive written notice in
     accordance with Paragraph 5 (h).

                                       -5-

<PAGE>

(h)  Notices to the Executive. Any notice or other communication to the
     Executive pursuant to any provision of this Certificate shall be deemed to
     have been delivered when delivered to the Executive in person or when
     deposited in the United States mail, first class postage prepaid, addressed
     to the Executive at his or her address on the security holder records of
     the Company or at such other address of which the Executive may from time
     to time give the Company written notice in accordance with Paragraph 5(g).

(i)  Agreement Subject to Plan. This Option Grant Certificate is being executed
     and delivered pursuant to and is subject in all events to the Plan, a copy
     of which, if not previously delivered to the Executive in connection with a
     prior grant thereunder, is being delivered to the Executive concurrently
     with this Certificate and which is incorporated in this Certificate by
     reference. Each provision of this Certificate shall be administered and
     construed in accordance with the Plan, and any provision that cannot be so
     administered or construed shall to that extent be disregarded.

                                             ENHANCE FINANCIAL, SERVICES
                                             GROUP INC.

Date: As of December 31, 1996                By:
                                                --------------------------
                                                Daniel Gross
                                                President

                                       -6-

<PAGE>

                                     Annex A

Enhance Financial Services Group Inc.
335 Madison Avenue
New York, New York 10017

Ladies and Gentlemen:

     I am an optionee under the Enhance Financial Services Group Inc. Long-Term
Incentive Plan for Key Employees (the "Plan"), having been granted on December
5, 1996 an option for          shares at an exercise price of $34.00 per share.
                      --------
     Of such grant, options for           shares remain unexercised and
                                ---------
unexpired. Of such number of unexercised and unexpired options, options for
         shares are vested as of this date.
--------

          Select, by indicating with an "X", one exercise method:

            I hereby exercise the aforesaid option for         shares using the
     ------                                            -------
Merrill Lynch "Corporate Stock Option Exercise Program." Accordingly, payment
will be remitted to the company on my behalf by Merrill Lynch.

            I hereby exercise the aforesaid option for          shares not using
     ------                                            --------
the Merrill Lynch "Corporate Stock Option Exercise Program" and enclose my
check, payable to the order of Enhance Financial Services Group Inc., for
$         in payment of the purchase price and applicable withholding taxes for
 --------
such shares. I ask that the certificate for the option shares be delivered to
me.

                                        Very truly yours,

Date:                                   Name:
                                             ----------------

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