Document:

Exhibit 10.2

                              ACE LIMITED 1995
                           OUTSIDE DIRECTORS PLAN
                 (As Amended Through the Fourth Amendment)

                                  GENERAL

1.1.     Purpose. The ACE Limited 1995 Outside Directors Plan (the
         "Plan") has been established by ACE Limited (the "Company") to
         promote the interests of the Company and its shareholders by
         enhancing the Company's ability to attract and retain the services
         of experienced and knowledgeable directors and by encouraging such
         directors to acquire an increased proprietary interest in the
         Company.

1.2.     Operation and Administration. The operation and administration
         of the Plan shall be subject to the provisions of Section 4.
         Capitalized terms in the Plan shall be defined as set forth in
         Section 7 or elsewhere in the Plan.

                                 SECTION 2
                                 ---------
                              RETAINER AWARDS
                              ---------------
2.1.     General.
         -------

(a)      For each Plan Year, each Director who is an Eligible Director on
         the first day of that Plan Year shall be granted a "Retainer
         Award" for the year, which shall be in the form of shares of Stock
         having a Fair Market Value of $35,000. Except as otherwise
         provided in this subsection 2.1, the Retainer Award for any Plan
         Year shall be made as of the first business day of that Plan Year
         (the "Award Date" for that Retainer Award), and the Fair Market
         Value of the Stock so awarded shall be determined as of that date.
         Notwithstanding the foregoing, for the Plan Year beginning in 1999
         (the "1999 Plan Year"), the Retainer Award for such Plan Year
         shall include an additional award (the "1999 Additional Award"),
         in the form of shares having a Fair Market Value of $8,750 (and
         for the 1999 Plan Year, reference in the Plan to the "Retainer
         Award" shall include reference to such 1999 Additional Award).
         Except as otherwise provided in this subsection 2.1, the 1999
         Additional Award shall be made as of the first business day
         following the adoption of the Second Amendment of the Plan (the
         "1999 Additional Award Date"), and the Fair Market Value of the
         Stock so awarded shall be determined as of that date.

(b)      If a Director becomes an Eligible Director during a Plan Year,
         on a date other than the first day of the Plan Year, he shall be
         granted a Retainer Award for the year, which shall be in the form
         of shares of Stock having a Fair Market Value equal to $35,000,
         subject to a pro-rata reduction to reflect the portion of the Plan
         Year prior to the date on which he becomes an Eligible Director;
         provided, however, that with respect to the 1999 Plan Year, such
         Retainer Award subject to pro rata reduction shall include the
         1999 Additional Award. A Director's Retainer Award under this
         paragraph (b) shall be made on the first business day on which he
         is an Eligible Director (the "Award Date" for that Retainer
         Award), and the Fair Market Value of the Stock so awarded shall be
         determined as of that date; provided, however, that if a Director
         becomes eligible for a Retainer Award under this Paragraph (b) on
         a date before the 1999 Additional Award Date, then that portion of
         the 1999 Additional Award to which he becomes entitled shall be
         made as of the 1999 Additional Award Date, and the Fair Market
         Value of the Stock so awarded shall be determined as of that date.

<PAGE>

(c)      The shares awarded under this subsection 2.1 shall be subject to the
         vesting provision set forth in subsection 2.3.

(d)      A Participant may elect to defer receipt of his Retainer Awards in
         accordance with Supplement A of the Plan.

2.2.     Fractional Shares. If the Retainer Award that would otherwise be made
         to a Participant as of any Award Date under paragraph 2.1 is not a
         whole number, then the number of shares otherwise awardable shall be
         reduced to the next lowest whole number and, instead, the Fair Market
         Value (determined as of the Award Date) of the shares subject to the
         reduction shall be paid to the Participant in cash as soon as
         practicable after the Award Date.

2.3.     Vesting.  A Participant who ceases to be a Director shall forfeit the
         Retainer Award which is not vested on his Date of Termination;
         provided, however, that (i) if a Participant ceases to be a Director
         by reason of his death or Disability, any portion of the Retainer
         Award that is not then vested shall vest on his Date of Termination;
         and (ii) any portion of the Retainer Award that is held by an
         individual serving as a Director on the date of a Change in Control
         that is not then vested shall vest on the date of the Change of
         Control.  Except as otherwise provided in this subsection 2.3, a
         Participant shall become vested in 100% of the Retainer Award shares
         for any Plan Year on the last day of that Plan Year; provided that a
         Participant shall become vested in the Retainer Award shares for the
         Plan Year only if such Participant's Date of Termination does not
         occur prior to the last day of that year.

2.4.     Limit on Stock.  Stock granted as a Retainer Award shall be subject
         to the following:

(a)      Such Stock may not be sold, assigned, transferred, pledged or
         otherwise encumbered prior to the date it is vested.

(b)      Each certificate issued in respect of such Stock shall be
         registered in the name of the Participant and deposited,
         together with a stock power endorsed in blank, with the
         Company.

(c)      Except as otherwise provided by the Plan, the Participant as
         owner of shares of Stock granted to him as a Retainer Award shall
         have all the rights of a shareholder, including but not limited to
         the right to vote such shares and the right to receive all
         dividends paid on such shares; provided, however, that no
         dividends shall be payable to or for the benefit of a Participant
         with respect to record dates for such dividends occurring on or
         after the date, if any, on which the Participant has forfeited the
         Stock.

                                      2

<PAGE>

                                 SECTION 3
                                 ---------
                         COMMITTEE CHAIRMAN AWARDS
                         -------------------------

(a)      Each Eligible Director who serves as the chairman of any
         committee of the Board (a "Committee Chairman") during any Plan
         Year Quarter shall be granted a Committee Chairman Award as of the
         first business day of the next following Plan Year Quarter, which
         shall be the "Award Date" for such award.

(b)      The amount of the Committee Chairman Award shall be the number
         of shares of Stock having a Fair Market Value (determined as of
         the Award Date) of $1,250 per quarter. If an individual serves as
         a Committee Chairman for less than a full Plan Year Quarter, then
         the size of the Committee Chairman Award shall be subject to a
         pro-rata reduction to reflect the portion of the Plan Year Quarter
         during which he was not Committee Chairman.

(c)      The shares granted as a Committee Chairman Award under this Section 3
         shall be fully vested at the time of award.

(d)      A Participant may elect to defer receipt of his Committee Chairman
         Awards in accordance with Supplement A of the Plan.

(e)      A Participant may elect to receive his Committee Chairman Award in
         cash.

                                 SECTION 3A
                                 ----------
                               MEETING AWARDS
                               --------------

(a)      Each Eligible Director who is otherwise eligible to receive cash
         compensation for attendance at a meeting of the Board or for
         attendance at a meeting of any committee of the Board, may in lieu
         of such cash compensation, elect to receive to such compensation
         in Stock, and such compensation payable in Stock shall be
         considered the grant of a "Meeting Award." An election to receive
         a Meeting Award in lieu of cash compensation must be made in
         accordance with the requirements of paragraph (c) of this Section
         3A. A Meeting Award shall be granted as of the first business day
         coincident with or next following the date of the Board or
         committee meeting to which it relates, which shall be the "Award
         Date" for such award.

(b)      The amount of the Meeting Award for attendance at a Board
         meeting shall be the number of shares of Stock having a Fair
         Market Value (determined as of the Award Date) of $3,000 per
         meeting. The amount of the Meeting Award for attendance at a
         committee meeting shall be the number of shares of Stock having a
         Fair Market Value (determined as of the Award Date) of $1,000 per
         meeting.

                                       3
<PAGE>

(c)      Except as otherwise provided in this paragraph (c), an election
         to receive a Meeting Award in lieu of cash compensation for
         attendance at Board and committee meetings shall be filed prior to
         the first day of the Plan Year in which such meetings occur. An
         individual who becomes an Eligible Director on a date other than
         the first day of the Plan Year may elect to receive a Meeting
         Award in lieu of cash compensation for the remainder of the year
         by filing a Meeting Award election prior to the date on which he
         becomes an Eligible Director. With respect to meetings occurring
         in the 1999 Plan Year but after August 6, 1999, an Eligible
         Director may elect to receive a Meeting Award in lieu of cash
         compensation by filing an election no later than September 6,
         1999; provided, however, that such election shall be effective
         only with respect to compensation for meetings occurring after the
         date such election is filed. An election to receive a Meeting
         Award rather than cash compensation shall apply to all Board and
         committee meetings in the Plan Year for which the election is
         made.

(d)      The shares granted as a Meeting Award under this Section 3A shall be
         fully vested at the time of award.

(e)      A Participant may elect to defer receipt of his Meeting Awards in
         accordance with Supplement A of the Plan.

(f)      If a Participant has made no election under this Section 3A with
         respect to the form of payment of compensation for his attendance
         at Board or committee meetings, then such compensation shall be
         paid in cash.

                                 SECTION 3B
                                 ----------
                               OPTION AWARDS
                               -------------

3B.1.    General.
         -------

(g)      For each Plan Year, each Director who is an Eligible Director on
         the first day of that Plan Year shall be granted an "Option Award"
         which shall entitle the Eligible Director to purchase shares of
         Stock. The number of shares subject to the Option Award with
         respect to the Option Award granted in the Plan Year beginning in
         2001 (the "2001/2002 Plan Year") and in each Plan Year thereafter
         shall be 4,000, unless and until the number of shares underlying
         an Option Award in any subsequent Plan Year is modified by the
         Board. Except as otherwise provided in this subsection 3B.1, the
         Option Award for any Plan Year shall be granted as of the first
         business day of that Plan Year (the "Award Date" for that Option
         Award).

(h)      If a Director becomes an Eligible Director during a Plan Year,
         on a date other than the first day of the Plan Year, he shall be
         granted an Option Award which shall entitle the Eligible Director
         to purchase shares of Stock. The number of shares of Stock subject
         to the Option Award shall be the number which would have been
         subject to the Option if he had become an Eligible Director on the
         first day of the Plan Year, except that such number of shares
         shall be subject to a pro rata reduction to reflect the portion of
         the Plan Year prior to the date on which he becomes an Eligible
         Director. In no event shall an Option Award be granted with
         respect to a fractional share, and the amount of any pro-rata
         reduction shall be rounded to the nearest whole share. An Option
         Award made under this paragraph (b) shall be granted on the first
         business day on which the Director is an Eligible Director (the
         "Award Date" for that Option Award).

                                      4
<PAGE>

(i)      In addition to any Option Award granted in accordance with
         paragraphs (b) or (c) of this subsection 3B.1, an individual who
         is an Eligible Director on the first day of the 2001/2002 Plan
         Year shall be granted an Option Award, entitling him to purchase
         2,000 shares of Stock. Such Option Award shall be granted as the
         first business day of the 2001/2002 Plan Year (the "Award Date"
         for that Option Award).

         3B.2.    Terms of Option Awards.
                  ----------------------

(j)      An Option Award shall entitle the Director to purchase shares of
         Stock at a per-share price equal to the greater of: (i) 100% of
         the Fair Market Value of a share of Stock as of the Award Date; or
         (ii) the par value of a share of Stock.

(k)      The full purchase price of each share of Stock purchased upon
         the exercise of any Option Award shall be paid at the time of such
         exercise and, as soon as practicable thereafter, a certificate
         representing the shares so purchased shall be delivered to the
         person entitled thereto.

(l)      The Option Award purchase price shall be payable in cash or in
         shares of Stock (valued at Fair Market Value as of the day of
         exercise), or in any combination thereof. A Director may elect to
         pay the purchase price upon the exercise of an Option Award
         granted pursuant to this Section 3B through a cashless exercise
         procedure established by the Company.

(m)      The Option Award granted to an Eligible Director shall become
         exercisable with respect to one-third of the shares covered by
         the Option Award on the last day of the Plan Year for which it was
         granted; with respect to an additional one-third of the shares
         covered by the Option Award on the last day of the Plan Year next
         following the Plan Year for which it was granted; and with respect
         to the remaining one-third of the shares covered by the Option
         Award on the last day of the next following Plan Year; provided,
         however, that such portion of the Option Award shall become
         exercisable only if such Director's Date of Termination does not
         occur on or prior to the last day of the applicable Plan Year.
         Notwithstanding any provision of the Plan to the contrary, the
         foregoing vesting schedule shall be subject to acceleration, to
         the extent permitted by the Committee, in the event of the
         Participant's death, Disability, retirement, or involuntary
         termination or in the event of a Change in Control.

(n)      An Option Award shall expire on the earlier of: (i) the ten-year
         anniversary of the Award Date or (ii) the one-year anniversary of
         the Director's Date of Termination. Notwithstanding the foregoing,
         the Committee may provide that, following a Director's Date of
         Termination, an Option Award shall expire on any date later than
         the one-year anniversary of the Director's Date of Termination,
         provided that such date of expiration may not be later than the
         ten-year anniversary of the date on which the Option Award was
         granted. No Option shall be exercisable following a Director's
         Date of Termination except to the extent that the Option is
         exercisable prior to, or becomes exercisable as of, such Date of
         Termination.

                                   5
<PAGE>

                                 SECTION 4
                                 ---------
                        OPERATION AND ADMINISTRATION
                        ----------------------------

4.1.     Effective Date.  Subject to the approval of the shareholders of the
         Company at the Company's 1996 annual meeting of its
         shareholders, the Plan shall be effective as of the Effective
         Date; provided, however, that to the extent that Awards are made
         under the Plan prior to its approval by shareholders, they shall
         be contingent on approval of the Plan by the shareholders of the
         Company. The Plan shall be unlimited in duration and, in the event
         of Plan termination, shall remain in effect as long as any shares
         of Stock awarded under it are outstanding and not fully vested, or
         any Option Awards granted under it are outstanding and not
         exercised; provided, however, that no new Awards shall be made
         under the Plan after the tenth anniversary of the Effective Date.
         With respect to any individual who is an Eligible Director on the
         Effective Date, receipt of Awards under the Plan shall be
         contingent on the Director relinquishing, as of the Effective
         Date, and subject to this Plan being approved by the shareholders
         at the 1996 annual meeting, the ownership rights to any shares of
         Stock awarded to him by the Company before the Effective Date, but
         only with respect to the shares that had not vested on or before
         February 1, 1996.

4.2.     Shares Subject to Plan. The shares of Stock with respect to
         which Awards may be made under the Plan shall be shares currently
         authorized but unissued shares, or shares purchased in the open
         market by a direct or indirect wholly owned subsidiary of the
         Company (as determined by the Chairman or any Executive Vice
         President of the Company). The Company may contribute to the
         subsidiary an amount sufficient to accomplish the purchase in the
         open market of the shares of Stock to be so acquired (as
         determined by the Chairman or any Executive Vice President of the
         Company). The number of shares of Stock available for Awards under
         the Plan during any fiscal year of the Company shall equal:

(a)      0.5% of the adjusted average of the outstanding Stock, as that
         number is determined by the Company to calculate fully diluted
         earnings per share for the preceding fiscal year;

         REDUCED BY

(b)      any shares of Stock granted pursuant to Awards under the Plan, and
         any shares of Stock subject to any outstanding award under the Plan;

         provided however, that no reduction shall be made in the number of
shares otherwise available under paragraph 4.2(a) for any shares of Stock
subject to an Award under the Plan to the extent that such shares are not
issued by reason of a lapse, forfeiture, expiration or termination of the
Award for any reason without issuance of shares (whether or not cash or
other consideration is paid to a Participant in respect of such shares).

4.3.     Fractional Shares. No fractional shares of Stock shall be distributed
         under the Plan and, instead, the Fair Market Value of such
         fractional share shall be distributed in cash, with the Fair
         Market Value determined as of the date the fractional share would
         otherwise have been distributable.

                                     6
<PAGE>

4.4.     Adjustments to Shares.
         ---------------------

(a)      If the Company shall effect any subdivision or consolidation of
         shares of Stock or other capital readjustment, payment of stock
         dividend, stock split, combination of shares or recapitalization
         or other increase or reduction of the number of shares of Stock
         outstanding without receiving compensation therefor in money,
         services or property, then the Committee shall adjust (i) the
         number of shares of Stock available under the Plan; (ii) the
         number of shares available under any limits; (iii) the number of
         shares of Stock subject to outstanding (non-vested) Awards and to
         deferred Stock Awards; (iv) the number of shares of Stock subject
         to future grants; and (v) the per-share price under any
         outstanding Option Award.

(b)      If the Company is reorganized, merged or consolidated or is party to
         a plan of exchange with another corporation, pursuant to which
         reorganization, merger, consolidation or plan of exchange the
         shareholders of the Company receive any shares of stock or other
         securities or property, or the Company shall distribute securities
         of another corporation to its shareholders, there shall be
         substituted for the shares subject to outstanding (non-vested)
         Awards and to deferred Stock Awards an appropriate number of
         shares of each class of stock or amount of other securities or
         property which were distributed to the shareholders of the Company
         in respect of such shares; provided that, upon the occurrence of a
         reorganization of the Company or any other event described in this
         paragraph (b), any successor to the Company shall be substituted
         for the Company.

(c)      The existence of this Plan and the Awards granted hereunder
         shall not affect in any way the right or power of the Company or
         its shareholders to make or authorize any or all adjustments,
         recapitalizations, reorganizations or other changes in the
         Company's capital structure or its business, any merger or
         consolidation of the Company, any issue of bonds, debentures,
         preferred or prior preference stocks ahead of or affecting the
         Company's Stock or the rights thereof, the dissolution or
         liquidation of the Company, any sale or transfer of all or any
         part of its assets or business, or any other corporate act or
         proceeding, whether of a similar character or otherwise.

(d)      Except as expressly provided by the terms of this Plan, the
         issue by the Company of shares of stock of any class, or
         securities convertible into shares of stock of any class, for cash
         or property or for labor or services, either upon direct sale,
         upon the exercise of rights or warrants to subscribe therefor or
         upon conversion of shares or obligations of the Company
         convertible into such shares or other securities, shall not
         affect, and no adjustment by reason thereof shall be made with
         respect to Awards then outstanding hereunder.

                                    7
<PAGE>

4.5.     Limit on Distribution.  Distribution of shares of Stock or other
         amounts under the Plan shall be subject to the following:

(a)      Notwithstanding any other provision of the Plan, the Company shall
         have no liability to issue any shares of Stock under the Plan or
         make any other distribution of benefits under the Plan unless such
         delivery or distribution would comply with all applicable laws and
         the applicable requirements of any securities exchange or similar
         entity.

(b)      The Committee shall add such conditions and limitations to any Award
         to any Participant who is subject to Section 16(a) and 16(b) of
         the Securities Exchange Act of 1934, as is necessary to comply
         with Section 16(a) or 16(b) and the rules and regulations
         thereunder or to obtain any exemption therefrom.

(c)      To the extent that the Plan provides for issuance of certificates to
         reflect the transfer of shares of Stock, the transfer of such
         shares may, at the direction of the Committee, be effected on a
         non-certificated basis, to the extent not prohibited by the
         provisions of Rule 16b-3, applicable local law, the applicable
         rules of any stock exchange, or any other applicable rules.

4.6.     Taxes.  All Awards and other payments under the Plan are subject to
         all applicable taxes.

4.7.     Distributions to Disabled Persons.  Notwithstanding any other
         provision of the Plan, if, in the Committee's opinion, a
         Participant or other person entitled to benefits under the Plan is
         under a legal disability or is in any way incapacitated so as to
         be unable to manage his financial affairs, the Committee may
         direct that payment be made to a relative or friend of such person
         for his benefit until claim is made by a conservator or other
         person legally charged with the care of his person or his estate,
         and such payment or distribution shall be in lieu of any such
         payment to such Participant or other person. Thereafter, any
         benefits under the Plan to which such Participant or other person
         is entitled shall be paid to such conservator or other person
         legally charged with the care of his person or his estate.

4.8.     Transferability.  Awards under the Plan are not transferable except
         as designated by the Participant by will or by the laws of descent
         and distribution.

4.9.     Administration.  The authority to control and manage the operation and
         administration of the Plan shall be vested in a committee (the
         "Committee") in accordance with Section 5.

4.10.    Form and Time of Elections. Any election required or permitted
         under the Plan shall be in writing, and shall be deemed to be filed
         when delivered to the Secretary of the Company. Any deferral
         election made under Supplement A shall be irrevocable after it
         is filed.

4.11.    Agreement With Company. Each Award of Stock granted under
         Sections 2 and 3 shall be evidenced by an Agreement (an
         "Agreement") duly executed on behalf of the Company and by the
         Participant to whom such Award is granted and dated as of the
         applicable date of grant. Each Agreement shall comply with and be
         subject to the terms of the Plan.

                                 8
<PAGE>

4.12.    Evidence.  Evidence required of anyone under the Plan may be by
         certificate, affidavit, document or other information which the
         person acting on it considers pertinent and reliable, and signed,
         made or presented by the proper party or parties.

4.13.    Action by Company. Any action required or permitted to be
         taken by the Company shall be by resolution of the Board,
         or by action of one or more members of the Board
         (including a committee of the Board) who are duly
         authorized to act for the board, by a duly authorized
         officer of the Board, or (except to the extent prohibited
         by the provisions of Rule 16b-3, applicable local law,
         the applicable rules of any stock exchange, or any other
         applicable rules) by a duly authorized officer of the
         Company.

4.14.    Gender and Number.  Where the context admits, words in any gender
         shall include any other gender, words in the singular shall include
         the plural and the plural shall include the singular.

                                 SECTION 5
                                 ---------
                                 COMMITTEE
                                 ---------

5.1.     Selection of Committee.  The Committee shall be selected by the
         Board, and shall consist of not less than two members of the Board.

5.2.     Powers of Committee. The authority to manage and control the
         operation and administration of the Plan shall be vested in the
         Committee. The Committee will have the authority to establish,
         amend, and rescind any rules and regulations relating to the Plan,
         to determine the terms and provisions of any agreements made
         pursuant to the Plan, and to make all other determinations that
         may be necessary or advisable for the administration of the Plan.

5.3.     Information to be Furnished to Committee. The Company shall
         furnish the Committee with such data and information as may be
         required for it to discharge its duties. The records of the
         Company as to the period of a Director's service shall be
         conclusive on all persons unless determined to be incorrect.
         Participants and other persons entitled to benefits under the Plan
         must furnish the Committee such evidence, data or information as
         the Committee considers desirable to carry out the terms of the
         Plan.

                                   9
<PAGE>

5.4.     Liability and Indemnification of Committee. No member or
         authorized delegate of the Committee shall be liable to any person
         for any action taken or omitted in connection with the
         administration of the Plan unless attributable to his own fraud or
         willful misconduct; nor shall the Company be liable to any person
         for any such action unless attributable to fraud or willful
         misconduct on the part of a director or employee of the Company.
         The Committee, the individual members thereof, and persons acting
         as the authorized delegates of the Committee under the Plan, shall
         be indemnified by the Company, to the fullest extent permitted by
         law, against any and all liabilities, losses, costs and expenses
         (including legal fees and expenses) of whatsoever kind and nature
         which may be imposed on, incurred by or asserted against the
         Committee or its members or authorized delegates by reason of the
         performance of a Committee function if the Committee or its
         members or authorized delegates did not act dishonestly or in
         willful violation of the law or regulation under which such
         liability, loss, cost or expense arises. This indemnification
         shall not duplicate but may supplement any coverage available
         under any applicable insurance.

                                 SECTION 6
                                 ---------
                         AMENDMENT AND TERMINATION
                         -------------------------

         The Board may, at any time, amend or terminate the Plan, provided
that, subject to subsection 4.4 (relating to certain adjustments to
shares), no amendment or termination may adversely affect the rights of any
Participant or beneficiary under any Award made under the Plan prior to the
date such amendment is adopted by the Board. Notwithstanding the provisions
of this Section 6, in no event shall the provisions of the Plan relating to
Awards under the Plan be amended more than once every six months, other
than to comport with changes in the Code, the Employee Retirement Income
Security Act, or the rules thereunder; provided, however, that the
limitation set forth in this sentence shall be applied only to the extent
required under SEC Rule 16b-3(c)(2)(ii)(B) or any successor provision
thereof.

                                 SECTION 7
                                 ---------
                               DEFINED TERMS
                               -------------

         For purposes of the Plan, the terms listed below shall be defined
as follows:

(a)      Award. The term "Award" shall mean the Retainer Award,
         the Option Award, the Committee Chairman Award, and the
         Meeting Award granted to any person under the Plan.

(b)      Board.  The term "Board" shall mean the Board of Directors of the
         Company.

(c)      Change in Control.  The term "Change in Control" shall mean the
         occurrence of any one of the following events:

                                 10
<PAGE>

o   any "person," as such term is used in Sections 3(a)(9) and 13(d)
    of the Securities Exchange Act of 1934, becomes a "beneficial
    owner," as such term is used in Rule 13d-3 promulgated under that
    act, of 50% or more of the Voting Stock (as defined below) of the
    Company;

o   the majority of the Board consists of individuals other than
    Incumbent Directors, which term means the members of the Board on
    the date of this Agreement; provided that any person becoming a
    director subsequent to such date whose election or nomination for
    election was supported by three-quarters of the directors who then
    comprised the Incumbent Directors shall be considered to be an
    Incumbent Director;

o   the Company adopts any plan of liquidation providing for the distribution
    of all or substantially all of its assets;

o   all or substantially all of the assets or business of the Company
    is disposed of pursuant to a merger, consolidation or other
    transaction (unless the shareholders of the Company immediately
    prior to such merger, consolidation or other transaction
    beneficially own, directly or indirectly, in substantially the
    same proportion as they owned the Voting Stock of the Company, all
    of the Voting Stock or other ownership interests of the entity or
    entities, if any, that succeed to the business of the Company); or

o   the Company combines with another company and is the surviving
    corporation but, immediately after the combination, the
    shareholders of the Company immediately prior to the combination
    hold, directly or indirectly, 50% or less of the Voting Stock of
    the combined company (there being excluded from the number of
    shares held by such shareholders, but not from the Voting Stock of
    the combined company, any shares received by Affiliates (as
    defined below) of such other company in exchange for stock of such
    other company).

For the purpose of this definition of "Change in Control", (I) an
"Affiliate" of a person or other entity shall mean a person or other entity
that directly or indirectly controls, is controlled by, or is under common
control with the person or other entity specified and (II) "Voting Stock"
shall mean capital stock of any class or classes having general voting
power under ordinary circumstances, in the absence of contingencies, to
elect the directors of a corporation.

(d)      Date of Termination.  A Participant's "Date of Termination" shall
         be the day following the last day on which he serves as a Director.

(e)      Director.  The term "Director" means a member of the Board.

(f)      Disability. A Participant shall be considered to have a
         "Disability" during the period in which he is unable, by
         reason of a medically determinable physical or mental
         impairment, to engage in any substantial gainful
         activity, which condition, in the opinion of a physician
         selected by the Committee, is expected to have a duration
         of not less than 120 days.

                                      11
<PAGE>

(g)      Dollars.  As used in the Plan, the term "dollars" or numbers preceded
         by the symbol "$" shall mean amounts in United States Dollars.

(h)      Effective Date.  The "Effective Date" means the date on which
         Directors begin their yearly term of office on the Board following
         their election at the Company's 1996 annual shareholders meeting.

(i)      Eligible Director.  Each Director who is not an employee of the
         Company or any Related Company shall be an "Eligible Director".

(j)      Fair Market Value. The "Fair Market Value" of a share of
         Stock of the Company as of any date shall be the closing
         market composite price for such Stock as reported for the
         New York Stock Exchange - Composite Transactions on that
         date or, if Stock is not traded on that date, on the next
         preceding date on which Stock was traded.

(k)      Participant.  A "Participant" is any person who has received an Award
         under the Plan.

(l)      Plan Year. The term "Plan Year" means the period (i) beginning
         on the date on which members of the Board begin their yearly term
         as Board members following the election of Directors at the
         Company's annual shareholders meeting and (ii) ending on the day
         immediately prior the first day of the following Plan Year. The
         first Plan Year shall begin on the Effective Date.

(m)      Plan Year Quarter.  For any Plan Year, the first Plan Year Quarter
         shall begin on the first day of the plan year, and shall end on
         the 90th day of the Plan Year; the second Plan Year Quarter shall
         begin on the 91st day of the Plan Year, and shall end on the 180th
         day of the Plan Year; the third Plan Year Quarter shall begin on
         the 181st day of the Plan Year, and shall end on the 270th day of
         the Plan Year; and the fourth Plan Year Quarter shall begin on the
         271st day of the Plan Year, and shall end on the last day of the
         Plan Year. Notwithstanding the foregoing, with respect to only the
         1999 Plan Year, there shall be an additional Plan Year Quarter, so
         that the fourth Plan Year Quarter shall begin on the 271st day of
         the Plan Year, and shall end on the 360th day of the Plan Year;
         and the fifth Plan Year Quarter shall begin on the 361st day of
         the Plan Year, and shall end on the last day of the Plan Year.

(n)      Related Companies.  The term "Related Company" means any company
         during any period in which it is a "subsidiary corporation"
         (as that term is defined in Code section 424(f)) with respect to
         the Company.

(o)      SEC.  "SEC" shall mean the Securities and Exchange Commission.

(p)      Stock.  The term "Stock" shall mean shares of common stock of the
         Company.

                                      12
<PAGE>

                                SUPPLEMENT A
                                ------------
                             ELECTIVE DEFERRAL
                             -----------------

                                SECTION A-1
                                -----------

                             DEFERRAL ELECTION
                             -----------------

A-1-1.   General.  An individual who is otherwise entitled to receive a
         Retainer Award or a Committee Chairman Award, or who is
         otherwise eligible to receive cash payment for services provided
         as a Director ("Cash Compensation"), may elect to defer delivery
         of all or a portion of such shares of Stock and such cash, subject
         to the following terms of this Section A-1.

A-1-2.   Stock Deferral Election.

(a)      An election to defer the receipt of Stock awarded as the
         Retainer Award for any Plan Year, to defer receipt of
         Stock awarded as the Meeting Award for any Plan Year, or
         to defer the receipt of Stock awarded as a Committee
         Chairman Award for any quarter of a Plan Year, shall be
         filed prior to the first day of that year.

(b)      An individual who becomes an Eligible Director on a date
         other than the first day of a Plan Year may elect to
         defer all or a portion of the Retainer Award for the
         remainder of the year by filing a deferral election prior
         to the date on which he becomes an Eligible Director.

(c)      An individual who becomes a Committee Chairman on a date
         other than the first day of a Plan Year may elect to
         defer all or a portion of the Committee Chairman Award
         for the remainder of the year by filing a deferral
         election prior to the date on which he becomes Committee
         Chairman; and, by filing a deferral election within 30
         days after becoming a Committee Chairman, he may defer
         receipt of the portion of the Committee Chairman Award
         for the portion of the Plan Year following the 30-day
         period.

(d)      An individual who becomes an Eligible Director on a date
         other than the first day of a Plan Year may elect to
         defer all or a portion of the Meeting Award for the
         remainder of the year by filing a deferral election prior
         to the date on which he becomes an Eligible Director.

A-1-3.   Deferral Election.

(a)      An election to defer the receipt of Cash Compensation for any Plan
         Year shall be filed prior to the first day of that year.

(b)      An individual who becomes an Eligible Director on a date
         other than the first day of a Plan Year may elect to
         defer all or a portion of the Cash Compensation for the
         remainder of the year by filing a deferral election prior
         to the date on which he becomes an Eligible Director.

                                  13

<PAGE>

                                SECTION A-2
                                -----------
                                  ACCOUNTS
                                  --------

A-2-1.   Stock Account.  A Stock Account shall be maintained on behalf
         of each Participant who elects to defer the distribution of
         shares of Stock under this Supplement A, for the period during
         which delivery of shares of Stock is deferred. A Participant's
         Stock Account shall be subject to the following adjustments:

(a)      The Stock Account will be credited with Share Units equal
         to the number of shares of Stock as to which the
         Participant has elected deferred receipt, with such Share
         Units to be credited as of the date on which the shares
         would otherwise have been delivered to him in the absence
         of the deferral.

(b)      As of each dividend record date for the Stock following the date
         any Share Units are credited to the Participant's Stock Account,
         and prior to the date of distribution of shares of Stock with
         respect to those Share Units, the Participant's Stock Account
         shall be credited with additional Share Units (including
         fractional Share Units) equal to (i) the amount of the dividend
         that would be payable with respect to the number of shares of
         Stock equal to the number of Share Units credited to the
         Participant's Stock Account on the dividend record date; divided
         by (ii) the Fair Market Value of a share of Stock on the date of
         payment of the dividend.

(c)      As of the date of any distribution of shares of Stock
         with respect to a Participant's Stock Account under
         Section A-3, the Share Units credited to a Participant's
         Stock Account shall be reduced by the number of Shares so
         distributed to the Participant.

A-2-2.   Cash Account. A Cash Account shall be maintained on behalf of
         each Participant who elects to defer the distribution of cash
         under this Supplement A, for the period during which delivery
         of cash is deferred. A Participant's Cash Account shall be
         credited with interest, with the applicable interest rate for
         any calendar year equal to the prime rate as of the first
         business day of that calendar year, as reported in The Wall
         Street Journal. As of the date of any distribution with
         respect to a Participant's Account under Section A-3, the
         balance credited to a Participant's Account shall be reduced
         by the amount of the distribution to the Participant.

A-2-3.   Statement of Accounts. As soon as practicable after the end
         of each Plan Year, the Company shall provide each Participant
         having one or more Accounts under the Plan with a statement
         of the transactions in his Accounts during that year and his
         Account balances as of the end of the year.

                                    14
<PAGE>

                                SECTION A-3
                                -----------
                               DISTRIBUTIONS
                               -------------

A-3-1.   General.

(a)      Subject to the terms of this Section A-3, a Participant shall
         specify, as part of his deferral election with respect to Stock
         Awards, and as part of his deferral election with respect to Cash
         Compensation, the time of distribution of the amounts deferred
         pursuant to such election; provided, however, that distribution of
         shares of Stock, and of Cash Compensation, shall be made in a lump
         sum not later than the first anniversary of the date on which the
         individual ceases to be a Director; and further provided that a
         Participant may elect only a single date for distribution of all
         of his deferred Stock Awards and only a single date for
         distribution of all of his deferred Cash Compensation under the
         Plan, provided that the distribution date for the Participant's
         deferred Stock Awards and for deferred Cash Compensation may
         differ.

(b)      At the time of distribution of deferred shares in accordance
         with the Participant's election, the Participant shall receive a
         distribution of shares of Stock equal to the number of share units
         credited to his Account immediately prior to such distribution. If
         the scheduled distribution date would otherwise occur after a
         dividend record date but before the payment of the dividend,
         distribution shall be deferred (not more than 30 days) until the
         dividend is paid.

(c)      At the time of distribution of Cash Compensation in accordance
         with the Participant's election, the Participant shall receive the
         amount then credited to the Participant's Cash Account as of the
         date of distribution.

(d)      In determining a Participant's right to distributions of stock
         under this Section A-3, the vesting provisions of subsection 2.3
         of the Plan shall apply to the share units credited to the
         Participant's Stock Account as though each unit represented one
         share of Stock, and with all units attributable to payment of
         dividends being fully vested as of the date they are credited to
         the Participant's Stock Account.

(e)      Notwithstanding the foregoing provisions of this Section A-3, if
         any share units are credited to a Participant's Stock Account as
         of the date of a Change in Control, the Participant shall receive
         a distribution of shares of Stock equal to the number of such
         share units. Such distribution shall be in settlement of the
         Participant's rights to distribution under this Section A-3,
         provided that if the record date for a dividend is prior to a
         Change in Control, but the dividend payment is to occur after such
         Change in Control, the additional shares attributable to such
         dividends shall be distributed as soon as practicable thereafter.

A-3-2.   Limitation of Implied Rights. Neither the Participant nor any
         other person shall, by reason of deferral of shares of Stock or
         the deferral of Cash Compensation, under this Supplement A,
         acquire any right in or title to any assets, funds or property of
         the Company whatsoever prior to the date such shares are
         distributed. A Participant shall have only a contractual right to
         the shares and cash, if any, distributable under the Plan,
         unsecured by any assets of the Company. Nothing contained in the
         Plan shall constitute a guarantee by the Company that the assets
         of the Company shall be sufficient to provide any benefits to any
         person.

                                        15Exhibit 10.3

                                ACE LIMITED 1995
                            LONG-TERM INCENTIVE PLAN
                    (As Amended Through the Second Amendment)

                                 SECTION 1
                                 ---------

                                  GENERAL
                                  -------

        1.1 Purpose. The ACE Limited 1995 Long-Term Incentive Plan (the
"Plan") has been established by ACE Limited (the "Company") to:

(a)     attract and retain Directors of the Company and employees of the
        Company and Related Companies;

(b)     motivate participating employees and Directors, by means of appropriate
        incentives, to achieve long-range goals;

(c)     provide incentive compensation opportunities that are competitive with
        those of other major corporations; and

(d)     further identify Participants' interests with those of the Company's
        other shareholders through compensation that is based on the Company's
        common stock;

and thereby promote the long-term financial interest of the Company and the
Related Companies, including the growth in value of the Company's equity and
enhancement of long-term shareholder return.

        1.2 Participation. Subject to the terms and conditions of the Plan,
the Committee shall determine and designate, from time to time from among
the employees of the Employers and from among the Directors of the Company
those persons who will be granted one or more Awards under the Plan, and
thereby become "Participants" in the Plan. In the discretion of the
Committee, and subject to the terms of the Plan, a Participant may be
granted any Award permitted under the provisions of the Plan, and more than
one Award may be granted to a Participant. Except as otherwise agreed by
the Committee and the Participant, or except as otherwise provided in the
Plan, an Award under the Plan shall not affect any previous Award under the
Plan or an award under any other plan maintained by the Company or the
Related Companies.

        1.3 Operation and Administration. The operation and administration
of the Plan, including the Awards made under the Plan, shall be subject to
the provisions of Section 6. Capitalized terms in the Plan shall be defined
as set forth in Section 10 or elsewhere in the Plan.

                                       1
<PAGE>

                                 SECTION 2
                                 ---------
                                  OPTIONS
                                  -------

        2.1 Definitions. The grant of an Option under this Section 2 entitles
the Participant to purchase shares of Stock at a price fixed at the time
the Option is granted, or at a price determined under a method established
at the time the Option is granted, subject to the terms of this Section 2.
Options granted under this Section 2 may be either Incentive Stock Options
or Non-Qualified Stock Options, as determined in the discretion of the
Committee, except that, to the extent required by the Code, a Director who
is not an employee of the Company or a Related Company may not be granted
an Incentive Stock Option. An "Incentive Stock Option" is an Option that is
intended to satisfy the requirement applicable to an "incentive stock
option" described in section 422(b) of the Code. A "Non-Qualified Option"
is an Option that is not intended to be an "incentive stock option" as that
term is described in section 422(b) of the Code.

        2.2 Eligibility. The Committee shall designate the Participants to
whom Options are to be granted under this Section 2 and shall determine the
number of shares of Stock to be subject to each such Option. To the extent
that the aggregate fair market value of Stock with respect to which
Incentive Stock Options are exercisable for the first time by any
individual during any calendar year (under all plans of the Company and all
Related Companies) exceeds $100,000, such options shall be treated as
Non-Qualified Stock Options, to the extent required by section 422 of the
Code.

        2.3 Price. The determination and payment of the purchase price of a
share of Stock under each Option granted under this Section 2 shall be
subject to the following:

(a)     The purchase price shall be established by the Committee or shall be
        determined by a method established by the Committee at the time the
        Option is granted; provided, however, that in no event shall such price
        be less than the greater of (i) 100% of the Fair Market Value of a
        share of Stock as of the date on which the Option is granted; or (ii)
        the par value of a share of Stock on such date.

(b)     Subject to the following provisions of this subsection 2.3, the full
        purchase price of each share of Stock purchased upon the exercise of
        any Option shall be paid at the time of such exercise and, as soon as
        practicable thereafter, a certificate representing the shares so
        purchased shall be delivered to the person entitled thereto.

(c)     The purchase price shall be payable in cash or in shares of Stock
        (valued at Fair Market Value as of the day of exercise), or in any
        combination thereof, as determined by the Committee.

(d)     A Participant may elect to pay the purchase price upon the exercise of
        an Option through a cashless exercise arrangement as may be established
        by the Committee.

                                       2
<PAGE>

        2.4 Exercise. Except as otherwise expressly provided in the Plan, an
Option granted under this Section 2 shall be exercisable in accordance with
the following terms of this subsection 2.4:

(a)     The terms and conditions relating to exercise of an Option shall be
        established by the Committee, and may include, without limitation,
        conditions relating to completion of a specified period of service,
        achievement of performance standards, or achievement of Stock ownership
        objectives by the Participant.

(b)     No Option may be exercised by a Participant: (i) prior to the date on
        which the Participant completes one Year of Service with the Company or
        any Related Company after the date as of which the Option is granted
        (provided, however, that the Committee may permit exercise following
        the Participant's Date of Termination for any period, ending not later
        than the Expiration Date for the Option as the Committee determines,
        regardless of whether the Participant had completed one Year of Service
        at the Date of Termination); or (ii) after the Expiration Date
        applicable to that Option.

(c)     The exercise of an Option will result in the surrender of the
        corresponding rights under a tandem Stock Appreciation Right, if any.

        2.5 Post-Exercise Limitations. The Committee, in its discretion, may
impose such restrictions on shares of Stock acquired pursuant to the
exercise of an Option (including stock acquired pursuant to the exercise of
a tandem Stock Appreciation Right) as it determines to be desirable,
including, without limitation, restrictions relating to disposition of the
shares and forfeiture restrictions based on service, performance, Stock
ownership by the Participant, and such other factors as the Committee
determines to be appropriate.

        2.6 Expiration Date. The "Expiration Date" with respect to an Option
means the date established as the Expiration Date by the Committee at the
time of the grant; provided, however, that the Expiration Date with respect
to any Option shall not be later than the earliest to occur of:

(a)     the ten-year anniversary of the date on which the Option is granted;

(b)     if the Participant's Date of Termination occurs by reason of death or
        Disability, the one-year anniversary of such Date of Termination; or

(c)     if the Participant's Date of Termination occurs by reason of
        Retirement, the date on which the Expiration Date would expire if the
        Participant's Date of Termination occurred on the ten-year anniversary
        of such date on which the Option is granted or, if earlier, the date of
        the Participant's death; or

(d)     if the Participant's Date of Termination occurs for reasons other than
        Retirement, death or Disability, the three-month anniversary of such
        Date of Termination.

Notwithstanding any provision of the Plan to the contrary, the Committee
may provide that, following a Participant's Date of Termination, regardless
of the reason for such Date of Termination, the Expiration Date with
respect to any Option granted to such Participant shall be any date
determined by the Committee, provided that such Expiration Date may not be
later than the ten-year anniversary of the date on which the Option was
granted.

                                       3
<PAGE>

        2.7 Restoration Option. In the event the Participant exercises an
Option and pays all or a portion of the purchase price in Common Stock, in
the manner permitted by subsection 2.3, such Participant may, in the
Committee's discretion, be issued a new Option to purchase additional
shares of Stock equal to the number of shares of Stock surrendered to the
Company in such payment plus the number of shares surrendered to satisfy
the Participant's tax liability. Such new Option shall have an exercise
price equal to the Fair Market Value per share on the date such new Option
is granted, shall first be exercisable not less than six months from the
date of grant of the new Option and shall have an Expiration Date that is
the same as the Expiration Date of the original Option so exercised by
payment of the purchase price in shares of Stock.

        2.8 Limited Stock Appreciation Rights. The Committee may award
Limited Stock Appreciation Rights in tandem with an Option, regardless of
whether the Option is in tandem with a Stock Appreciation Right. An award
of Limited Stock Appreciation Rights entitles the Participant to receive,
in connection with a Change in Control, a cash payment in cancellation of
the tandem Options (and any Stock Appreciation Rights in tandem with such
Options) which are outstanding on the date the Change in Control occurs
(regardless of whether such Options are then presently exercisable). The
payment amount shall be equal to the difference between the exercise price
per share of any Stock covered by the tandem Option and the "Market Price"
of a share of Stock. For purposes of this subsection 2.8, the term "Market
Price" shall mean the greater of (a) the highest price per share of Stock
paid in connection with the Change in Control and (b) the highest price per
share of Stock as reported on the Composite Transaction Reporting System on
the New York Stock Exchange (which includes other participating exchanges
and over-the-counter markets) during the 30-day period ending on the date
of the Change in Control.

                                 SECTION 3
                                 ---------
                         STOCK APPRECIATION RIGHTS
                         -------------------------

        3.1 Definition. Subject to the terms of this Section 3, a Stock
Appreciation Right granted under the Plan entitles the Participant to
receive, in cash or Stock (as determined in accordance with subsection
3.4), value equal to all or a portion of the excess of: (a) the Fair Market
Value of a specified number of shares of Stock at the time of exercise;
over (b) a specified price which shall not be less than 100% of the Fair
Market Value of the Stock at the time the Stock Appreciation Right is
granted, or, if granted in tandem with an Option, the exercise price with
respect to shares under the tandem Option.

        3.2 Eligibility. Subject to the provisions of the Plan, the Committee
shall designate the Participants to whom Stock Appreciation Rights are to
be granted under the Plan, shall determine the exercise price or a method
by which the price shall be established with respect to each such Stock
Appreciation Right, and shall determine the number of shares of Stock on
which each Stock Appreciation Right is based. A Stock Appreciation Right
may be granted in connection with all or any portion of a previously or
contemporaneously granted Option or not in connection with an Option. If a
Stock Appreciation Right is granted in connection with an Option, then, in
the discretion of the Committee, the Stock Appreciation Right may, but need
not be granted in tandem with the Option.

        3.3 Exercise. The exercise of Stock Appreciation Rights shall be
subject to the following:

(a)     The terms and conditions relating to exercise of a Stock Appreciation
        Right shall be established by the Committee, and may include, without
        limitation, conditions relating to completion of a specified period of
        service, achievement of performance standards, or achievement of Stock
        ownership objectives by the Participant.

                                       4
<PAGE>

(b)     If a Stock Appreciation Right is not in tandem with an Option, then the
        Stock Appreciation Right shall be exercisable in accordance with the
        terms established by the Committee in connection with such rights;
        provided, however, that except as otherwise expressly provided in the
        Plan, no Stock Appreciation Right may be exercised by a Participant (i)
        prior to the date on which he completes one Year of Service with the
        Company or any Related Company after the date as of which the Stock
        Appreciation Right is granted (provided, however, that the Committee
        may permit earlier exercise following the Participant's Date of
        Termination by reason of death or Disability); or (ii) after the
        Expiration Date applicable to that Stock Appreciation Right.

(c)     If a Stock Appreciation Right is in tandem with an Option, then the
        Stock Appreciation Right shall be exercisable at the time the tandem
        Option is exercisable. The exercise of a Stock Appreciation Right will
        result in the surrender of the corresponding rights under the tandem
        Option.

        3.4 Settlement of Award. Upon the exercise of a Stock Appreciation
Right, the value to be distributed to the Participant, in accordance with
subsection 3.1, shall be distributed in shares of Stock (valued at their
Fair Market Value at the time of exercise), in cash, or in a combination
thereof, in the discretion of the Committee.

        3.5 Post-Exercise Limitations. The Committee, in its discretion, may
impose such restrictions on shares of Stock acquired pursuant to the
exercise of a Stock Appreciation Right as it determines to be desirable,
including, without limitation, restrictions relating to disposition of the
shares and forfeiture restrictions based on service, performance, ownership
of Stock by the Participant, and such other factors as the Committee
determines to be appropriate.

        3.6 Expiration Date. If a Stock Appreciation Right is in tandem with
an Option, then the "Expiration Date" for the Stock Appreciation Right
shall be the Expiration Date for the related Option. If a Stock
Appreciation Right is not in tandem with an Option, then the "Expiration
Date" for the Stock Appreciation Right shall be the date established as the
Expiration Date by the Committee; provided, however, that subject to the
following provisions of this subsection 3.6, the Expiration Date with
respect to any Stock Appreciation Right shall not be later than the
earliest to occur of:

(a)     the ten-year anniversary of the date on which the Stock Appreciation
        Right is granted;

(b)     if the Participant's Date of Termination occurs by reason of death or
        Disability, the one-year anniversary of such Date of Termination; or

(c)     if the Participant's Date of Termination occurs by reason of
        Retirement, the three-year anniversary of such Date of Termination; or

(d)     if the Participant's Date of Termination occurs for reasons other than
        Retirement, death or Disability, the three-month anniversary of such
        Date of Termination.

                                       5
<PAGE>

                                 SECTION 4
                                 ---------
                              RESTRICTED STOCK
                              ----------------

        4.1 Definition. Subject to the terms of this Section 4, Restricted
Stock Awards under the Plan are grants of Stock to Participants, the
vesting of which is subject to such conditions as may be established by the
Committee, with some or all of those conditions relating to performance or
events occurring after the date of grant.

        4.2 Eligibility. The Committee shall designate the Participants to
whom Restricted Stock is to be granted, and the number of shares of Stock
that are subject to each such Award. The Award of shares under this Section
4 may, but need not be made in conjunction with a cash-based incentive
compensation program maintained by the Company, and may, but need not, be
in lieu of cash otherwise awardable under such program.

        4.3 Terms and Conditions of Awards. Shares of Restricted Stock granted
to Participants under the Plan shall be subject to the following terms and
conditions:

(a)     Restricted Stock granted to Participants may not be sold, assigned,
        transferred, pledged or otherwise encumbered, except as hereinafter
        provided, for a period of not less than one year after the time of the
        grant of such Stock (the "Restricted Period"). Except for such
        restrictions, the Participant as owner of such shares shall have all
        the rights of a shareholder, including but not limited to the right to
        vote such shares and, except as otherwise provided by the Committee,
        the right to receive all dividends paid on such shares.

(b)     Except as otherwise determined by the Committee, a Participant whose
        Date of Termination occurs prior to the end of the Restricted Period
        for any reason shall forfeit all shares of Restricted Stock remaining
        subject to any outstanding Restricted Stock Award.

(c)     The Committee may, in its discretion, condition the vesting of shares
        of Restricted Stock on the achievement of performance goals.

(d)     Each certificate issued in respect of such Stock shall be registered in
        the name of the Participant and deposited in a bank designated by the
        Committee. Each such certificate shall bear the following (or a
        similar) legend:

                 "The transferability of this certificate and the shares of
                 stock represented hereby are subject to the terms and
                 conditions (including forfeiture) contained in the ACE Limited
                 1995 Long-Term Incentive Plan and an agreement entered into
                 between the registered owner and ACE Limited. A copy of such
                 plan and agreement is on file in the office of the General
                 Counsel of ACE Limited, The ACE Building, 30 Woodbourne
                 Avenue, Hamilton HM 08, Bermuda."

(e)     Subject to the limitations of the Plan and the Award of Restricted
        Stock, at the end of the Restricted Period for Restricted Stock, such
        Restricted Stock will be transferred free of all restrictions to a
        Participant (or his or her legal representative, beneficiary or heir).

                                       6
<PAGE>

                                 SECTION 5
                                 ---------
                           STOCK PURCHASE PROGRAM
                           ----------------------

        5.1 Purchase of Stock. The Committee may, from time to time, establish
one or more programs under which Participants will be permitted to purchase
shares of Stock under the Plan on a periodic basis, and shall designate the
Participants eligible to participate under such Stock purchase programs.
The purchase price for shares of Stock available under such programs, and
other terms and conditions of such programs, shall be established by the
Committee. The purchase price may not be less than the Fair Market Value of
the Stock at the time of purchase (or, in the Committee's discretion, the
value of the Stock based on the average Fair Market Value for a number of
days determined by the Committee); provided, however, that with respect to
shares of Stock purchased under a program that do not result in an award of
matching shares (as provided in subsection 5.2), the purchase price may not
be less than 50% of the Fair Market Value of the Stock at the time of
purchase (or, in the Committee's discretion, the value of the Stock based
on the average Fair Market Value for a number of days determined by the
Committee).

        5.2 Matching Shares. Except as otherwise provided in subsection 5.1,
any Stock purchase program established by the Committee under this Section
5 may provide for the award of matching shares of Stock, except that in no
event shall the matching rate exceed one share for each one share purchased
by the Participant.

        5.3 Restrictions on Shares. The Committee may impose such restrictions
with respect to shares purchased under subsection 5.1, or matching shares
awarded pursuant to subsection 5.2, as the Committee determines to be
appropriate. Such restrictions may include, without limitation,
restrictions of the type that may be imposed with respect to Restricted
Stock under Section 4.

                                 SECTION 6
                                 ---------
                        OPERATION AND ADMINISTRATION
                        ----------------------------

        6.1 Effective Date. Subject to the approval of the shareholders of the
Company at the Company's 1996 annual meeting of its shareholders, the Plan
shall be effective as of the date on which it is adopted by the Board;
provided, however, that to the extent that Awards are made under the Plan
prior to its approval by shareholders, they shall be contingent on approval
of the Plan by the shareholders of the Company. The Plan shall be unlimited
in duration and, in the event of Plan termination, shall remain in effect
as long as any Awards under it are outstanding; provided, however, that no
new Awards shall be made under the Plan after the tenth anniversary of the
Effective Date.

        6.2 Shares Subject to Plan. The shares of Stock with respect to which
Awards may be made under the Plan shall be currently authorized but
unissued shares, or shares purchased in the open market by a direct or
indirect wholly owned subsidiary of the Company (as determined by the
Chairman or any Executive Vice President of the Company). The Company may
contribute to the subsidiary an amount sufficient to accomplish the
purchase in the open market of the shares of Stock to be so acquired (as
determined by the Chairman or any Executive Vice President of the Company).
The number of shares of Stock available for Awards under the Plan during
any fiscal year of the Company shall equal:

(a)     5% of the adjusted average of the outstanding Stock, as that number is
        determined by the Company to calculate fully diluted earnings per share
        for the preceding fiscal year;

        REDUCED BY

(b)     any shares of Stock granted pursuant to Awards under the Plan, and any
        shares of Stock subject to any outstanding award under the Plan;

                                       7
<PAGE>

provided, however, that no reduction shall be made in the number of shares
otherwise available under paragraph 6.2(a) for any shares of Stock subject
to an Award under the Plan to the extent that such shares are not issued by
reason of a lapse, forfeiture, expiration or termination of the Award for
any reason without issuance of shares (whether or not cash or other
consideration is paid to a Participant in respect of such shares); and
further provided that no more than 2,300,000 shares of Common Stock shall
be cumulatively available for issuance under the Plan for the Award of
Incentive Stock Options.

        6.3 Adjustments to Shares.

(a)     If the Company shall effect any subdivision or consolidation of shares
        of Stock or other capital readjustment, payment of stock dividend,
        stock split, combination of shares or recapitalization or other
        increase or reduction of the number of shares of Stock outstanding
        without receiving compensation therefor in money, services or property,
        then the Committee shall adjust (i) the number of shares of Stock
        available under the Plan; (ii) the number of shares available under any
        limits; (iii) the number of shares of Stock subject to outstanding
        Awards; and (iv) the per-share price under any outstanding Award to the
        extent that the Participant is required to pay a purchase price per
        share with respect to the Award.

(b)     If the Company is reorganized, merged or consolidated or is party to a
        plan of exchange with another corporation, pursuant to which
        reorganization, merger, consolidation or plan of exchange the
        shareholders of the Company receive any shares of stock or other
        securities or property, or the Company shall distribute securities of
        another corporation to its shareholders, there shall be substituted for
        the shares subject to outstanding Awards an appropriate number of
        shares of each class of stock or amount of other securities or property
        which were distributed to the shareholders of the Company in respect of
        such shares, subject to the following:

        (i)  If the Committee determines that the substitution described in
             accordance with the foregoing provisions of this paragraph (b)
             would not be fully consistent with the purposes of the Plan or
             the purposes of the outstanding Awards under the Plan, the
             Committee may make such other adjustments to the Awards to the
             extent that the Committee determines such adjustments are
             consistent with the purposes of the Plan and of the affected
             Awards.

        (ii)  All or any of the Awards may be cancelled by the Committee on
              or immediately prior to the effective date of the applicable
              transaction, but only if the Committee gives reasonable
              advance notice of the cancellation to each affected
              Participant, and only if either: (A) the Participant is
              permitted to exercise the Award for a reasonable period prior
              to the effective date of the cancellation; or (B) the
              Participant receives payment or other benefits that the
              Committee determines to be reasonable compensation for the
              value of the cancelled Awards.

        (iii) Upon the occurrence of a reorganization of the Company or any
              other event described in this paragraph (b), any successor to
              the Company shall be substituted for the Company to the extent
              that the Company and the successor agree to such substitution.

                                      8

<PAGE>

(c)     Upon (or, in the discretion of the Committee, immediately prior to) the
        sale to (or exchange with) a third party unrelated to the Company of
        all or substantially all of the assets of the Company, all Awards shall
        be cancelled. If Awards are cancelled under this paragraph (c), then,
        with respect to any affected Participant, either:

       (i)       the Participant shall be provided with reasonable advance
                 notice of the cancellation, and the Participant shall be
                 permitted to exercise the Award for a reasonable period prior
                 to the effective date of the cancellation; or

       (ii)      the Participant shall receive payment or other benefits that
                 the Committee determines to be reasonable compensation for the
                 value of the cancelled Awards.

        The foregoing provisions of this paragraph (c) shall also apply to the
        sale of all or substantially all of the assets of the Company to a
        related party, if the Committee determines such application is
        appropriate.

(d)     In determining what action, if any, is necessary or appropriate under
        the foregoing provisions of this subsection 6.3, the Committee shall
        act in a manner that it determines to be consistent with the purposes
        of the Plan and of the affected Awards and, where applicable or
        otherwise appropriate, in a manner that it determines to be necessary
        to preserve the benefits and potential benefits of the affected Awards
        for the Participants and the Employers.

(e)     The existence of this Plan and the Awards granted hereunder shall not
        affect in any way the right or power of the Company or its shareholders
        to make or authorize any or all adjustments, recapitalizations,
        reorganizations or other changes in the Company's capital structure or
        its business, any merger or consolidation of the Company, any issue of
        bonds, debentures, preferred or prior preference stocks ahead of or
        affecting the Company's Stock or the rights thereof, the dissolution or
        liquidation of the Company, any sale or transfer of all or any part of
        its assets or business, or any other corporate act or proceeding,
        whether of a similar character or otherwise.

(f)     Except as expressly provided by the terms of this Plan, the issue by
        the Company of shares of stock of any class, or securities convertible
        into shares of stock of any class, for cash or property or for labor or
        services, either upon direct sale, upon the exercise of rights or
        warrants to subscribe therefor or upon conversion of shares or
        obligations of the Company convertible into such shares or other
        securities, shall not affect, and no adjustment by reason thereof shall
        be made with respect to Awards then outstanding hereunder.

(g)     Awards under the Plan are subject to adjustment under this subsection
        6.3 only during the period in which they are considered to be
        outstanding under the Plan. For purposes of this subsection 6.3, an
        Award is considered "outstanding" on any date if the Participant's
        ability to obtain all benefits with respect to the Award is subject to
        limits imposed by the Plan (including any limits imposed by the
        Agreement reflecting the Award). The determination of whether an Award
        is outstanding shall be made by the Committee.

                                       9
<PAGE>

        6.4 Limit on Distribution. Distribution of shares of Stock or other
amounts under the Plan shall be subject to the following:

(a)     Notwithstanding any other provision of the Plan, the Company shall have
        no liability to issue any shares of Stock under the Plan or make any
        other distribution of benefits under the Plan unless such delivery or
        distribution would comply with all applicable laws and the applicable
        requirements of any securities exchange or similar entity.

(b)     In the case of a Participant who is subject to Section 16(a) and 16(b)
        of the Securities Exchange Act of 1934, the Committee may, at any time,
        add such conditions and limitations to any Award to such Participant,
        or any feature of any such Award, as the Committee, in its sole
        discretion, deems necessary or desirable to comply with Section 16(a)
        or 16(b) and the rules and regulations thereunder or to obtain any
        exemption therefrom.

(c)     To the extent that the Plan provides for issuance of certificates to
        reflect the transfer of shares of Stock, the transfer of such shares
        may, at the direction of the Committee, be effected on a
        non-certificated basis, to the extent not prohibited by the provisions
        of Rule 16b-3, applicable local law, the applicable rules of any stock
        exchange, or any other applicable rules.

        6.5 Liability for Cash Payments. Subject to the provisions of this
Section 6, an Employer shall be liable for payment of cash due under the
Plan with respect to any Participant to the extent that such benefits are
attributable to the services rendered for that Employer by the Participant
and the Company shall be liable for payment of cash due under the Plan with
respect to any Participant to the extent that such benefits are
attributable to the services rendered for the Company as a Director. Any
disputes relating to liability of Employers and the Company for cash
payments shall be resolved by the Committee.

        6.6 Withholding. All Awards and other payments under the Plan are
subject to withholding of all applicable taxes, which withholding
obligations may be satisfied, with the consent of the Committee, through
the surrender of shares of Stock which the Participant already owns, or to
which a Participant is otherwise entitled under the Plan.

        6.7 Distributions to Disabled Persons. Notwithstanding any other
provision of the Plan, if, in the Committee's opinion, a Participant or
other person entitled to benefits under the Plan is under a legal
disability or is in any way incapacitated so as to be unable to manage his
financial affairs, the Committee may direct that payment be made to a
relative or friend of such person for his benefit until claim is made by a
conservator or other person legally charged with the care of his person or
his estate, and such payment or distribution shall be in lieu of any such
payment to such Participant or other person. Thereafter, any benefits under
the Plan to which such Participant or other person is entitled shall be
paid to such conservator or other person legally charged with the care of
his person or his estate.

                                       10
<PAGE>

        6.8 Transferability. Awards under the Plan are not transferable except
as designated by the Participant by will or by the laws of descent and
distribution or pursuant to a qualified domestic relations order as defined
by the Code, Title I of the Employee Retirement Income Security Act, or the
rules thereunder (a "QDRO"). To the extent that the Participant who
receives an Award under the Plan has the right to exercise such Award, the
Award may be exercised during the lifetime of the Participant only by the
Participant. Notwithstanding the foregoing provisions of this subsection
6.8, the Committee may permit Awards under the Plan to be transferred to or
for the benefit of the Participant's family (including, without limitation,
to a trust for the benefit of a Participant's family), subject to such
limits as the Committee may establish. In no event shall an Incentive Stock
Option be transferable to the extent that such transferability would
violate the requirements applicable to such option under Code section 422.

        6.9 Administration. The authority to control and manage the operation
and administration of the Plan shall be vested in a committee (the
"Committee") in accordance with Section 8.

        6.10 Notices. Any notice or document required to be filed with the
Committee under the Plan will be properly filed if delivered or mailed by
registered mail, postage prepaid, to the Committee, in care of the Company,
at its principal executive offices. The Committee may, by advance written
notice to affected persons, revise such notice procedure from time to time.
Any notice required under the Plan (other than a notice of election) may be
waived by the person entitled to notice.

        6.11 Form and Time of Elections. Unless otherwise specified herein,
each election required or permitted to be made by any Participant or other
person entitled to benefits under the Plan, and any permitted modification
or revocation thereof, shall be in writing filed with the Committee at such
times, in such form, and subject to such restrictions and limitations, not
inconsistent with the terms of the Plan, as the Committee shall require.

        6.12 Agreement With Company. At the time of an Award to a Participant
under the Plan, the Committee will require a Participant to enter into an
agreement with the Company in a form specified by the Committee, agreeing
to the terms and conditions of the Plan and to such additional terms and
conditions, not inconsistent with the Plan, as the Committee may, in its
sole discretion, prescribe.

        6.13 Limitation of Implied Rights.

(a)     Neither a Participant nor any other person shall, by reason of the
        Plan, acquire any right in or title to any assets, funds or property of
        the Employers whatsoever, including, without limitation, any specific
        funds, assets, or other property which the Employers, in their sole
        discretion, may set aside in anticipation of a liability under the
        Plan. A Participant shall have only a contractual right to the amounts,
        if any, payable under the Plan, unsecured by any assets of the
        Employers. Nothing contained in the Plan shall constitute a guarantee
        by any of the Employers that the assets of the Employers shall be
        sufficient to pay any benefits to any person.

(b)     The Plan does not constitute a contract of employment, and neither the
        Plan nor Awards granted under the Plan, nor selection as a Participant,
        shall confer any right upon a Participant to be retained in the employ
        of an Employer or any Related Company or to be retained as a Director
        of the Company, nor any right or claim to any benefit under the Plan,
        unless such right or claim has specifically accrued under the terms of
        the Plan. Except as otherwise provided in the Plan, no Award under the
        Plan shall confer upon the holder thereof any right as a shareholder of
        the Company prior to the date on which he fulfills all service
        requirements and other conditions for receipt of such rights.

                                       11

<PAGE>

        6.14 Benefits Under Qualified Retirement Plans. Awards to a Participant
(including the grant and the receipt of benefits) under the Plan shall be
disregarded for purposes of determining the Participant's benefits under any
Qualified Retirement Plan.

        6.15 Evidence. Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the person
acting on it considers pertinent and reliable, and signed, made or
presented by the proper party or parties.

        6.16 Action by Employers. Any action required or permitted to be taken
by any Employer shall be by resolution of its board of directors, or by
action of one or more members of the board (including a committee of the
board) who are duly authorized to act for the board, or (except to the
extent prohibited by the provisions of Rule 16b-3, applicable local law,
the applicable rules of any stock exchange, or any other applicable rules)
by a duly authorized officer of the Employer.

        6.17 Gender and Number. Where the context admits, words in any gender
shall include any other gender, words in the singular shall include the
plural and the plural shall include the singular.

                                 SECTION 7
                                 ---------
                             CHANGE IN CONTROL
                             -----------------

        Subject to the provisions of subsection 6.3 (relating to the
adjustment of shares), and except as otherwise provided in the Plan or the
Agreement reflecting the applicable Award, upon the occurrence of a Change
in Control:

(a)     All outstanding Options (regardless of whether in tandem with Stock
        Appreciation Rights) shall become fully exercisable, except to the
        extent that the right to exercise the Option is subject to any
        restrictions established in connection with a Limited Stock
        Appreciation Right that is in tandem with the Option.

(b)     All outstanding Stock Appreciation Rights (regardless of whether in
        tandem with Options) shall become fully exercisable, except that if
        Stock Appreciation Rights are in tandem with an Option, and the Option
        is in tandem with a Limited Stock Appreciation Right, the right to
        exercise the Stock Appreciation Right shall be subject to any
        restrictions established in connection with the Limited Stock
        Appreciation Right.

(c)     All shares of Restricted Stock shall become fully vested.

(d)     All vesting restrictions imposed under subsection 5.3 (relating to
        restrictions on shares purchased by the Participants, and matching
        shares awarded to Participants) shall cease to apply, and the
        Participant shall become fully vested in those shares.

                                       12
<PAGE>

                                 SECTION 8
                                 ---------
                                 COMMITTEE
                                 ---------

        8.1 Selection of Committee. The Committee shall be selected by the
Board, and shall consist of not less than two members of the Board, or such
greater number as may be required for compliance with SEC Rule 16b-3.

        8.2 Powers of Committee. The authority to manage and control the
operation and administration of the Plan shall be vested in the Committee,
subject to the following:

(a)     Subject to the provisions of the Plan, the Committee will have the
        authority and discretion to select employees and Directors to receive
        Awards, to determine the time or times of receipt, to determine the
        types of Awards and the number of shares covered by the Awards, to
        establish the terms, conditions, performance criteria, restrictions,
        and other provisions of such Awards, and to cancel or suspend Awards.
        In making such Award determinations, the Committee may take into
        account the nature of services rendered by the respective employee or
        Director, his present and potential contribution to the Company's
        success and such other factors as the Committee deems relevant."

(b)     The Committee will have the authority and discretion to interpret the
        Plan, to establish, amend, and rescind any rules and regulations
        relating to the Plan, to determine the terms and provisions of any
        agreements made pursuant to the Plan, and to make all other
        determinations that may be necessary or advisable for the
        administration of the Plan.

(c)     Any interpretation of the Plan by the Committee and any decision made
        by it under the Plan is final and binding on all persons.

(d)     Except as otherwise expressly provided in the Plan, where the Committee
        is authorized to make a determination with respect to any Award, such
        determination shall be made at the time the Award is made, except that
        the Committee may reserve the authority to have such determination made
        by the Committee in the future (but only if such reservation is made at
        the time the Award is granted and is expressly stated in the Agreement
        reflecting the Award).

        8.3 Delegation by Committee. Except to the extent prohibited by the
provisions of Rule 16b-3, applicable local law, the applicable rules of any
stock exchange, or any other applicable rules, the Committee may allocate
all or any portion of its responsibilities and powers to any one or more of
its members and may delegate all or any part of its responsibilities and
powers to any person or persons selected by it. Any such allocation or
delegation may be revoked by the Committee at any time.

        8.4 Information to be Furnished to Committee. The Employers and
Related Companies shall furnish the Committee with such data and
information as may be required for it to discharge its duties. The records
of the Employers and Related Companies as to an employee's or Participant's
employment, a Director's term of service, termination of employment,
termination as a Director, leave of absence, reemployment and compensation
shall be conclusive on all persons unless determined to be incorrect.
Participants and other persons entitled to benefits under the Plan must
furnish the Committee such evidence, data or information as the Committee
considers desirable to carry out the terms of the Plan.

                                     13
<PAGE>

        8.5 Liability and Indemnification of Committee. No member or
authorized delegate of the Committee shall be liable to any person for any
action taken or omitted in connection with the administration of the Plan
unless attributable to his own fraud or willful misconduct; nor shall the
Employers be liable to any person for any such action unless attributable
to fraud or willful misconduct on the part of a director or employee of the
Employers. The Committee, the individual members thereof, and persons
acting as the authorized delegates of the Committee under the Plan, shall
be indemnified by the Employers, to the fullest extent permitted by law,
against any and all liabilities, losses, costs and expenses (including
legal fees and expenses) of whatsoever kind and nature which may be imposed
on, incurred by or asserted against the Committee or its members or
authorized delegates by reason of the performance of a Committee function
if the Committee or its members or authorized delegates did not act
dishonestly or in willful violation of the law or regulation under which
such liability, loss, cost or expense arises. This indemnification shall
not duplicate but may supplement any coverage available under any
applicable insurance.

                                 SECTION 9
                                 ---------
                         AMENDMENT AND TERMINATION
                         -------------------------

        The Board may, at any time, amend or terminate the Plan, provided that,
subject to subsection 6.3 (relating to certain adjustments to shares), no
amendment or termination may adversely affect the rights of any Participant
or beneficiary under any Award made under the Plan prior to the date such
amendment is adopted by the Board.

                                 SECTION 10
                                 ----------
                               DEFINED TERMS
                               -------------

        For purposes of the Plan, the terms listed below shall be defined as
follows:

(a)     Award. The term "Award" shall mean any award or benefit granted to any
        Participant under the Plan, including, without limitation, the grant of
        Options, Stock Appreciation Rights, Restricted Stock, or Stock acquired
        through purchase or through matching allocations under Section 5.

(b)     Board.  The term "Board" shall mean the Board of Directors of the
        Company.

(c)     Change in Control.  The term "Change in Control" shall mean the
        occurrence of any one of the following events:

       (i)       any "person," as such term is used in Sections 3(a)(9) and
                 13(d) of the Securities Exchange Act of 1934, becomes a
                 "beneficial owner," as such term is used in Rule 13d-3
                 promulgated under that act, of 50% or more of the Voting Stock
                 (as defined below) of the Company;

       (ii)      the majority of the Board consists of individuals other than
                 Incumbent Directors, which term means the members of the Board
                 on the date of this Agreement; provided that any person
                 becoming a director subsequent to such date whose election or
                 nomination for election was supported by three-quarters of the
                 directors who then comprised the Incumbent Directors shall be
                 considered to be an Incumbent Director;

       (iii)     the Company adopts any plan of liquidation providing for the
                 distribution of all or substantially all of its assets;

                                       14
<PAGE>

       (iv)      all or substantially all of the assets or business of the
                 Company is disposed of pursuant to a merger, consolidation or
                 other transaction (unless the shareholders of the Company
                 immediately prior to such merger, consolidation or other
                 transaction beneficially own, directly or indirectly, in
                 substantially the same proportion as they owned the Voting
                 Stock of the Company, all of the Voting Stock or other
                 ownership interests of the entity or entities, if any, that
                 succeed to the business of the Company); or

       (v)       the Company combines with another company and is the surviving
                 corporation but, immediately after the combination, the
                 shareholders of the Company immediately prior to the
                 combination hold, directly or indirectly, 50% or less of the
                 Voting Stock of the combined company (there being excluded
                 from the number of shares held by such shareholders, but not
                 from the Voting Stock of the combined company, any shares
                 received by Affiliates (as defined below) of such other
                 company in exchange for stock of such other company).

        For the purpose of this definition of "Change in Control", (I) an
        "Affiliate" of a person or other entity shall mean a person or other
        entity that directly or indirectly controls, is controlled by, or is
        under common control with the person or other entity specified and (II)
        "Voting Stock" shall mean capital stock of any class or classes having
        general voting power under ordinary circumstances, in the absence of
        contingencies, to elect the directors of a corporation.

(d)     Code.  The term "Code" means the Internal Revenue Code of 1986, as
        amended.  A reference to any provision of the Code shall include
        reference to any successor provision of the Code.

(e)     Date of Termination. A Participant's "Date of Termination" shall be,
        with respect to an employee, the date on which his employment with all
        Employers and Related Companies terminates for any reason, and with
        respect to a Director, the date immediately following the last day on
        which he serves as a Director; provided that a Date of Termination
        shall not be deemed to occur by reason of a Participant's transfer of
        employment between the Company and a Related Company (including an
        Employer) or between two Related Companies (including Employers);
        further provided that a Date of Termination shall not be deemed to
        occur by reason of a Participant's cessation of service as a Director
        if immediately following such cessation of service he becomes or
        continues to be employed by the Company or a Related Company, nor by
        reason of a Participant's termination of employment with the Company or
        a Related Company if immediately following such termination of
        employment he becomes or continues to be a Director; and further
        provided that a Participant's employment shall not be considered
        terminated while the Participant is on a leave of absence from an
        Employer or a Related Company approved by the Participant's employer.

(f)     Director. The term "Director" means a member of the Board, who may
        or may not be an employee of the Company or a Related Company."

                                       15
<PAGE>

(g)     Disability. A Participant shall be considered to have a "Disability"
        during the period in which he is unable, by reason of a medically
        determinable physical or mental impairment, to engage in any
        substantial gainful activity, which condition, in the opinion of a
        physician selected by the Committee, is expected to have a duration of
        not less than 120 days.

(h)     Dollars.  As used in the Plan, the term "dollars" or numbers preceded
        by the symbol "$" shall mean amounts in United States Dollars.

(i)     Effective Date. The "Effective Date" shall be the date on which the
        Plan is adopted by the Board.

(j)     Employer. The Company and each Related Company which, with the consent
        of the Company, adopts the Plan for the benefit of its eligible
        employees are referred to collectively as the "Employers" and
        individually as an "Employer".

(k)     Fair Market Value. The "Fair Market Value" of a share of Stock of the
        Company as of any date shall be the closing market composite price for
        such Stock as reported for the New York Stock Exchange - Composite
        Transactions on that date or, if Stock is not traded on that date, on
        the next preceding date on which Stock was traded.

(l)     Option. The term "Option" shall mean any Incentive Stock Option or
        Non-Qualified Stock Option granted under the Plan.

(m)     Qualified Retirement Plan. The term "Qualified Retirement Plan" means
        any plan of the Company or a Related Company that is intended to be
        qualified under section 401(a) of the Code.

(n)     Related Companies. The term "Related Company" means any company
        during any period in which it is a "subsidiary corporation" (as that
        term is defined in Code section 424(f)) with respect to the Company.

(o)     Retirement. "Retirement" of a Participant shall mean with respect
        to an employee of the Company or a Related Company, the occurrence of
        a Participant's Date of Termination with the consent of the
        Participant's employer after the Participant is eligible for early
        retirement or normal retirement under the ACE Limited Employee
        Retirement Plan (or any other retirement plan maintained by the Company
        or the Related Companies) and with respect to a Director, the
        Participant's Date of Termination with the consent of the Company after
        the Participant would be eligible for retirement under any retirement
        plan maintained by the Company or a Related Company if the Director
        were an employee of the Company or a Related Company; provided,
        however, that the Committee may impose such additional or alternative
        conditions or restrictions on Retirement as it determines to be
        appropriate.

(p)     SEC.  "SEC" shall mean the Securities and Exchange Commission.

(q)     Stock.  The term "Stock" shall mean shares of common stock of the
        Company.

(r)     Year of Service. The term "Year of Service" means one continuous year
        of employment with the Company or a Related Company, one continuous
        year of service as a Director of the Company, or one continuous year of
        any combination of employment with the Company or a Related Company and
        service as a Director.

                                       16

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