ACE Limited subsidiary ACE Global Markets has launched talks with Lloyd's to explore its options after a push to merge its syndicates was shot down.

Last week's vote on whether to merge syndicates 960, 219, 488 and 2488 into one mega-syndicate was narrowly defeated when just 71.15 percent of syndicate 488 capital providers voted in favour of forming the bloc.

Lloyd's regulations demand 75 percent vote in favour of a motion in order for it to be carried.

But it may not be the end of the merger plan which ACE hatched as the final phase in its two-year process of consolidation.

The talks with Lloyd's are expected to continue for the next few weeks when it will be decided which path to proceed down.

London-based ACE Global Markets chairman William Loschert described the situation as "not ideal, but not the end of the world either''.

Those in favour of the merger had argued that a large consolidated syndicate with an underwriting capacity of $960 million would place it in the right position to survive the current tough underwriting conditions.

By pooling its capital, its client base, its administration, IT systems, and its research and development the larger operation would also see it achieve lucrative economies of scale.

The move could see the mega-syndicate underwrite bigger lines while retaining the ability to operate in niche markets.

Proponents of the merger believed it would put the larger syndicate in a position to influence market conditions.

Some reports quoted a member's agent saying that the names on syndicate 488 were concerned about the annual fee increase which would see the 2.75 percent of their capacity which they currently pay, grow to 6.9 percent.

And they feared the effect on the profitability of other lines of business being merged with 488's marine and aviation portfolio since some lines of business have been traditionally more expensive to administer and distribute.