IPC Holdings faces paying a $50 million fee if its board decides to pull out of the planned merger with fellow Bermuda re/insurer Max Capital before shareholders have had a chance to vote on it.

The amalgamation deal, announced a month ago, has come under threat after Class of 2005 Bermuda reinsurer Validus Holdings made a $1.68 billion bid for IPC.

The termination fee is spelled out in a document filed with financial regulator the US Securities and Exchange Commission.

It states: "If IPC or Max, as the case may be, terminates this agreement then the non-terminating party shall, as promptly as reasonably practicable, pay to the terminating party, by wire transfer of immediately available funds, $50million."

IPC put out a statement late on Tuesday saying its board of directors would study the Validus offer. IPC chief executive officer Jim Bryce declined to comment further.