The move follows intensive pressure from some of Lloyd's most influential underwriting agencies, which look after the affairs of the 20,000 underwriting members in the market.
Mr Merrett was warned by agencies that had introduced thousands of underwriting members to his syndicates that they would withdraw their members unless management changes were made.
At a tense meeting yesterday in Lloyd's, agents from Willis Corroon, Anton, Murray Lawrence, London Wall, Sedgwick, Wellington, Sturge and Christie told Mr Merrett that they had to reconsider supporting his underwriting operations.
The agents have been angered by the poor performance of his syndicate 418, which has prompted legal action by underwriting members. There has also been internal criticism by the Lloyd's authorities about the management of syndicate 421, and what they considered to be a 'profile problem' of the Merrett group.
However, agents were warned by Merrett executives that if changes were to be made they would have to agree to support the group's operations at a sufficient level. One executive, Stephen Cane, stressed yesterday that if Mr Merrett were to step aside he would still remain chairman of Merrett Holdings, the ultimate parent company of the underwriting group.
Mr Cane said the group was expected to go forward next year with the same level of financial support as this year, with pounds 384m of underwriting capacity, which could involve new investment by companies rather than individuals in the market.