A US$30bn merger between Aon PLC and Willis Towers Watson PLC which would have created the world’s largest insurance broker has collapsed after hitting a major roadblock with US regulators.

The US Department of Justice (DOJ) filed a lawsuit in June in a bid to block the combination, originally announced in March last year, on the grounds that it would reduce competition in the market and result in higher prices, particularly in the areas of reinsurance brokering, pension and retirement planning, and private retiree multi-carrier healthcare exchanges.

While both Aon and Willis previously agreed to several divestments in order to appease regulators, the merger plans have now be dropped completely to end the litigation with the DOJ.

“Despite regulatory momentum around the world, including the recent approval of our combination by the European Commission, we reached an impasse with the US Department of Justice”, Aon chief executive Greg Case said in a statement.

“The DOJ position overlooks that our complementary businesses operate across broad, competitive areas of the economy. We are confident that the combination would have accelerated our shared ability to innovate on behalf of clients, but the inability to secure an expedited resolution of the litigation brought us to this point”, he added.

The scrapping of the merger will cost Aon US$1bn in termination fees now owed to Willis, which coincidentally said on Monday that it will increase its existing share repurchase program by the same amount.

The share prices of the two firms were sent in opposite directions in mid-morning trading on Wall Street on Monday, with Aon jumping 7.3% to US$249.48 while Willis Towers slumped 7.1% to US$210.44.