UPDATE 1-Aon, Willis Towers Watson to call off $30 bln merger

(Adds background on deal, termination fee)

July 26 (Reuters) - Insurance brokers Aon PLC and Willis Towers Watson PLC said on Monday they had agreed to terminate their $30 billion merger agreement and end their litigation with the U.S. Department of Justice.

The deal would have put London-headquartered Aon ahead of the world's largest insurance broker Marsh & McLennan Companies Inc.

"Despite regulatory momentum around the world, including the recent approval of our combination by the European Commission, we reached an impasse with the U.S. Department of Justice," Aon Chief Executive Officer Greg Case said.

In June, the Department of Justice had sued to block the deal saying it would reduce competition and could lead to higher prices.

Aon will pay $1 billion as termination fee to Willis, it said. (Reporting by Sohini Podder and Niket Nishant in Bengaluru; Editing by Krishna Chandra Eluri and Saumyadeb Chakrabarty)