Insurance broker Aon has announced a $30bn (£22.9bn) swoop to buy Willis Towers Watson in a move that will combine the second and third largest players in the market.

Aon, the New York-listed insurance and investment firm, announced an all-share merger that will create the world’s biggest commercial insurance broker, with a value of about $80bn. It comes after talks between the two companies collapsed last year. The tie-up continues a wave of consolidation among the biggest players in the insurance market. Marsh & McLennan splashed out £4.3bn on Jardine Lloyd Thompson, another major broker, last year. Insurance brokers, who match insurers with businesses who want to buy insurance, have been bulking up in an effort to diversify their businesses, increase commissions and satisfy customers who prefer to use a small number of brokers for all of their insurance purchases. Aon chief executive Greg Case said: “This combination will create a more innovative platform capable of delivering better outcomes for all stakeholders.”

“This isn’t about bigger,” Mr Case told analysts. “This is about better.”

The merger will also help Aon capitalise on growth opportunities in cyber, intellectual property and climate risk, he added. The deal, which is expected to result in pre-tax savings of $800m a year, will require approval from shareholders in both firms, as well as regulators. Aon is a broker on the Lloyd’s of London insurance market and employs 50,000 people globally. Willis Towers Watson has more than 45,000 employees worldwide with clients in more than 140 countries. The firm is itself the product of an $8.9bn merger in 2016. Its shareholders will receive 1.08 shares in the combined company for each Willis share they hold. Existing Aon shareholders will own about 63pc of the merged firm, which will retain its London headquarters, with Willis investors holding the remaining 37pc.

Andreas van Embden, an analyst at Peel Hunt, said: “With broker fees under pressure, this merger provides significant scale and room for material cost cutting whilst protecting fee income.” But some industry figures warned that the deal risked further concentrating the power of two of the market’s biggest players

Vassos Vassou, a pensions trustee at Dalriada Trustees, said: “As a trustee, our key concerns when looking after our members are choice, quality of service and value for money.” “A tie-up between Willis Towers Watson and Aon will mean the combined business will be a dominant player in the market and will lead to less choice for trustees looking for third-party support.” Simon Fitzsimmons, a mergers and acquisitions adviser at Mazars said the merger was driven by technological disruption in the insurance brokerage market but added that competition authorities would be likely to scrutinise the deal closely.

He said that the competition watchdog could require some parts of the businesses to be sold off as a condition for allowing the deal to go ahead.