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CORRECTED-Willis Towers mulls sale of reinsurance unit after halting merger

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(Corrects final paragraph to clarify that Aon was the proposed seller, not Willis Towers Watson.)

By Alwyn Scott

NEW YORK, Aug 3 (Reuters) - Insurance broker Willis Towers Watson PLC said on Tuesday it is weighing strategic alternatives for its reinsurance unit, Willis Re, days after a planned sale to rival Arthur J. Gallagher fell through.

Willis and broker Aon PLC had planned to merge to create the world's largest insurance broker, topping current leader Marsh & McLennan Companies Inc.

As part of the merger, European regulators demanded the sale of Willis Re to preserve competition, and Gallagher had agreed to buy it and other assets for about $3.6 billion.

Opposition from the U.S. Department of Justice, however, caused Aon and Willis Towers Watson to walk away from the merger last week, which scotched the concession sales.

Reports this week suggested Gallagher was close to clinching a deal for Willis Re, but Willis Towers Watson Chief Executive Officer John Haley said he is considering wider possibilities.

"We're conducting a review of strategic alternatives for Willis Re," Haley told a conference call on Tuesday reporting on second-quarter results. While the timing was "appropriate" given the failed merger, he warned that a sale was not assured.

Haley also said no other units that regulators had asked it to sell are currently being considered for sale.

Other assets slated for sale to meet European regulators' requirements included Aon's German retirement benefits and consulting business, to Lane Clark & Peacock LLP. (Reporting by Alwyn Scott; Editing by Dan Grebler)