Marsh & McLennan, the world's largest insurance broker, has ousted its chief executive, Michael Cherkasky, as part of a review that could lead to a break-up of the scandal- laden group.

Mr Cherkasky was brought into Marsh & McLennan in October 2004 after Eliot Spitzer, then the New York attorney-general, accused the company of colluding with competitors to inflate insurance prices and using hidden incentive fees to steer so-called property and casualty insurance contracts to favoured clients in return for lucrative payoffs.

The group in 2005 reached a settlement with insurance regulators and Mr Spitzer that forced it to give up so-called contingent commissions from insurers, which had been bringing in an estimated $800 million (£403million) of revenues a year. These commissions typically reward a broker for bringing an insurer a given quantity of new business each year.

The settlement caused Marsh & McLennan's profitability to collapse and prompted the group to cut costs by eliminating thousands of jobs.

The insurance broking unit lost many of its clients and, more recently, its commissions have fallen again, as declining prices for commercial insurance have hit payments to it.

Last month Marsh & McLennan reported that operating profits from continuing operations fell 40 per cent, missing Wall Street's targets. Its shares have fallen by a fifth this year, while those of rivals, such as Aon and Willis, have advanced.

Stephen Hardis, the group's non- executive chairman, said: “Marsh & McLennan's financial performance in 2007 has fallen far short of our expectations.”

Investors such as KJ Harrison & Partners, the US asset manager, have been urging Marsh & McLennan to spin off some of its consulting businesses, including its Mercer human resources unit and the Oliver Wyman management consultant, arguing that they do not fit well with insurance broking.

Marsh & McLennan said yesterday that its board would “evaluate strategies to enhance shareholder value”, suggesting that a disposal of at least part of the business is being seriously considered. In August, the group sold its Putnam asset management unit to Canada's Great-West Lifeco for $3.9billion. Last year, Kohlberg Kravis Roberts, the American buyout firm, reportedly teamed up with Willis to pursue Marsh & McLellan, although no party would comment.

Mr Cherkasky fired Brian Storms, the chief executive of the group's main Marsh insurance broking unit, this year after only two years in the job because he failed to raise revenues or to stem defections of large brokers and clients. Last month he admitted that the brokerage unit's performance had been “disappointing and unsatisfactory”.

Mr Cherkasky will remain in his present role until a replacement is found.

Analysts said that Daniel Glazer, the new head of Marsh, looked to be a leading contender to replace Mr Cherkasky. Mr Glazer, a former executive with American International Group who joined Marsh & McLennan last month, was mentioned prominently in the press release announcing Mr Cherkasky's departure.

Shares in Marsh & McLennan, which stood at $33.46 in May, rose by $1.79 to $26.68, a rise of 7.2 per cent, in morning trading on Wall Street yesterday.

Mr Cherkasky, who once served as Mr Spitzer's boss in the Manhattan district attorney's office, entered the business world in 1994 by joining Kroll, the risk consultant and corporate investigator. He rose to chief executive in 2001, and remained when Marsh & McLennan bought the business in 2004.

He took the top job after the then chief executive, Jeffrey Greenberg - son of Maurice “Hank” Greenberg, the former AIG chairman and chief executive — was forced out after Mr Spitzer refused to negotiate with him over the price-rigging allegations.

Initially Mr Cherkasky's experience in crisis management helped to stabilise the company, but criticism of his inability to expand the business has increased recently. The group, once the largest insurance broker, is now worth $12.9billion, less than Aon.

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