* Xiang most senior financial regulator caught in anti-graft campaign
* Industry expects further crackdown on products, acquisitions
* CIRC executives told to "be on guard against risks" - source
By Julie Zhu
HONG KONG, April 11 (Reuters) - China's anti-graft probe into the head of the country's insurance watchdog could lead to more intense regulatory scrutiny on the insurance industry, executives and analysts say.
A crackdown could put particular focus perceived risks that have emerged in the sector in recent years, such as high-yielding investment products and speculative acquisitions by insurers.
The Central Commission for Discipline Inspection (CCDI) said on Sunday Xiang Junbo, head of the China Insurance Regulatory Commission (CIRC) was suspected of "serious disciplinary violations" - a phrase typically used to refer to graft.
The CCDI and the CIRC did not provide any further details regarding the investigation into Xiang, who is the most senior financial regulator to be caught up in Beijing's fight against corruption.
Analysts and market-watchers said they saw the investigation as part of a broader push by the government to crack down on risks in China's financial sector, including excesses that had grown in the insurance sector under Xiang's watch.
"The on-going anti-corruption campaign...doesn't aim to only take down a few 'big tigers' but aims to make the Chinese financial system a clean club," said Hong Hao, chief strategist at BOCOM International, adding the campaign was ultimately good for the financial markets and economy.
Financial system risks have been exacerbated by some insurers taking sizable stakes in market-listed companies often funded by issuing high-yield, short-term universal life insurance and other investment products.
"China's insurance industry has been developing too fast and aggressively since Xiang took office," said one executive at a major Chinese insurer.
"Going forward, the CIRC would probably tighten regulations on the industry, in particular on insurers' solvency and their universal life products. The whole industry is likely to become more traditional and conservative than before."
One senior executive at another large Chinese insurer said the CIRC will "definitely tighten its regulations on the industry," adding it would likely focus on the liquidity risks created by insurers' asset and liability mismatches.
One senior source, who spoke on the condition of anonymity, told Reuters that CIRC officials were told at a meeting to support the government's decision to investigate Xiang, to "maintain the stability of the industry" and "be on guard against risks".
This person declined to be identified due to the sensitivity of the issue. The CIRC said in a statement on Monday it will tackle illegal activities in the insurance market and fend off financial risk.
At the time of publication, the regulator had not responded to a Reuters fax requesting comment.
Since becoming head of the insurance regulator in 2011, Xiang had overseen rapid growth of the industry spurred in part by the liberalisation of investment rules that allowed insurers to invest more of their assets at home and overseas.
China's insurance assets have nearly doubled over the last three years, reaching 15.1 trillion yuan ($2.19 trillion) at the end of 2016, CIRC data shows.
This buying spree, often funded by the issuance of short-term products, had sparked alarm among regulators, leading the CIRC to restrict insurers selling universal life and other products. More recent rules bar insurers from opening new subsidiaries and branches if they rely heavily on these products.
Leon Qi, Head of Greater China Financials Research at brokerage Daiwa, said China's top leadership has become much tougher on financial regulatory officials.
Lawyers and market participants say Liu Shiyu, the head of the China Securities Regulatory Commission, has taken a more aggressive stance than his predecessor, Xiao Gang, who was removed from his post in February last year after critics accused him of mishandling the 2015 stock market crisis.
Writing by Michelle Price; Additional reporting by Ben Lim and Matthew Miller in Beijing and Umesh Desai in Hong Kong; Editing by Sam Holmes