* Xiang most senior financial regulator caught in anti-graft
* Industry expects further crackdown on products,
* CIRC executives told to "be on guard against risks" -
By Julie Zhu
HONG KONG, April 11 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
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
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
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
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
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)