UPDATE 3-Italy's Ligresti, his children arrested in insurance probe
* Police says 600 mln-euro hole was hidden from markets
* Ligrestis secured 'constant flow' of dividends
* Fondiaria merger with Unipol not at risk - UniCredit (Adding comment from Paolo Ligresti, probe into former insurance regulator)
By Ilaria Polleschi and Gianni Montani
TURIN/MILAN, July 17 (Reuters) - Tax police have arrested former Fondiaria-SAI owner Salvatore Ligresti, his children and former executives of the troubled Italian insurer as part of an ongoing probe into false accounting and market manipulation.
The police on Wednesday said the alleged crimes relate to a hole of about 600 million euros ($788 million) in the group's claim reserves that was not disclosed to the market.
"The failure to communicate this sensitive and crucial piece of information for investors has caused serious damage to at least 12,000 savers," the tax police statement said.
Salvatore Ligresti and the former Fondiaria executives could not be reached to comment.
The investigation, started last August and led by Turin prosecutors Marco Gianoglio and Vittorio Nessi, is digging into the claim provisions as well as property deals made by the insurance group between 2008 and 2011.
The former chief of insurance regulator IVSAP Giancarlo Giannini is also being investigated in a separate probe to determine whether he failed to carry out proper oversight of Fondiaria, judicial sources told Reuters on Wednesday.
Giannini's lawyer Giampiero Biancolella told an Italian newspaper on Wednesday that his client "is confident he can provide all the necessary clarifications."
Police said underestimating the value of the claim reserves allowed the company to avoid booking losses and pay over the years 253 million euros in dividends to the Ligresti family's holding company, Premafin.
"The Ligresti family, relying on the acquiescence of top managers, secured for themselves a constant flow of dividends and approval for several intra-group property deals," said a second statement released by investigators at a news conference.
At the time of the alleged wrongdoing, the members of the Ligresti family arrested on Wednesday held positions within Fondiaria-SAI, police said.
Salvatore Ligresti, Fondiaria's former Chairman Antonio Talarico, and its ex-CEO Fausto Marchionni were all placed under house arrest.
Ligresti's daughters Jonella and Giulia as well as ex-CEO Emanuele Erbetta were being held in jail, while his son, Paolo, was not in Italy and faces a European arrest order, a source with the investigation told Reuters.
Paolo Ligresti said in a statement he resides in Switzerland and learned of "the events involving his family" from news media.
"He has no intention of leaving Swiss territory," Paolo Ligresti's lawyer Maria Galliani said in a statement.
Rival insurer Unipol agreed to rescue Fondiaria last year in a complex four-way tie-up, brokered by investment bank Mediobanca, but a series of regulatory and legal hurdles has held up completion of the deal, which is expected by the end of the year.
Federico Ghizzoni, CEO of UniCredit, Italy's biggest bank by assets and the largest creditor of Premafin and Fondiaria, said on Wednesday the arrests would not have repercussions on the merger between Fondiaria and Unipol.
The rescue forced the once powerful Italian family out of the insurer, one of Italy's largest. ($1 = 0.7612 euros) (Additional reporting by Emilio Parodi; Writing by Danilo Masoni; Editing by David Cowell and Maureen Bavdek)
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