Odd Lots Why Taiwanese Life Insurers Are The Great 'Whodunit' Of The Financial World
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Oct 28, 2019 
In this chat, Brad Setser, a Senior Fellow at the Council on Foreign Relations and founder of Exante Data, sheds light on the enigmatic Taiwanese life insurance industry. He reveals how these insurers hold vast amounts of foreign assets while managing currency mismatches. A fascinating discussion unfolds around their investment strategies post-global crisis and the complexities of Taiwan's central banking practices. Setser also addresses the potential risks to Taiwan's financial stability, leaving listeners captivated by the intricate dynamics of global finance.
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Taiwanese Life Insurers' Impact
- Taiwan's life insurers hold substantial assets, roughly 150% of its GDP, driven by high savings rates and limited domestic investment opportunities.
- This has led them to invest heavily in foreign bonds, impacting global financial markets.
Regulatory Arbitrage
- Taiwanese insurers circumvented regulations by investing in Formosa bonds (USD-denominated bonds issued in Taiwan) and local ETFs holding foreign bonds.
- These regulatory loopholes allowed them to exceed foreign investment caps, with nearly 70% of their assets, or $600 billion, in foreign holdings.
Taiwan's Statistical Practices
- Taiwan's unique political status and non-membership in international bodies like the IMF result in unconventional statistical practices.
- This complicates analysis of its financial sector, including the life insurance industry.