Debt

Taiwan's insurers play cat and mouse over bond exposure

Who's Tom and who's Jerry? Taiwan's insurers get creative (again) in their quest for products that solve the sector’s continuing FX and interest rate mismatch.

It is a familiar conundrum to bond investors the world over how to generate yield without ramping up risk in a low interest rate environment.

For the past two decades, Taiwan has faced the biggest problem of all. The island not only houses an outsized insurance sector but one long forced to invest in offshore assets to try and generate returns that are higher than its onshore liabilities.

This underlying mismatch has led to a constant game of cat and mouse between the industry and its regulator, the Financial Supervisory Commission FSC. The insurers need offshore assets to maintain their profitability, while the regulator remains understandably...

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