There are two major problems with investment regulations for the insurance industry in Taiwan. First, the relationship between the corporate capital and external reserves remains ambiguous. Second, a problem exists with the double gearing of insurers’ investments. By using comparative and case studies, this article seeks to explore the dichotomy that exists between insurance regulation and the actual practice of the insurance industry. In order to cope with the deregulation and increasing internationalization of global financial markets, this paper recommends for the government to supervise investment funds from the following three dimensions: amending the investment regulation code; establishing market disciplines; and enforcing market-driven practices. The study suggests utilizing the negative list method to regulate the use of investment funds. The market conduct should be strengthened, combined with efforts to raise the responsibility of actuaries and chief finance officers. The insurance industry associations should establish their own strong monitoring position. The government then could supervise the insurance industry by discriminating insurance companies based on financial and business performance.