(January 31, 2012) — California’s top insurance commissioner has settled litigation over the state’s efforts to thwart insurers’ investments in companies doing business in energy, nuclear, or defense-related work in Iran, which has been identified by the US State Department as a state sponsor of terrorism.
The settlement — led by five insurance trade associations — allows for California Insurance Commissioner Dave Jones to keep “a public list of businesses involved in volatile sectors of the Iranian economy,” according to a release by the industry group. Meanwhile, the commissioner is permitted to continue to review and publicize the names of insurance companies that invest in businesses with interests in Iran.
California Insurance Commissioner Dave Jones announced the settlement late last week. The settlement stemmed from a 2009 initiative led by Steve Poizner, Jones’ predecessor, who threatened to penalize insurance companies that invest in companies doing business in Iran. Insurance companies asserted that Poizner’s anti-Iran initiative was illegal. Subsequently, Poizner sued a state agency, the Office of Administrative Law. The settlement with the California commissioner now allows the Department of Insurance to share its information over Iran with the federal government.
“We continue to emphasize that these investments are legal under both state and federal law,” a release written by the five insurance trade associations said. “We also believe supervision of insurers’ lawful foreign investments must remain uniform and is best administered at the federal level so that the United States can effectively respond to international challenges.”
The trade associations that challenged the Department of Insurance’s regulation regarding Iran-related investments were the American Council of Life Insurers; the American Insurance Association; the Association of California Insurance Companies; the Association of California Life and Health Insurance Companies; and the Personal Insurance Federation of California.
Worries over business with Iran have becoming more forceful in recent years. In May, California Public Employees’ Retirement System (CalPERS) asserted that it plans to shed the rest of its Sudan and Iran-linked holdings. The move was in response to strong sanctions adopted in 2010 by the federal government, the United Nations, and European Union, which started the withdrawal of several large multi-national oil and energy companies from Iran and Sudan.
Other funds have faced mounting pressure to exit holdings of Iran. In August 2010, Massachusetts Governor Deval Patrick signed legislation that will force the state pension fund to divest from companies supporting Iran’s oil industry. According to the legislation, the Massachusetts Pension Reserve Investment Board (MassPRIM) – which manages roughly $42 billion on behalf of public entities in the Bay State – had one year in which to hire an independent research firm to conduct a study of its holdings and divest from any companies that invest in the Iranian oil industry. Additionally, the law stipulated that the MassPRIM board update the list of prohibited companies on a quarterly basis.