The California Insurance Commissioner Steve Poizner has filed a lawsuit challenging the determination made by the California Office of Administrative Law (“OAL”) that the Commissioner’s attempt to place a moratorium on new investment in companies doing business in Iran by insurers licensed in California is an overreach of the Commissioner’s powers.
Under the Commissioner’s moratorium, insurers licensed in California were banned from making any new investment in 50 companies doing business in Iran that the California Insurance Department deemed as assisting the Iranian nuclear, defense, and energy sectors. While over 1,000 of the 1,300 licensed insurers in California agreed to the moratorium, three insurance industry trade groups sought an OAL determination, as they were concerned that the Commissioner’s ban on investment in Iran amounted to an “underground” regulation.
The Commissioner’s lawsuit contends that his office has the authority to address the issue of insurer support of Iran as well the solvency of their investment portfolios. According to the Commissioner, “Insurance premium dollars that Californians pay should not end up supporting a regime that has shown time and time again its disregard for the concerns of the global community. . . . Since companies doing business with Iran face financial risk, I have the authority to protect insurer portfolios from investments in those companies.”
Whether the Commissioner’s moratorium is determined by a California court to be an unenforceable “underground” regulation, many insurers seem to be going beyond the ban on any new investment and appear to be completely divesting themselves of Iran-related assets. Quarterly statements filed with the California Department of Insurance show that in the second quarter of 2010, the first quarter in which the moratorium took place, the value of existing investment by insurers licensed in California in companies doing business in Iran plummeted $337 million.