Calif. Insurers Agree to Voluntary Sanctions Against Iranian Government

California Insurance Commissioner Steve Poizner announced that 1,010 insurance companies — more than 75 percent of insurers licensed to do business in California — have agreed to forgo future investments in 50 companies identified as doing business with Iran’s nuclear, energy or defense sectors.

“This is a great victory for California consumers and sends a strong message to the regime in Iran,” said Commissioner Poizner.

As of March 31, 2010, the California Department of Insurance (CDI) disqualified an estimated $6 billion in holdings in the 50 Iran-related companies. This estimate is based on 2008 data, the most recent available information to be analyzed.

“With Tehran continuing its headlong rush to go nuclear, with Holocaust denier Ahmadinejad threatening genocide against Israel, with millions of Iranian people seeking to free themselves from the yoke of the Ayatollahs, it is outrageous that these companies have decided that it’s business as usual and will continue to invest in companies that actively support the Iranian government,” said Rabbi Abraham Cooper, associate dean of the Simon Wiesenthal Center. “Commissioner Poizner should be commended for his leadership on this issue. All we have seen from the United Nations and the Obama administration and Congress is mostly talk. In California, we have real action and tangible results.”

Insurer investment in the 50 companies on the CDI investment lists totaled $1.8 billion during 2008 and averaged approximately $1 billion per year from 2005-’07. Given this record, the decision by more than 1,000 licensees to agree to the investment moratorium means hundreds of millions of investment dollars will likely be diverted from these companies in the coming years.

California has the fourth largest insurance market in the world — and as a whole, insurers are the largest investor group in the global economy, with an estimated $3 trillion to $4 trillion in investments, Poizner indicated.

Earlier this year, Commissioner Poizner announced that 100 percent of the 1,306 insurance companies licensed in California responded to his request to provide data on their investments with companies doing business with Iran’s, nuclear, defense, and energy sectors.

Commissioner Poizner first announced his Terror Financing Probe in June 2009 to review compliance with a recent California law that prohibits insurers from investing in designated state sponsors of terror. As part of a data call issued by the Commissioner, insurance companies were required to identify their direct investments in designated sectors of the Iranian economy and indirect investments in companies doing business in those sectors. In December 2009, the Department announced that insurers reported no direct investments in Iran and therefore are in full compliance with state law prohibiting those investments. But the Department uncovered billions of dollars of indirect investments in companies doing business with the Iranian oil and natural gas, nuclear and defense sectors.

Several insurance associations, however, said Poizner has exceeded his legal authority in barring Iranian insurance company investments. In a letter to Poizner, the Association of California Insurance Companies, the Association lf California Life and Health Insurance Companies, the Personal Insurance Federation of California and the American Insurance Association said:

“Any company compelled to be a signatory to the Response Form has fiduciary duties to its stakeholders to invest its resources in a manner that is prudent and yields acceptable returns. Before any company can consider the Department’s initiative in a responsible manner and fully understand the ramifications of signing the Response Form, we believe it is imperative that the potential impact of the Iran-related initiative on insurers’ investment duties and the following areas of concern be addressed and clarified.”