The California Office of Administrative Law has ruled that state Insurance Commissioner Steve Poizner’s Iranian investment regulations were improper.
Earlier this year, the California Department of Insurance identified in 50 companies to be doing business with the Iranian energy, nuclear and defense sectors, and said that no Iranian investment held by an insurer would be recognized on that insurer’s financial statements in California. The commissioner also requested insurers licensed to do business in California agree to a moratorium on future investments in any of the companies on the list or in any affiliates owned 50 percent or more by those companies until either (a) Iran is removed from the United States State Department’s list of state sponsors of terrorism or (b) a specified company and its affiliates cease to do business with Iran’s oil and natural gas, nuclear, and defense sectors and is removed from the list. Commissioner
While many insurers voluntarily agreed to the moratorium, 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 all expressed concern with the law, and filed a petition with the OAL seeking a decision as to whether the state insurance commissioner’s rules on Iran investment activity constituted an “underground” regulation.
The OAL also accepts petitions challenging alleged underground regulations — those rules issued by state agencies which meet the Administrative Procedure Act’s definition of a “regulation” but were not adopted pursuant to the APA process. The OAL issued its decision late yesterday which found the insurance commissioner’s actions to be improper.
Steve Suchil, AIA assistant vice president for the Western Region, said
“AIA is pleased that the Office of Administrative Law found that the insurance commissioner’s activities with respect to insurer investments in companies doing business in Iran were underground regulations. The commissioner failed to adopt such rules under state law as provided in the Administrative Procedure Act. Insurers fully comply with all state and federal laws as pertaining to investments and disclosure. AIA and other trade associations petitioned the Office of Administrative Law to find that the commissioner’s actions were improper underground regulations.”
The associations said they understood the Commissioner’s concern with Iran as a security threat, but took issue with setting a precedent for regulating investments in that fashion.
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