California Insurance Commissioner Dave Jones and a group of insurers have settled litigation over insurer investments in companies doing business in Iran, it was announced on Friday.
The terms of the settlement permit the Jones to “maintain a public list of businesses involved in volatile sectors of the Iranian economy,” according to a statement issued by Jones’ office. The settlement also prevents Jones from declaring the investments of insurers in question to be declared non-admitted.
The deal dates back to efforts in 2009 by the state’s previous insurance commissioner to police insurance companies who had investments in firms doing business in Iran, efforts that were challenged by a number of insurance trade associations under what they declared an “Iranian directive,” which was eventually ruled “underground regulation” by the California Office of Administrative Law.
In November, 2010, Jones’ predecessor, Steve Poizner, filed a lawsuit challenging OAL determination declaring the commissioner’s Iran efforts constituted an “underground regulation.”
The associations that made the challenge included the American Council of Life Insurers, 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.
The case was Insurance Commissioner Steve Poizner v. Office of Administrative Law, and it was brought before the Superior Court of Los Angeles of the State of California. The five insurance associations were named “real parties of interest.”
Under Poizner’s “Iranian directive,” the assets of insurers believed to have been investing their insurance assets with companies operating in Iran would be declared non-admitted. Many of the companies on this list of companies “doing business” with Iran are large multi-national corporations, in which many investors have assets.
Had Poizner, or Jones, been successful, it would have dealt a blow to the apparent financial solvency of several California insurance companies, said ACIC President Mark Sektnan.
“It would have taken those investments and declared them non admitted assets,” Sektnan said, adding, “Certainly, no insurance companies in this country supports the Iranian government.”
By federal law, no U.S. company is allowed to directly invest in Iran. “These are indirect investments,” Sektnan said.
Under the deal Jones will withdraw the lawsuit against OAL. The insurance trade associaitons have agreed to withdraw their legal challenge to the commissioner’s efforts to publicize insurer investments in companies engaged with Iran. As their financial statements already contain this information, insurers will no longer be required to file quarterly reports regarding their Iran-related investment activities, nor will such investments be disallowed for purposes of determining financial solvency of the insurers, according to the terms of the deal.
The groups that challenged the commissioner believe the investments are legal under both state and federal law, and the 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,” according to a statement from ACIC.
“We worked cooperatively with the commissioner to come to an agreeable settlement,” Sektnan said. “We believe this is a good settlement.”
In his statement, Jones called the deal “an important step forward for our efforts to make sure that the public, insurers, and investors are aware of companies doing business in the nuclear, military and energy sectors of Iran’s economy, particularly in light of the growing nuclear threat posed by Iran.”
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