California Insurance Commissioner Steve Poizner today announced that he will launch an effort to probe insurance company investments for ties to Iran and immediately direct California-based insurance companies to divest any direct holdings in the Iranian government.
"State law prohibits California insurance companies from investing in countries designated as state sponsors of terrorism," says Commissioner Poizner. "I have directed California insurers to divest of Iranian government holdings and ordered a survey of these insurance companies to ensure compliance with the law. Additionally, I am requiring all insurance companies that do business in California to disclose what, if any, indirect investments they have in Iran.
"Specifically, I will require each insurer to report all investments they have with companies that do business with the defense, nuclear, petroleum, natural gas or banking sectors of the Iranian economy as of March 31, 2009. To protect California consumers, the California Department of Insurance will also closely evaluate any indirect investments by California-based insurers in Iran to make sure that they are safe and sound."
The California insurance code specifically prohibits any investment respecting a foreign jurisdiction, or any investment denominated in the currency of that foreign jurisdiction, if that jurisdiction is designated as a state sponsor of terrorism. This section of the code took effect Jan. 1, 2009. The insurance code also authorizes the Insurance Commissioner to evaluate the "soundness" of investments by California insurance companies. Should the Commissioner hold a hearing and find the investments to be unsound, he can order divestment.
Insurance companies generally invest premium dollars as they are received until they are needed to pay claims. For example, a life insurer may collect premiums for decades before the policy is paid out.
The goal of the survey will be to determine an insurer's level of indirect investment in specific sectors of the Iranian economy as well as direct investments in the Iranian government. Each insurer licensed to do business in California will be required to list any investment in a company that conducts in excess of $20 million of business in the Iranian petroleum or natural gas sectors. Insurers will also be required to list investments of any amount in companies doing business in the banking, nuclear, or defense sectors of Iran, including activities relating to the production of chemical, biological or nuclear weapons and technologies. The companies' reports will be due in approximately 90 days.
A preliminary CDI analysis shows that insurance companies that conduct business in California - which is the 4th largest insurance market in the world - have tens of billions of dollars of investments in companies with substantial business in Iran. Insurance companies are the largest investor group in the global economy, with an estimated $3 trillion to $4 trillion in investments.
This action will join an existing array of global and local economic and trade sanctions already in place against Iran, including measures by Congress, the European Union and the states of Missouri, Texas and Florida. California has taken similar measures in the past by directing the state's two enormous public pension funds to divest Iranian investments.
"We need to strictly enforce every sanction that is currently in place against the government of Iran and send a clear message to Tehran's oppressive leadership that we as a nation stand as one," said Commissioner Poizner. "I call on my fellow state Insurance Commissioners to launch similar investigations in their jurisdictions. I will share relevant information we collect with federal and other government officials and agencies as appropriate if we detect suspected violations of federal or state laws."
Before his election as Insurance Commissioner in 2006, Poizner served as a White House Fellow in the National Security Council in the aftermath of the Sept. 11, 2001, attacks and helped build a new homeland security plan for the United States. He is also is a lifetime member of the Council on Foreign Relations.
Prior to turning to public service, Poizner was a highly successful businessman/entrepreneur and founded several technology companies. Poizner's last company, SnapTrack, pioneered life-saving technology that integrated GPS receivers into cell phones. This technology is now the industry standard and can be found in more than 700 million cell phones around the world.