Posted on 07 Jul 2010
Insurers have sold off close to $400 million in assets linked to the Iranian economy, or one-fifth of what the California Department of Insurance identified they held in 50 companies that do business with Iran's nuclear, energy and defense sectors.
Insurers licensed to do business in California held $2 billion on investments in the 50 named companies at the end of 2009, a figure that is down to $1.6 billion, according to newly compiled data for the first quarter of 2010, according to the department. Iranian-related investments are less than 0.20% of investments held by companies that do business in California, according to a department spokesman. More than 1,000 of approximately 1,300 insurance companies licensed in California have reported they have no investments in the 50 companies.
Insurance trade associations have filed an objection to Insurance Commissioner Steve Poizner's moves to control investments. The state Office of Administrative Law is scheduled to receive the department's formal response later this month and will likely render a decision in October, said Mark Sektnan, vice president of the Association of California Insurance Companies.
"We don't believe he has the authority to limit the investments that insurance companies make," he said. "The insurance industry has and will continue to follow federal and state law."
President Barack Obama recently signed a new round of Iran sanctions into law, leaving insurers and reinsurers vulnerable to punitive action if they do business that is connected to Iran's energy sector. Action has been a concern for the insurance industry, especially for reinsurers who may enter into contracts that expose them to such relationships without their awareness. The final version of the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 included a new exception for insurers and underwriters who "exercise due diligence".
The law, expanding on existing U.S. bans of American involvement in Iranian energy, was designed to sever U.S. market access for foreign companies who engage in even the loosest levels of involvement with the Iranian energy sector, and it puts parent companies on the hook for the actions of subsidiaries. A summary of the bill from the Congressional Research Service describes it as directing the White House to impose sanctions on any "financial institution, insurer, underwriter, guarantor, and any other business organization including a foreign subsidiary, parent, or affiliate" that helps Iran's oil operations/