NU Online News Service, June 30, 11:27 a.m. EDT

Responding to the California insurance commissioner's announcement of a "Terrorism Financing Probe" of insurers, an insurance trade group said his actions could interfere with federal oversight.

That comment, from the American Insurance Association, followed Commissioner Steve Poizner's statement that he will launch an inquiry into insurer investments in Iran.

According to the announcement, a preliminary analysis by the California Insurance Department of insurers doing business in the state found "tens of billions of dollars of investments in companies with substantial business in Iran."

Mr. Poizner's statement mentioned that he previously served as a White House Fellow in the National Security Council after the Sept. 11, 2001 attacks and "helped build a new homeland security plan for the United States." The statement said he will 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. 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," said his announcement.

David Snyder, AIA vice president and associate general counsel, public policy, said the group is concerned "with any action, however well-intentioned, that complicates or dilutes the efforts of the United States to effectively respond to international challenges–especially on matters of national security."

"The issue of Iranian assets is under the national jurisdiction of the Office of Foreign Assets Control (OFAC) within the U.S. Treasury Department," he said, and "for matters, such as Iran, involving national security and extremely complex foreign relations, it is absolutely critical that the U.S. speak with one voice and act exclusively at the federal level."

Mr. Poizner said he is also ordering insurance companies doing 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," he advised.

Mr. Poizner added, "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."

His announcement noted that under California law that took effect Jan. 1, investments are prohibited 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.

The insurance code, according to his department, also authorizes the commissioner to evaluate the "soundness" of investments by California insurance companies and should he hold a hearing and find the investments to be unsound, he can order divestment.

The goal of the investment survey, it was explained, will be to determine not only an insurer's level of indirect investment in specific sectors of the Iranian economy, but direct investments in the Iranian government as well.

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.

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," Commissioner Poizner said. "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."

Special Reports /

Calif. Regulator's Terror Probe Of Insurers Is U.S. Job, Says AIA

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