NU Online News Service, March 31, 4:09 p.m. EDT

The California Insurance Department rejects an argument by insurance groups that its rules concerning investments with Iran-linked companies are illegal, a spokesman for the agency said.

Five insurance trade groups yesterday filed a petition asking for an official review as to whether Insurance Commissioner Steve Poizner created "illegal underground regulations" concerning Iranian investments.

Under the contested regulations, Commissioner Poizner said that as of April 1 he will not credit any investment on an insurer's balance sheet in any of 50 companies he has blacklisted for involvement with Iran.

"Ultimately we have the power to do this as the commissioner oversees investments by insurance companies," said spokesman Darrell Ng, adding the department believes investments in the companies having links to Iran "are risky, and insurers should not be involved" because of the "unstable nature of the Iran regime."

He said 460 insurers had agreed to a moratorium on investment with the 50 companies, and "we look for rest of industry to join in."

Insurers, in their petition, called the regulation unclear, and said there were indications that on that basis some would not file financial statements after the petition labeled the Iran investment rules "illegal underground regulation."

Mr. Ng. said since filings were not due until tomorrow, he did not know how individual insurers' filings responded to the regulation

In petitioning the California Office of Administrative Law for a regulatory review, the insurers said Mr. Poizner had no legal basis for his actions. "Our lawyers believe we do," said Mr. Ng.

On Friday, companies will be required to return a form notifying the Insurance Department whether they will or will not be investing in the 50 companies on the list.

The filing of the 17-page petition with the California Office of Administrative Law does not enjoin the commissioner from eliminating recognition of the contested investments on insurers' financial statements, which could lower their capital and surplus levels.

If accepted, however, it could lead to a legal evaluation that would void the regulation.

Last Friday, the five insurance trade groups had issued a statement calling his creation of the regulation without the normal hearing process a "well-intentioned but misguided" move that would establish a "perilous precedent" because it involved regulation without due process, "with no legal authority."

Special Reports /

Poizner Says He Has Right To Set Iranian Investment Restriction

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