The California Insurance Department rejects an argument by insurance groups that its rules concerning investments with Iran-linked companies are illegal, a representative for the agency said.
Five insurance trade groups last week filed a petition asking for an official review as to whether Insurance Commissioner Steve Poizner created "illegal underground regulations" concerning Iranian investments.
The trade groups involved are the Association of California Insurance Companies, the Personal Insurance Federation of California, the American Insurance Association, the American Council of Life Insurers, and the Association of California Life and Health Insurance Companies.
Under the contested regulations, Commissioner Poizner said that as of April 1 he would not credit any investment on an insurer's balance sheet in any of 50 companies he had blacklisted for involvement with Iran. The 50 listed companies, according to the department, do business with the Iranian energy, nuclear and defense sectors.
"Ultimately we have the power to do this as the commissioner oversees investments by insurance companies," said a spokesman, Darrell Ng. He added that 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."
Mr. Poizner–who is running in the state's Democratic primary for governor–said 460 insurers had agreed to a moratorium on investment with the 50 companies, and "we look for rest of industry to join in."
In petitioning the California Office of Administrative Law for a regulatory review, the five insurers contesting the order said Mr. Poizner had no legal basis for his actions. "Our lawyers believe we do," according to Mr. Ng.
On March 26, the five insurance trade groups issued a statement calling the regulation's promulgation 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."
On Feb. 19, the organizations had written the commissioner, contending among other things that his actions would put insurers licensed in other domiciles "in direct conflict with their respective regulators."
The letter asked how he determined jurisdiction "over non-domestic insurers' statutory financial statements" and how he was coming up with criteria for companies on his list.
In their petition, the groups said he had never identified the laws he based his action on, adding that the state code does not give him "any apparent authority to regulate the content of financial statements…"
It called the issue "a matter of great importance," noting that "a company that files a false financial statement may lose its certificate of authority."
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