The first state to made such a requirement, California Insurance Commissioner Ricardo Lara has issued a notice to all insurance companies doing business in the state of California to take immediate steps to identify and divest from any direct financial investments in either Russian property or assets that could support Russia in its military invasion of Ukraine.
The notice, titled Notice on Ukraine Solidarity and Russia Divestment, is directed to all admitted and non-admitted insurance companies, all licensed producers, and any other interested parties. Commissioner Lara was quoted as saying "California stands with the world community in rejecting Russia's invasion of Ukraine and its assault on freedom and equality." . "As the nation's largest insurance market and the fourth largest insurance market in the world, we must not tolerate California consumers' insurance premiums funding an authoritarian regime that invades a sovereign government, terrorizes its population, and is an enemy of free expression, speech, assembly, press, and equality for LGBTQ+ people, women, and ethnic and religious minorities. Insurance companies must send a loud and clear message of solidarity with the people of Ukraine and the global community by withdrawing any financial support for the Russian regime." Commissioner Lara was joined in the call to take immediate action by the legislative leaders of the California Senate and Assembly Insurance Committees.
Insurance company investments are a major source of global capital, and many global companies have already acted to cut off capital support for the Russian government. Commissioner Lara stated that insurance companies must send a loud and clear message of solidarity with the people of Ukraine and the global community by withdrawing any financial support for the Russian regime.
According to a September, 2021 NAIC report, California invests a substantial portion of approximately $370 billion annual consumer premiums. While AM Best earlier this month estimated the impact of the conflict on U.S. direct investments to Ukraine and Russia to be limited to less than $2 billion in exposed bonds; the Best's Commentary pointed out that insurers' indirect exposures may be more substantial. For example, while U.S. insurers have little stock portfolios that invest directly in Russian companies, they do have exposures to companies that derive a share of their earnings from Russia. A full copy of the report can be found here.
In the notice, Commissioner Lara made it clear that he will use all remedies available under the state's insurance law to push the industry to actionably demonstrate that they are aligning with the global community to hold Russia accountable, stating in part "If insurance companies do not voluntarily act now to dispose of direct investments in Russia, I will explore all options to compel them to follow through."