California Insurance Commissioner Dave Jones is declaring a big success his department’s 4-year-old program to pressure state-licensed insurance companies to stop investing in multinational firms that do business in Iran.
Just eight of a total of 1,300 licensed insurers continue to invest in foreign-owned companies that are involved in the military, energy or nuclear sectors of the economy of the Islamic republic, he said. The State Department identifies the Middle Eastern nation as a state sponsor of terrorism.
Topping Jones’ list, unveiled at a news conference in Los Angeles on Wednesday, was California’s biggest private auto liability insurer: State Farm Mutual Automobile Insurance Co. According to the department, State Farm collected $1.5 billion in premiums in California in 2011, accounting for 13.4% of the market.
State Farm and the other seven companies, all life insurers, on the list are engaged in risky investments, Jones warned. “Iran is unstable and at risk ... in conflict with its neighbors and in conflict with the United States,” he said.
Jones noted, however, that it is not illegal for State Farm and the other companies to refuse to comply with his department’s call for divestment in firms that do business in Iran.
“As commissioner, I don’t have the authority to sanction those who do not divest,” he said.
Nevertheless, Jones noted, the public, shareholders and policyholders have a right to know which insurers are not complying with the 2009 regulation issued by then-Commissioner Steve Poizner.
State Farm in a statement emphasized that it “cares deeply about America’s security” but does not believe that the California Department of Insurance is the proper agency to be dealing with such issues.
“We believe foreign policy and rules on foreign investments can be most effectively addressed by the federal government,” the company said. The U.S. Treasury has tightened a series of economic sanctions against Iran’s government but is not regulating indirect investments in the 37 companies identified by the Department of Insurance as being active in Iran’s nuclear, military and energy sectors.
Most of those companies are oil and gas and construction firms based in China, Russia, India and other developing countries in Asia and Africa, according to the California department’s list.
Jones credited his department’s Iran initiative with making “substantial progress” despite legal challenges from the insurance industry.
The eight insurers have invested a total of $198 million in foreign multinational corporations operating in Iran, down from a total of $6 billion in 2009, Jones said. That’s a 97% reduction from when the divestment regulation was originally approved, he said.
The original Poizner regulation gave the commissioner the power to disallow Iran-related indirect investments from being counted as part of a company’s legally required financial reserves. That tool was removed by a Superior Court judge as part of a legal settlement.
Instead, the commissioner only can publicize the names of the companies that refuse to curtail their indirect investments.