California Business and commercial insurance trends as I see the California Insurance Market evolve from the perspective of a independent California commercial insurance broker. Industries I have clients in include non-profits, manufacturing, commercial property owners, technology and software to name a few. I'll be discussing the trends in California Workers Compensation, Property Insurance, E&O, Errors and omissions, Directors and officers, D&O, EPLI, and other coverages
Friday, April 16, 2010
California Insurers Battle With DOI over Iran-Linked Investments
Last week, five insurance trade groups whose members do business in California filed an official petition asking whether the California Insurance Commissioner Steve Poizner created "illegal underground regulations" concerning Iranian investments. The just of the regulation is this, as of April 1, 2010 California would no longer credit any investment on an insurer's balance sheet in any of 50 companies that were black listed by California insurance commissioner Poizner. These are companies that do business with Iranian energy, nuclear and defense sectors.
The crux of the argument is that this ruling by the commissioner Poizner could set dangerous precedent in the areas of determining jurisdiction "over non-domestic insurers' statutory financial statements, how the list of 50 companies was created, and a few other points of contention.
Here are a few basic fundamentals that need to be stated before I make my point, Insurance is the foundation that has allow American business to thrive, the banking industry to invest in those companies and for America to become the leader in the industrialized world. Another often unknown fact is that many insurers operate at an underwriting loss but make up that difference through the profitability in their investment portfolio. A simple example of this would be California Insurance Company XYZ took in $1 billion in premium dollars but paid out $1.05 Billion in claims and expenses. This would be an unsustainable method to conduct any business, however the insurance industry reinvests their premium dollars and in this case say the company made 10% on its investments. In this very simplified example, California Insurance Company XYZ net profits would be $500 Million for the year.
In the search for profitable investments insurance companies have made some very poor decisions in the last few years. Insurance companies do fail, but this most round of near failures with billions in government intervention was systemic. In the search for profitability we(the insurance industry) can forget our moral compass. Iran is a country that under its current regime wishes to destroy our partners, and inflict terror through state sponsored events through out the middle east(world?). I do not always agree with every agenda that is handed out by the California Insurance Commissioners office, often because is is a launching point for higher office therefore politically motivated, but this particular action is what the industry need to show American that it is capable of self regulation.
My two cents...
Tim Pine Commercial Insurance Broker tim@socalinsurancebroker.com 800-401-6764
