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AB-705 Insurance: risk retention.(2011-2012)

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AB705:v98#DOCUMENT

Amended  IN  Assembly  April 27, 2011

CALIFORNIA LEGISLATURE— 2011–2012 REGULAR SESSION

Assembly Bill
No. 705


Introduced  by Blumenfield Assembly Member Blumenfield, Feuer
(Coauthor(s): Assembly Member Gatto)

February 17, 2011


An act to amend Section 1241.1 of add Section 1241.2 to the Insurance Code, relating to insurance.


LEGISLATIVE COUNSEL'S DIGEST


AB 705, as amended, Blumenfield. Insurance: risk retention.
Existing law prohibits domestic insurers from acquiring foreign investments from or located in foreign jurisdictions designated as state sponsors of terrorism by the United States Secretary of State.

This bill would require that an admitted foreign insurer’s foreign investments, located in foreign jurisdictions designated as state sponsors of terrorism by the United States Secretary of State, be disallowed and treated as nonadmitted assets on the financial statements of the admitted foreign insurer filed with the Insurance Commissioner. The bill would also require that if a jurisdiction was not so designated when an investment was made, the investment be disallowed and treated as nonadmitted.

This bill would prohibit a domestic insurer from acquiring any direct or indirect investment, as defined, in Iran. The bill would disallow and treat as a nonadmitted asset on the financial statements required to be filed with the Insurance Commissioner any direct or indirect investment of an admitted foreign insurer in Iran.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NO   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 Section 1241.2 is added to the Insurance Code, to read:

1241.2.
 (a) The Legislature finds and declares the following:
(1) Direct investments in Iran and investments in companies doing business with the Iranian energy sector are subject to financial risk as a result of Iran’s pursuit of nuclear weapons, sponsorship of international terrorism, and consequent international isolation.
(2) This section furthers the commissioner’s authority to ensure that investments by insurers doing business in California are financially sound and not subject to risk based on ties to Iran.
(b) In addition to the requirements of Section 1241.1, a domestic insurer shall not acquire any direct or indirect investment in Iran.
(c) Any direct or indirect investment of an admitted foreign insurer shall be disallowed and treated as a nonadmitted asset on the financial statements of the foreign insurer filed with the commissioner.
(d) For purposes of this section, “business operations” shall mean engaging in commerce in any form, including, but not limited to, acquiring, developing, maintaining, owning, selling, possessing, leasing, or operating equipment, facilities, personnel, products, services, personal property, real property, or any other apparatus of business or commerce.
(e) For purposes of this section “direct investment” shall mean an investment in either of the following:
(1) The government of Iran, including any political subdivision, agency, or instrumentality thereof and including any entity controlled by the government of Iran.
(2) In a person or asset domiciled or headquartered, or real estate located, in the territory of Iran, or any other territory or marine area, including the exclusive economic zone and continental shelf, over which the government of Iran claims sovereignty, sovereign rights, or jurisdiction, provided that the government of Iran exercises partial or total de facto control over the area or derives a benefit from economic activity in the area pursuant to an international agreement.
(f) For purposes of this section “energy sector” shall have the same meaning as set forth in subdivision (b) of Section 2202 of the Public Contract Code.
(g) For purposes of this section “indirect investment” shall mean an investment in a person identified on the current list developed by the Department of General Services pursuant to subdivision (b) of Section 2203 of the Public Contract Code.

SECTION 1.Section 1241.1 of the Insurance Code is amended to read:
1241.1.

(a)A domestic insurer shall not acquire any investment (1) respecting a foreign jurisdiction, (2) supporting economic or political activity in, or military activity by or on behalf of, that foreign jurisdiction, or (3) denominated in the currency of that foreign jurisdiction, if that jurisdiction is designated as a state sponsor of terrorism by the United States Secretary of State pursuant to Section 6(j) of the Export Administration Act, Section 40 of the Arms Export Control Act, and Section 620A of the Foreign Assistance Act. If any investment made pursuant to Section 1241 later becomes prohibited by this section, that investment shall not be retained as an investment made pursuant to this code.

(b)Any investment of an admitted foreign insurer (1) respecting a foreign jurisdiction, (2) supporting economic or political activity in, or military activity by or on behalf of, that foreign jurisdiction, or (3) denominated in the currency of that foreign jurisdiction, if that jurisdiction is designated as a state sponsor of terrorism by the United States Secretary of State pursuant to Section 6(j) of the Export Administration Act, Section 40 of the Arms Export Control Act, and Section 620A of the Foreign Assistance Act, shall be disallowed and treated as a nonadmitted asset on the financial statements of the foreign insurer filed with the commissioner. If a jurisdiction was not so designated when an investment was made, the investment shall be disallowed and treated as nonadmitted on statements filed with the commissioner after the designation is made.