Foreign Investments: Iran Investment Bill Well-Intentioned, But Unconstitutional

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Sam Sorich and Larry Golub authored an article in the Insurance Journal discussing AB 2160, legislation that would prevent insurers from counting investments connected to the Iran's energy industry toward meeting their capital requirements. According to Sorich, the proposed California law is unconstitutional and inconsistent with the United States’ established foreign policy. 

Sorich explained that the state has broad authority to regulate the business of insurance, however, that authority is limited by the U.S. Constitution. One of the limitations is in Article II, which gives the president the power to decide U.S. foreign policy. Once the federal government establishes foreign policy on a matter, a state does not have the authority to create its own policy, no matter how well-intentioned. Sorich says the proposed law is flawed because it violates this constitutional principle.

The Assembly passed AB 2160 in May. The Senate Insurance Committee approved the bill on June 28. AB 2160 is now waiting for a vote on the Senate floor. The regular legislative session will end on Aug. 31.  

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