Racicot’s New Job in the Eye Of the Storm

Posted September 9, 2005 at 4:39pm

Former Montana Gov. Marc Racicot (R) had been chief executive of the American Insurance Association for just three weeks when what is likely to become the worst natural disaster in U.S. history occurred. For the association, which represents property and auto insurers, the devastation of Hurricane Katrina immediately accelerated Racicot’s learning curve, and heightened his profile.

Initially, Racicot had been focused on easing into the issues, getting to know the organization — which Robert Vagley had led for 18 years — and putting his own imprint on the group’s priorities.

As one of his colleagues observed, this was no baptism by fire. It was by water.

“I think we’ve just been amazed at how quickly he’s jumped into the fray,” said Joel Freedman, senior vice president and director of government affairs with The Hartford, one of AIA’s largest members. “He went over to the White House last Friday with claims executives. I believe the governor has called other governors who he knows, and he’s called insurance commissioners in the affected areas and has had dialogue with Congressional leaders. It’s the leadership role that you would expect of a former governor.”

In an interview late last week, in his corner office in downtown Washington, D.C., Racicot called the hurricane and its aftermath “a once-in-a-lifetime-of-humanity” tragedy. But those tragedies, he added, are “the reason why insurance companies exist.”

Since the hurricane, Racicot has been coordinating with government agencies and the Bush administration to arrange for claims adjusters to get access to the disaster zone to pay out for the losses.

“The industry has had people on the ground ready to go,” Racicot said. “We face many of the same challenges that the government faces.”

The insurance business, he has learned, is a delicate enterprise. “You have to produce as many assets as possible so you can ultimately pay out,” he said.

Although the amount that his member companies will ultimately have to pay out for Katrina’s destruction is likely to be staggering, Racicot was very clear that the industry he represents “won’t be in the position of asking Congress” for a bailout. And it also won’t be the only focus of AIA in the coming months.

While Katrina already has changed AIA’s agenda, Racicot said the lobby group will continue to push its other policy priorities, such as federal terrorism risk insurance legislation and a bill to deal with asbestos lawsuits.

The Terrorism Risk Insurance Act, a temporary 2002 law that provides for shared public and private compensation for losses stemming from terrorist acts, expires in December, and Racicot said it must be addressed by year’s end. At the very least, he favors another temporary extension to give industry and government officials an opportunity to look at longer-term solutions.

Another top issue for AIA’s members is regulatory reform. Under the current system, insurance companies are regulated by individual states, so the industry “needs a uniform system of regulation,” Racicot said.

On the asbestos issue, the debate over how to handle lawsuits has been one of the diciest matters in Congress. Even some AIA members have different positions when it comes to how lawmakers should act.

Some insurers favor federal laws that would create medical criteria in order for people who were exposed to asbestos to collect a settlement. Other members, Racicot said, are more open to the idea of a trust fund that would pay out money to asbestos victims.

But even with a divided membership, Racicot said the AIA intends to maintain a leading role on the asbestos debate. The group, he said, will “stay at the table and try to work through” any differences.

Racicot said ironing out differences in his current position is similar to holding elected office.

“It has an impact over a huge part of the economy and touches almost every life in America,” he said. “You need to bring consensus among diverse interests. It’s almost a description for public office.”

For the half year leading up to Racicot’s arrival on his new job, AIA leaders have been conducting a “mission analysis” to determine what the group’s strengths and weaknesses are. Racicot said he has continued that task.

And while he seemed reticent to criticize the AIA as it currently is, he did point out that the group could do better at raising the profile of its mission — that the industry “literally exists to help people in times of trouble.”

But he doesn’t have immediate plans to make any big changes to the AIA’s organization or in-house or outside lobbying lineup.

“Frankly, it didn’t take me long to learn this is a very capable team,” Racicot said. And AIA is “much more nimble than we were 10 years ago.”

Leigh Ann Pusey, a one-time aide to then-Speaker Newt Gingrich (R-Ga.), runs the in-house lobbying shop. And AIA keeps lobbyists from Fierce, Isakowitz & Blalock, Van Scoyoc Associates and the Cypress Group on retainer.

“I don’t have any changes in mind for any personnel,” Racicot said, though the association plans to fill two vacancies in its lobbying shop. Still, he added, “I wouldn’t tell you the process is complete. … There are naturally opportunities for change. There are seasons, and you mutate and change with the seasons.”

AIA has six regional offices including outposts in Albany, Sacramento, Chicago and Atlanta. Racicot’s annual compensation package is reported to be upwards of $1 million, and from mid-2004 to mid-2005 the group reported spending about $3.3 million in its lobbying disclosure forms.

Racicot’s tenure as a comparatively moderate governor of a presidential red state won him kind words from some Democrats. More recently, he headed the Republican National Committee and served as a top insider with the Bush-Cheney presidential campaign, jobs in which he hasn’t exactly shied away from GOP partisanship.

Still, he said, just like an elected official represents those who didn’t vote for him, Racicot will approach his constituents and audience with bipartisanship.

Kirk Blalock of Fierce, Isakowitz & Blalock said the hurricane won’t change Racicot’s job, but it adds a massive and unexpected dynamic to it.

“It will raise his visibility for the industry faster because the insurance industry will be communicating to its policyholders in an unprecedented way,” he said. As a governor, Racicot “ran an enterprise much larger than AIA — he ran a state. So Marc has the management abilities needed to be hugely successful. He also is a skillful and thoughtful person, and has the ability to build relationships on all sides of an issue: Republicans, Democrats and Independents.”

“To me,” Racicot said, “the substance of the issues is more important than the political aspects. We’re going to win battles here if we’re doing the right thing for the right reasons and the facts are on our side,” he said.

Racicot, 57, said that in his new job, he intends to take a more measured approach to political life.

While Racicot did chair the RNC when he was working at the law and lobbying firm Bracewell & Patterson (now Bracewell & Giuliani), “I won’t be chairing the RNC while I’m here,” or chairing a leadership political action committee, he said.

“Your first loyalty is to the people you work with and for,” he said. “I’m willing to subjugate” the political work. But he plans to continue to remain active in fundraising circles, especially for candidates he considers friends, such as Sen. Conrad Burns (R-Mont.).