Last year at this time, Tom Gallagher had every reason to feel in control as Florida's first Republican treasurer, insurance commissioner, and fire marshal.

As treasurer, he had won praise for overhauling investment of the state's general fund receipts to permit the use of external investment professionals - a move that had significantly raised the state's return on those funds.

In his role as insurance commissioner, he had regained some of the confidence lost by consumers after the collapse of Guaranty Security Life Insurance Corp. - the largest insurance company failure in state history - by moving aggressively against the firm with a $300 million fraud and negligence suit.

Gallagher also developed a reputation as an outspoken and effective part of Florida's cabinet, which is composed of the state's top seven elective officials.

Of special interest to municipal market participants, he had worked effectively with Democratic Gov. Lawton Chiles and other cabinet members to institute broadbased rules reforming the selection of underwriting syndicates for state bond deals. The rules, which prohibited municipal market participants competing for state borrowings from making campaign contributions to state candidates, have served as a model for other issuers considering such guidelines.

Overall, the 48-year-old former state legislator and mortgage insurance executive, who took office in 1989 after winning a special election for the seat vacated by former Treasurer Bill Gunter, seemed to be on a securely upward track - until Hurricane Andrew hit on Aug. 24, 1992.

In the aftermath of the storm, which hit insurers with over 700,000 individual damage claims totaling about $16 billion, Gallagher has had to walk a tightrope, according to Walter T. Dartland, a Tallahassee consumer activist who ran against Gallagher in the 1988 treasurer's race.

On the one hand, Gallagher has been obliged to get the best shake for policyholders who bore the brunt of the storm damage, Dartland says. This has meant jawboning the insurance industry to respond to claims quickly and to maintain its coverage of clients, he said.

On the other hand, Gallagher is responsible for helping the insurance industry deal with a crisis that has so far forced 14 property and casualty firms into liquidation.

"All and all, he has done about as well as anyone could in the last year, given the hurricane and all the other pots he has to watch." Dartland said. "In particular, what has impressed me about Gallagher's response to Andrew has been his willingness to listen to advice and roll up his sleeves and get involved."

Dartland, currently executive director of Consumer Fraud Watch, a consumer advocacy group, also commends Gallagher for taking an even-handed, apolitical approach since coming into office.

You might have expected that as a Republican coming into that job, that he would fire a lot of people and bring in his own crew," he said. "To his real credit, that didn't happen."

Other consumer advocates also praise Gallagher.

Robert Hunter, president of National Insurance Consumer Organization, an Alexandria, Va.-based group, said he was impressed with Gallagher's response to an announcement from Allstate Insurance Co. that it planned to drop 300,000 policyholders because of its massive storm losses.

Gallagher quickly moved to place a 90-day freeze on insurers dropping customers. In a recent special legislative session, lawmakers agreed to a law extending the moratorium until Nov. 15.

"He has to be given credit for getting behind the idea of a moratorium and sticking by it in the face of pressure from the insurance industry," Hunter said.

Consumer advocates like Hunter have also been pleased by Gallagher's recognition that the system of insurance coverage in Florida needs fundamental reform.

To backstop insurers, Gallagher proposed in May what he called a "catastrophe only" fund. The fund, to be managed by the state, would be created from a surcharge on policies to be collected from insurers. Serving as a kind of massive reinsurance fund, it would only be used to pay claims that arise from a major catastrophe.

Although the idea bogged down in a special legislative session in June, Gallagher still stands by his concept, though he says it probably is best pursued on a federal level.

High Marks

Municipal market participants also give Gallagher high marks for quickly and efficiently orchestrating a$600 million tax-exempt bond issue to bail out the Florida Insurance Guarantee Fund, allowing the fund to pay off policyholder claims on insurers forced into liquidation. The issue, authorized by the state legislature in December, was sold in January.

Since Hurricane Andrew, however, not all recent evaluations of Gallagher's performance have been favorable.

"Emergency decrees really are no substitute for preparedness," says Karen Gievers, a Miami lawyer and Democrat who recently announced her candidacy for the treasurer and insurance commissioner's post. "I think Andrew made it very clear that the insurance system is dysfunctional, and that the insurance commissioner has not taken the systematic steps needed to cure it. "

And in March, the U.S. Senate permanent Subcommittee on Investigations issued a biting 22-page report that faulted Gallagher for failing to recognize until 1990 the precarious financial state of Guarantee Security Life Insurance Corp.

"While primary fault for the fiasco rests with the officers of Guaranty Security, the subcommittee finds that the insurance department- ... failed in its duty to the taxpayers and policyholders," the report concluded, insisting that the department should have recognized the precarious state of the insurer's reserves, which had been invested in junk bonds.

Gallagher's supporters say that along with the recognition he has gained following Hurricane Andrew, there also have been substantial political risks, particularly for a politician who aspires to become Florida's governor. Gallagher ran unsuccessfully for the office in 1982 and 1986.

"The problem for Tom as both a manager and politician is that he confronts the uncertainty of forces totally outside his control," said Tom Slade, chairman of the Republican Party in Florida. "If there is another disaster like Andrew, that could be the ball game."

Gallagher himself is quick to acknowledge the precariousness of his position.

"It's been a pretty wild ride, and yes another Andrew would be very bad news. But I think we have met some tough challenges so far and will continue to use this crisis to push for real reform," he said.

Gallagher is also quick to insist that the hurricane crisis, and the demands it has placed on him as insurance commissioner, has not led to any management problems at either the Treasury Department or the Office of State Fire Marshal.

The state legislature added the task of insurance commissioner to the treasurer's duties in 1915. In 1941, lawmakers made the treasurer responsible for the fire marshal duties as well.

Under Florida's constitution, the treasurer is required to invest all state general and trust funds, except the retirement fund. Those funds carry average daily balances of over $7 billion. The treasurer also oversees, along with Florida's governor and comptroller, the state Board of Administration, which manages the state's Retirement System assets and administers its debt service funds.

"You are only as good as the people around you, and one of the best compliments I can pay to the treasury staff is telling you they don't require a lot of my time." Gallagher said.

In the midst of the insurance crisis, Gallagher takes particular pride in pushing through legislation this year that broadens the authorized investments available to the treasurer to include covered calls and options, and out-of-state certificates of deposit.

Meanwhile, Gallagher says he has kept an eye on developments in the municipal market, including the increased media and regulatory attention paid to the selection of underwriting syndicates.

As he sees it, the problems of other issuers this year point up the wisdom of the reform of the underwriter selection process instituted by Florida's cabinet in 1991.

"I saw a lot of things that have made me feel uncomfortable about [campaign contributions from market participants], and by taking the approach we have, I think we have not only helped deal with political abuses, but we have also made negotiated deals more efficient," Gallagher said.

But Gallagher said he is skeptical about the need for rules that would limit negotiated bond deals on the local level in Florida.

"First of all, I'm a big believer in home rule and think the decision should ultimately be that of the local governments." he said. "Also, I think we need to recognize the limits of any rules imposed on the bond industry. "

Similarly, Gallagher says that state officials should be careful about reforming guidelines for the issuance of certificates of participation in the aftermath of controversy over a COPs deal in Brevard County. in February, the voters in Brevard narrowly affirmed continuing lease payments on a $24 million COPs deal sold in 1989 to fund a controversial government center.

Background Helps

In Florida currently, COPs deals can be sold without a voter referendum.

As his supporters see it, an important source of Gallagher's success as crisis manager comes from his background as a legislator and businessman.

Gallagher, who grew up in Wilmington, Del., as the oldest of eight children, moved to Florida in 1961 to attend college. After graduating in 1965 with a marketing degree, he moved to New York City where, he worked briefly as a salesman for a home textile products company.

Following a two-year stint in the Army, he returned to Miami. By the early 1970s, he found the twin callings which have defined his subsequent career, Politics and insurance.

His insurance career began in 1973 with Liberty Mortgage Insurance Co. and continued with Ticor Mortgage Insurance Co., where he was vice president and southeast regional sales manager until 1983. in 1986, he set up his own company, Gallagher Financial Systems, a mortgage software company now run by his brother Doug.

In 1972, Gallagher ran for the Florida legislature from Dade County and lost. But in a special election in March 1974, he was elected to the state House of Representatives, where he rose to become minority whip from 1980 to 1982.

In 1982, Gallagher announced that he would take on then-Gov. Bob Graham, but later decided not to pursue the race when we was unable to raise enough money. Four years later, he again sought the governorship, but lost to Tampa Mayor Bob Martinez in the Republican primary. In 1987, Martinez, then governor, appointed him to head the state's Department of Professional Regulation.

In January 1989, he became treasurer after winning an election to fill out the unexpired term of former state Treasurer Bill Gunter, who left that office to run for governor in 1990. Gallagher was reelected to a regular four-year term in 1990.

"What his background has given him is the ability to combine two things you don't usually see in a politician: an appreciation for technological innovation and an old-fashioned capacity to motivate people." says Slade, the Republican chairman.

"For me, Tom is the classic case of a person rising to meet a challenge," Slade said.

Gallagher said he remains open to the idea of running again for governor in 1994, but has not decided whether he will.

If he does, he faces an already crowded field on the Republican side, with contenders including Jeb Bush, former President George Bush's son; secretary of state Jim Smith; and Senate president Ander Crenshaw.

"For the time being, I'm just not going to make any decision on whether to run right now, and I'll leave discussions of what the state needs in terms of a governor to others," he said. "I'll leave my options open, but the way I look at it right now, I've got to spend all my time at my present job."

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