California’s insurance market is heating up – both literally and figuratively – thanks to an escalating wave of natural disasters that are reshaping the industry. The Franklin Fire, a roaring blaze devouring thousands of acres in Southern California, has thrust the state’s luxury properties into the spotlight. Among them is Beyoncé and Jay-Z’s $200 million Malibu mansion, perched in the high-risk Paradise Cove area. Despite its record-breaking value and opulent features – think a 30,000-square-foot expanse with oceanfront views and an infinity pool – the property now teeters on the brink of devastation.
And this stark reality underscores a grim truth: even the wealthiest homeowners are not insulated from the ravages of nature. As evacuation orders roll in, the Carters and their neighbors are reminded that luxury cannot outmaneuver catastrophe. The Franklin Fire has already scorched more than 3,000 acres in a mere 24 hours, leaving communities and insurers grappling with the fallout.
For Charlie Massie (pictured), president of ISU Massie & Beck Insurance Services, the blaze serves as a brutal emblem of a market in upheaval.
“The property market, both in California and nationwide, is experiencing a mass exodus of standard and admitted carriers,” Massie said. “Places like Malibu, Lake Tahoe, and other luxury regions are being abandoned by carriers unwilling to shoulder the risks.”
And, in these high-stakes areas, insurance options have dwindled, leaving property owners with few lifelines. The scarcity of coverage has driven insurers like Massie’s firm to innovate rapidly.
“We’ve had to pivot significantly,” he said, describing reliance on the California FAIR Plan – once a last resort – and partnerships with non-admitted carriers willing to cover these volatile risks. The resulting policies, however, come with steep price tags,” Massie said.
“For properties in high-risk areas, we often have to layer coverage across multiple carriers. It’s a complex process that leads to premiums most would consider exorbitant.”
The Franklin Fire’s devastation extends far beyond scorched earth – it’s igniting a larger conversation about the challenges facing ultra-high-net-worth individuals in securing insurance for properties in high-risk areas. As wildfires and other natural disasters intensify, even the wealthiest homeowners are grappling with coverage that’s harder to find and prohibitively expensive.
Massie, however, is all too familiar with these challenges.
“We’ve had clients with homes valued at $25 million who were paying $50,000 to $60,000 in premiums for years, and now they’re being quoted $800,000 annually,” Massie said. “One client in Utah, facing this new reality, simply decided, ‘No, I’m going to self-insure.’”
Self-insurance is a growing trend among ultra-high-net-worth individuals, particularly when premiums reach what Massie describes as “beyond extreme” levels – 4% or 5% of a home’s value annually. However, the decision to self-insure doesn’t come without risks.
“We always recommend keeping a liability policy in place,” Massie said. Liability coverage ensures protection against accidents, a crucial safeguard when time and financial resources are a homeowner’s most valuable assets.
For others, the solution lies in layering coverage across multiple carriers. This approach, though effective, adds complexity and cost to the process.
“Instead of having one carrier provide $20 or $30 million in coverage, you’re working with several to cover different layers,” Massie explained. “The end result is a stack of policies that’s far more expensive.”
Despite these stopgap measures, Massie isn’t optimistic about an imminent solution to the insurance crisis.
“Not anytime soon,” he said, noting that conditions are worsening. He pointed to increasingly stringent underwriting requirements: “What used to take 30 seconds and 10 questions now requires 100 questions and two weeks for approval. The drain on time and resources has gone up five- or sixfold.”
Beyond individual homeowners, businesses have turned to group captives as a form of self-insurance. Massie is a strong advocate for this approach, calling it “one of the best solutions out there” for companies that meet the qualifications. Captives, which pool risks among a group, offer stability with renewal rates around 98%.
“These are intelligent business owners who weigh their options every year, and almost all of them stick with the captive,” Massie said.
In contrast, ultra-high-net-worth individuals opting for traditional self-insurance are effectively choosing to absorb the full risk.
“This is a challenging environment,” Massie said. “When you’re looking at premiums in the hundreds of thousands for a single property, I understand why people are exploring alternatives.”
