Liquefaction

Key Takeaways

• Liquefaction makes soil unstable due to earthquakes and causes damage to buildings.
• This risk is important for landowners and insurance providers to consider and manage.
• High-risk areas include regions with sandy soils and shallow groundwater, like parts of Utah.
• Soil instability from liquefaction can lead to landslides and damage to infrastructure.
• Insurance and environmental surveys can help mitigate, but not eliminate, liquefaction risks.

What Is Liquefaction?

Liquefaction occurs when violent ground movement, such as earthquakes or construction blasts, causes water-saturated soil to lose strength and become unstable. This can damage buildings, infrastructure, and underground utilities, resulting in major losses. Insurers track liquefaction risk because it affects property protection decisions and investment exposure.

How Liquefaction Works

Liquefaction is one among many risk factors that builders, landlords, and insurance companies must consider when making underwriting decisions. It refers to soil instability and can be caused by various factors such as the inflow of water beneath the soil or a sudden shock caused by earthquakes or human activities. If the soil of a particular region suffers from liquefaction, it may become unable to support the weight of its structures. In that scenario, those structures could suffer severe damage, or even collapse completely into the ground.

In some cases, a building might withstand a severe shock, such as an earthquake, only to be subsequently destroyed by liquefaction. For these reasons, liquefaction hazards must be disclosed when real estate property is sold, so that the buyer is made aware of this important risk of ownership. Land surveys, such as those produced by the United States Geological Survey, can also provide insight into the level of liquefaction risk for a particular region.1

Investors and insurers can help reduce the risk of liquefaction by hiring environmental consultants. These consultants can test the surrounding soil and study environmental surveys produced by governments and private firms. These methods can help estimate the likelihood of liquefaction, as well as the probable impact if liquefaction does occur. However, these methods are inherently uncertain, so it is never possible to entirely eliminate this risk. Many investors will therefore purchase insurance against liquefaction risk as an additional layer of protection.

Real World Example of Liquefaction

In addition to buildings, liquefaction can ruin roads, railways, airport runways, dams and anything else that sits on the ground. It can also cause damage to below-ground utilities. Liquefaction can cause landslides, settlements, and eruptions of mud or water from the ground.

Certain soil types, the depth of the groundwater and a higher probability of earthquakes can make specific locales more vulnerable to liquefaction, as can locations near rivers, streams, and lakes. For example, there are certain areas of Utah that run a high risk of liquefaction due to the sandy soil easily saturated by shallow groundwater, along with a risk of moderate to severe earthquakes.2