Liquefaction

What Is Liquefaction?

Liquefaction is a phenomenon in which the soil underneath a building can become unstable due to violent ground movements such as earthquakes or construction blasts. The term is widely used in the insurance industry, since liquefaction can cause major damage to buildings and utilities infrastructure, resulting in insurance claims.

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.

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.