Assessing the value of information in pricing insurance against multiple hazards: the case of earthquake and liquefaction

Pricing of natural hazard insurance requires robust estimates of potential losses from multiple interacting hazards, even in the presence of significant uncertainty in key risk parameters such as site conditions and structural characteristics. This paper presents a framework for quantifying the Value of Information ( VoI ) provided by targeted, site-specific data to reduce the uncertainty in multi-hazard earthquake and liquefaction risk assessments and to support more informed insurance decision-making. The proposed framework builds on a loss assessment methodology that integrates earthquake shaking and liquefaction hazards, capturing their combined effects on structural vulnerability and expected losses, and applies principles of expected utility theory and decision-making to identify optimal insurance pricing for both clients and insurer. The approach is demonstrated through a case study in New Zealand, a seismically active country where variability in ground conditions, particularly Vs30 , strongly influences seismic risk. A probabilistic graphical model captures conditional dependencies between shaking, liquefaction, and structural damage, enabling realistic estimation of expected losses. VoI is computed separately for insurers and clients, accounting for premium structures and the financial consequences of incorrect insurance decisions. Results show that VoI is greatest in high-risk, high-uncertainty contexts, particularly where low stiffness soils amplify liquefaction-related losses. While data collection consistently benefits clients, insurers may experience diminishing or even negative VoI as clients adopt more conservative insurance strategies. The VoI framework offers practical insights into balancing data acquisition costs against financial benefits, supporting resilient and equitable insurance systems in regions exposed to natural hazards. • Probabilistic graphical model to quantify losses from earthquake and liquefaction hazards. • Framework to assess the Value of Information ( VoI ) under uncertain multi-hazard risk parameters. • New Zealand case study shows VoI highest in high-risk, high-uncertainty areas. • VoI analysed from a multi-party perspective in natural hazard insurance. • Client VoI is always positive; insurer VoI depends on client’s prior insurance decisions.