> For the complete documentation index, see [llms.txt](https://docs.kanalabs.io/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.kanalabs.io/perpetual-futures/kana-perps/breaking-down-kana-perps/insurance-fund.md).

# Insurance Fund

## Insurance Fund

The **Insurance Fund** is a core risk-management component in Kana Perps. It is designed to absorb losses from undercollateralized liquidations and provide a backstop for extreme market events.

#### Purpose

The primary role of the Insurance Fund is to ensure that the platform remains solvent and traders are protected even if a liquidated position's loss exceeds the user’s posted collateral.

#### Funding Mechanisms

The Insurance Fund is funded in two main ways:

1. **Voluntary Contributions:**
   * Any user can deposit funds into the Insurance Fund at any time.
   * These deposits are recorded and tracked separately from user trading balances.
   * The fund is denominated in `KanaUSDT`.
2. **Automatic Allocations from Liquidations:**
   * During every liquidation, if the user has remaining collateral:
     * **20%** of that collateral is automatically added to the Insurance Fund.
     * The rest is distributed as per the standard liquidation logic (30% to the liquidator, 50% back to the user).
   * These contributions continue until the fund reaches its configured **threshold cap**.

#### Threshold and Admin Control

* The Insurance Fund has a **platform-wide threshold** that defines the maximum reserve it should hold.
* Once this threshold is reached:
  * **Platform administrators** are granted permission to withdraw excess funds for operational or treasury use.
* Withdrawals can only occur **after the threshold is met**, ensuring that the fund remains adequately capitalized for risk protection.

> **Important:** Admins cannot access or withdraw funds from the Insurance Fund before the threshold is reached, enforcing a strict safeguard for user protection.

#### Use During Insolvency

When a position’s losses **exceed the user’s collateral**, and liquidation is triggered:

* The Insurance Fund **covers the shortfall**.
* In such cases, **no rewards** are given to the liquidator.
* The fund acts as a payer of last resort to ensure markets remain balanced and counterparties are not affected