> ## Documentation Index
> Fetch the complete documentation index at: https://help.arcus.xyz/llms.txt
> Use this file to discover all available pages before exploring further.

# How is the insurance fund capitalized?

A portion of the spread from efficient, profitable liquidations is paid to the insurance fund during backstop liquidations (when book liquidity is insufficient).

The exchange is responsible for ensuring proper capitalization of the insurance fund, sizing it according to open interest, margin parameters, backstop capacity, and historical volatility.