# Insurance Pool

## **Insurance Pool Mechanics**

<figure><img src="/files/xV14czKCviGnyGqyf5oK" alt=""><figcaption></figcaption></figure>

Every time a debt is repaid, a portion of the accrued interest is allocated to the [insurance pool.](https://arbiscan.io/address/0xEE1c5a8c397F4D6BBC33BAd080e77D531C6d8Ce5#tokentxns) This allocation is determined by the insurance rate multiplier.

**Example for USDC Liquidity Pool**:

* **Interest Rate**: 10%
* **Insurance Rate Multiplier**: 20%

Suppose a user's interest is 100,000 USDC. In this case, 80,000 USDC of the revenue will be sent to the USDC liquidity providers, while 20,000 USDC will be allocated to the insurance pool.

The same logic applies to the WBTC and ETH liquidity pools. The insurance pool consists of three token balances: ETH, WBTC, and USDC. If there is a bad debt, the insurance pool will automatically cover it.


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