Deribit has an insurance fund that covers the negative equity of bankrupt traders. This ensures that winning traders still get paid, even if the trader on the other side of the trade goes bankrupt. In this context, bankruptcy means an account has lost 100% of the funds that were in the account, and then something extra. However, due to Deribit's advanced real-time incremental liquidation system, it is more common for a liquidation to be completed before bankruptcy occurs.
On the insurance page, all occurring bankruptcies are published in real-time, along with the current state of the insurance fund.
If the insurance fund were to ever be completely depleted, any other occurring bankruptcies would then be socialized among the winning traders for that day. However, to date there has not been a socialised loss event on Deribit. The Deribit risk team is constantly monitoring the platform to (among other things) minimise the risk of this ever happening.
The insurance fund balance, as well as bankruptcy history can be accessed on a dedicated page.
A transfer from the insurance fund changes the receiving account's cash balance when it is posted. It is not part of the daily settlement at 08:00 UTC. The same posted-cash timing applies to cash adjustments and fees that arise when an LSP or ADL transfer is applied to an account. How those transfers affect positions, margin, and unsettled trading profit and loss is described in those articles.
Insurance fund income:
All liquidation orders are charged an extra fee on top of the default transaction fees. Every hour the additional proceeds are added to the insurance fund. Please see the liquidation fee specifications in our fees documentation.