Since providing liquidity to an index is leveraged, there is a risk of insolvency if more than the underlying assets are paid out. To prevent it, InsureDAO has several mechanisms.
Maximum allocation limit to one pool
InsureDAO sets the maximum allocation limit to one pool so that the underlying asset remains solvent even if all the allocated credit to one pool is paid out.
Leverage rate control operation
When the underlying asset of a pool is paid out, the leverage rate becomes higher. In such cases, InsureDAO would conduct deleverage operations, which forcibly deallocate credit from pools to lower the leverage rate. Also, those who provided liquidity become unable to withdraw until the leverage rate gets back to the safe rate. Other than de-leverage operation, leverage rate can be lower when 1) new liquidity is added or 2) an index earned premium, which will be compounded as the underlying asset.