Dynamic ILP Insurance Cover
The ILP insurance cover is dynamic and is based on the current health of ILP. The more defaults the ILP has to handle the worse its health becomes. Conversely, the more ILP fees are collected, the better ILP health becomes.
LDP calculates how much of the loan book size in USDC will default by %. This number, in the beginning, will be an industry-accepted number and will change according to the DAO, as well as the historical performance of the platform.
Balancing the LDP ratio: If less USDC than LDP target - Investors can deposit USDC in the ILP to earn LODESTAR.
What if the ILP is performing badly?
The treasury can issue an IOU to the ILP to cover the falling LDP ratio, by providing USDC until an investor invests the required USDC to cover the ratio. The treasury can use up to 20% of its size for this purpose.