Insurance funds in their current state have significant issues, the largest of which is insolvency risk. That is when there is a market movement which causes trades to become bankrupt. The counterparty to the trade must still earn profit, but if there is no money on the other side this is impossible. Insurance funds attempt to patch this by having a pool of capital that can fill the gap financially between a trade's bankruptcy price and the price at which it can exit the position to another solvent trader.