> For the complete documentation index, see [llms.txt](https://docs.noon.capital/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.noon.capital/5.-the-security-framework/layered-insurance.md).

# Layered Insurance

If something goes wrong, what protections absorb the loss? A three-tiered defensive insurance stack designed to insulate $USN and $sUSN holders.

## <mark style="color:yellow;background-color:$warning;">**Protect**</mark>

In digital asset management, true protection requires defense-in-depth. <mark style="color:purple;">**Noon**</mark> relies on a 3-Layer Insurance Framework spanning protocol-level cash reserves, on-chain smart contract cover, and institutional broker insurance to absorb market noise, smart contract vulnerabilities, and custodial insolvencies.

Users sit behind all three protective layers.

<figure><img src="https://3816918787-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FL26rQzcNmiUZrCXkxkjS%2Fuploads%2FLghQJstRVJLfYw8Zfsh6%2FInsuranceStack.png?alt=media&amp;token=1c0342ec-0490-4671-9b16-cb1a3abedef2" alt=""><figcaption></figcaption></figure>

## <mark style="color:$primary;">1. Layer 1: The</mark> <mark style="color:purple;">**Noon**</mark> <mark style="color:$primary;">Insurance Fund (NIF)</mark>

The <mark style="color:purple;">**Noon**</mark> Insurance Fund (NIF) serves as the protocol's first-line defensive buffer. Funded continuously by 10% of total raw protocol returns and held in liquid stablecoins ($USDC / $USDT), the NIF performs three critical roles:

* Absorbs Daily Volatility: Neutralizes short-term mark-to-market fluctuations from assets like AAA-rated JAAA CLOs or private credit valuations, ensuring that temporary price noise never impacts <mark style="color:violet;">**$sUSN**</mark> daily appreciation.
* Covers Insurance Deductibles: Bridges the deductible gap during Nexus Mutual claim payouts to guarantee 100% principal recovery for stakers.
* Absorbs Liquidity Slippage: Covers transaction slippage when positions must be unwound rapidly during high-volume withdrawal windows.

> <mark style="color:$warning;">**Seasoning & Buyback Engine:**</mark> NIF contributions are seasoned for 12 months to maintain a robust protocol safety buffer. After 12 months, unutilized surplus is used to buy back <mark style="color:violet;">**$NOON**</mark> on the open market and distribute it pro-rata to <mark style="color:violet;">**$sNOON**</mark> stakers, ensuring capital either protects the protocol or rewards the community.

## <mark style="color:$primary;">2. Layer 2: On-Chain Smart Contract Cover</mark>

All scaled DeFi strategy deployments (such as Aave, Compound, or Pendle PT pools) carry active, on-chain protocol insurance purchased through Nexus Mutual.

* Mandatory Integration Gate: Insurance verification is a mandatory prerequisite before any strategy adapter scales to full deployment capacity.
* Auditable On-Chain Policies: All coverage limits, active policies, and expiration dates are published transparently on-chain, making "insured" an independently checkable claim rather than a marketing promise.
* Controlled Testing Exclusion: Early, small-scale strategy test deployments (sized at less than 50% of the active Insurance Fund balance) may operate un-covered temporarily while proving execution at low volumes. Once scaled, 100% of deployment capital requires active cover.

## <mark style="color:$primary;">3. Layer 3: Custodial & Broker-Dealer Protections</mark>

For tokenized traditional assets (such as U.S. Treasury bills and JAAA CLOs), collateral is protected by regulated institutional insurance infrastructure through our custodial and broker-dealer partners:

* SIPC Asset Protection: Assets held via our RWA execution partner Dinari through Alpaca Securities (a licensed U.S. broker-dealer and FINRA member) carry standard Securities Investor Protection Corporation (SIPC) coverage protecting up to $500,000 per account.
* $150 Million Excess Insurance Policy: In addition to standard SIPC coverage, Alpaca maintains an excess insurance policy through Lloyd’s of London, providing up to $150 Million in aggregate excess protection ($75 Million for securities and $75 Million for cash) per account.
* Institutional Fund Isolation: Private credit positions (such as Fasanara F-TAC) sit inside regulated, bankruptcy-remote institutional fund structures subject to independent third-party administration.

### How a Loss Event Flows Through the Stack

<figure><img src="https://3816918787-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FL26rQzcNmiUZrCXkxkjS%2Fuploads%2Fc1Cin3Jfo2c3KkOnZhKr%2FClaimPaths.png?alt=media&amp;token=63866050-4c5f-44c8-b60f-cd6debae6e36" alt=""><figcaption></figcaption></figure>

By layering cash-reserve buffers, smart-contract protocol cover, and institutional broker insurance, <mark style="color:purple;">**Noon**</mark> creates a resilient financial framework that protects user capital across all market environments.