For each clearing service, JSCC assumes that several clearing participants default under extreme but plausible market conditions, and has each clearing participant deposit a default fund large enough to cover the potential future exposure (possible future loss) in that case. In JSCC's clearing of CDS and interest rate swaps, the assumption is that the two largest clearing participants (including their affiliates) default.
JSCC's basic approach to covering losses is to use first the defaulting clearing participant's resources (margin and similar), then JSCC's own contribution, and then the resources of non-defaulting clearing participants (the default fund and similar). For example, if the defaulting member's margin and default fund contribution are enough, the default funds of the other members are not used. If they are not enough, the others' may be used.
The default fund is separate from the margin that members deposit. The PFMI give a default fund as an example of a mechanism in which participants bear risk mutually.