Reliability doesn't directly determine collateralization. Reliability might be used to determine additional rewards or slightly reduce requirements by a very small margin. Reliability would be measured by the speed at which a wrapping provider unwraps bitcoin. If we can assume 2 hours is a maximum for good UX, then anything longer than 2 hours could create a negative reputation hit for taking too long (or never) unwrapping a transaction. This could be measured over a long period of time and count total volume to determine a score for a specific node. All of this can be counted via smart contract logic.
The bitcoin is stored on wrapping providers using collateralization and chain proofs for security. Collateralization is used as punishment for behavior, while the chain proofs allow a smart contract to verify Bitcoin activity trustlessly.