They've already said that this will use Shamir's Secret Sharing. (Let's not even get in to why SSS is a bad idea: https://blog.keys.casa/shamirs-secret-sharing-security-shortcomings/) In a 2-of-3 set up, if one share is lost you can recombine the other two shares to recreate the secret, and then from that secret generate three new shares

It's not clear whether that would require the user to set up everything again from scratch, or whether Ledger would just recreate your seed phrase and then generate three new shares automatically. I'm sure I don't need to point out the massive risk with the second option.