Glossary (DeFi-translated)
This document references and defines prominent reinsurance and DeFi terms found elsewhere throughout the docs¹ .
DeFi (and Re-specific onchain) terms
Discount to NAV: when reUSDe trades onchain below its onchain NAV. Driven by liquidity premium (can't instant-redeem) + tail-risk pricing. Similar dynamic to closed-end funds, stETH/ETH spreads, Pendle PTs.
Ethena basis trade: Ethena's funding-rate-capture strategy (long stETH, short ETH perps). sUSDe yield = this basis. Re uses sUSDe for onchain capital pending deployment.
Implied IRR: when buying reUSDe at a discount: annualized return assuming you hold to the next quarterly redemption and tNAV holds. The framework for evaluating discount-to-NAV trades, though the spread above the base yield is compensation for bearing illiquidity and tail risk rather than riskless arbitrage.
Insurance Capital Layer (ICL): Re's onchain vault contract for one tranche. Two of them exist: Basis-Plus (reUSD) and Alpha (reUSDe). Functionally a tranched ERC-4626-style vault.
Monotonic NAV oracle: Re's daily price feed only moves upward in normal operation. Downward revisions require formal actuarial write-down + 48-hour timelock + 3-of-5 multisig.
NAV (Net Asset Value): the protocol's calculated per-token value, updated daily at UTC 00:00 via Chainlink. Distinct from market price (what Curve will quote you). Closest analogue: a vault's pricePerShare.
NAV oracle vs. TWAP oracle: two ways a lending market can value reUSD/reUSDe collateral. NAV oracle = use Chainlink-published economic value. TWAP = use DEX time-weighted price. NAV is stable but lags intraday stress; TWAP is conservative but manipulable in thin pools.
Pendle PT / YT: splits a yield-bearing token into a Principal Token (right to NAV at maturity, trades at a discount) and a Yield Token (right to all yield until maturity). Live for both reUSD and reUSDe.
Principal-at-Risk Note: the legal instrument that channels onchain deposits to the offchain reinsurer. Cover Re SPC issues it; Re purchases and holds it; capital flows to a §114 Trust against it. Coupon = SOFR + spread, tranched as M1 (senior, reUSD, +500 bps) and M2 (mezzanine, reUSDe, +950 bps). The bridge between onchain capital and offchain capital used as collateral backing reinsurance treaties.
Pro-rata (in redemptions): when quarterly requests exceed available surplus, each holder gets a proportional fill; unfilled balances roll forward and keep earning. Same mechanic as oversubscribed token sales.
SOFR: Secured Overnight Financing Rate. USD risk-free benchmark. Re's reference rate for capital deployed to the §114 Trust.
StableSwap vs. twocrypto: wwo Curve pool types. StableSwap (reUSD/USDC) optimizes for near-parity pairs. Twocrypto (reUSDe/sUSDe) handles variable-price relationships, appropriate because reUSDe's NAV drifts upward over time.
tNAV (target NAV): reUSDe-specific. The formal NAV struck quarterly by the actuary; daily prices linearly interpolate toward it between events. A quarterly mark-to-model with daily accrual in between.
Reinsurance terms
Actuary / actuarial gate: independent insurance mathematicians who certify at quarter-end how much surplus capital can be released for redemptions, and whether tNAV needs to be written down. In DeFi terms: an offchain oracle with statutory authority. They unlock liquidity.
Attritional losses: the steady, predictable, small-frequency claims any normal book absorbs every period. The opposite of catastrophe (one event blowing a hole).
AUP (Agreed-Upon Procedures) attestation: The Network Firm's daily independent verification of offchain trust balances and wallet ownership. Results are published onchain via Chainlink Proof of Reserve, which is the same mechanism DeFi users already know from USDC, USDT, and other reserve-backed assets (Re is attesting reinsurance collateral instead of stablecoin reserves).
Capital stack / loss waterfall: the order in which losses get absorbed. Re's order: Re's equity (junior) → reUSDe (mezzanine) → reUSD (senior). Same idea as tranched DeFi vaults (Idle, BarnBridge), but applied to reinsurance losses.
Catastrophe-lite (cat-lite): reinsurance lines with low exposure to single large-scale events. Losses are attritional, predictable, and frequency-based; for example, workers' comp, commercial auto, and non-CAT homeowners. Re writes only these. DeFi analogue: lending against blue-chip collateral rather than long-tail tokens.
Cedent / ceding insurer: the primary insurance company handing off risk and premium to the reinsurer. Re's actual upstream counterparties (Trean, Spinnaker, AmTrust, etc.).
CIMA: Cayman Islands Monetary Authority. Regulates Cover Re SPC. Caps premium-to-capital leverage at 7:1; Re runs at approximately 3:1 (as of April 2026).
Combined ratio: (losses + expenses) ÷ premiums. The single most important number in reinsurance. Below 100% = profitable underwriting. 92% means $0.08 of profit per $1 of premium. Re's 2025 book ran ~93%.
Cover Re SPC: Cover Reinsurance SPC, Ltd. The Cayman Class B(iii) reinsurer Re's capital backs. The regulated counterparty that actually signs treaties. Separate legal entity from Resilience Foundation.
Loss ratio: claims ÷ premiums. Combined ratio's narrower cousin (no expenses). Shows up in Re-vs-industry comparison tables.
The Network Firm: independent accounting firm with read-only access to Re's offchain trust and custody accounts. Performs the daily AUP attestation verifying balances and wallet ownership. Results are published onchain via Chainlink Proof of Reserve. The Network Firm is the auditor; Chainlink is the oracle (distinct roles in the same pipeline).
Premium (insurance): recurring payment from policyholder → insurer → reinsurer in exchange for taking on risk. The actual cash flow that funds reUSDe yield.
Premium receivable: premiums earned under active contracts but not yet collected. Insurance "accounts receivable." Counts in TVL.
Premium-to-capital leverage: total premiums written ÷ supporting capital. Roughly the underwriting equivalent of a lending protocol's utilization ratio.
Quota-share: reinsurance structure in which the reinsurer takes a fixed percentage of every policy in a book, sharing premiums and losses proportionally. Equivalent to LPing into a basket rather than concentrating in one bet.
Reinsurance: insurance for insurance companies. A primary insurer offloads a slice of its policy risk (and a matching share of premiums) to a reinsurer. DeFi analogue: backstopping a lending protocol's bad-debt exposure in exchange for a share of interest income.
Reinsurance treaty: the contract between insurer and reinsurer. Fixed term, defined limits, defined cession %. Closest DeFi parallel: a fixed-term lending agreement with terms encoded upfront.
Section 114 Trust (§114 Trust): U.S. regulatory structure: a segregated bank account holding reinsurance collateral, ring-fenced from the reinsurer's general assets. Stands as surety for the reinsurer paying out claims. Gives the ceding insurer regulatory credit. Equivalent to an offchain "vault" with statutory ring-fencing.
Senior / mezzanine / junior tranche: position in the waterfall. Junior absorbs losses first, earns most. Senior is paid first, hit last. Same vocabulary DeFi structured products use; here the cash flow is underwriting profit, not lending interest.
Surplus / actuarially-released surplus: capital remaining after reserves are set aside for expected and actual claims. Each quarter's reUSDe redemption pool fills from released surplus.
Underwriting / underwriting profit / underwriting loss: pricing and accepting insurance risk. Profit = premiums earned − (claims + expenses). When this goes negative, Re's equity eats the losses first, then reUSDe, then reUSD.
¹ The terms explained here are provided as a general glossary to help readers understand reinsurance and related concepts. They are simplified for clarity, are not legal or financial advice, and do not form part of any contract. Where a defined term appears in an actual agreement, treaty, or other binding document, the definition set out in that document controls and prevails over anything stated here.
For educational and informational purposes only. Nothing on this Site is investment, financial, legal, or tax advice, or an offer, solicitation, or recommendation to buy, sell, or hold any digital asset, including reUSD and reUSDe. Yields are not guaranteed and all figures are illustrative, not a promise of return; past performance is not a reliable indicator of future results. Digital assets involve significant risk, including total loss of principal — the Tokens are not bank deposits and are not insured by any government agency. The Tokens are available only to eligible non-U.S. persons in permitted jurisdictions and are subject to KYC/AML requirements. The binding terms of the applicable agreements govern and prevail over this summary. See our full Disclosures for important additional information.
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