# Insurance Capital Layer (ICL) Overview

**Insurance Capital Layers (ICLs) are the core custody vaults that hold user deposits and allocate capital to real-world reinsurance contracts. Think of an ICL as the protocol's on-chain treasury account for a specific risk/return tranche.**

### Key Characteristics

| Feature                  | Description                                                                                                                 |
| ------------------------ | --------------------------------------------------------------------------------------------------------------------------- |
| **Dedicated Vault**      | Each ICL has its own Fireblocks storage vault and on-chain vault contract.                                                  |
| **Token Binding**        | One ICL maps to one ERC-20 yield token (reUSD or reUSDe).                                                                   |
| **Daily Sweeps**         | Idle stablecoins sweep into the vault every 24 hours, minimizing smart-contract exposure.                                   |
| **Surplus Note Gateway** | Capital can only exit the ICL after a Surplus Note is signed between Re Protocol and a licensed reinsurer.                  |
| **Transparency**         | Draw-downs and repayments are emitted on-chain between the protocol and reinsurance counterparties.                         |
| **Audit Trail**          | Off-chain balances (trust accounts, operating accounts) are attested daily by The Network Firm and published via Chainlink. |

### How ICLs Fit in the Capital Stack

1. **User Deposits** → Mint a yield token (reUSD or reUSDe).
2. **ICL Vault** → Holds deposits; performs daily Fireblocks sweep.
3. **Surplus Note** → When signed, allows the reinsurer to draw capital up to a pre-agreed limit.
4. **§114 Trust** → For reUSD, funds regulatory collateral; for reUSDe, funds loss reserves.
5. **Yield Accrual** → Capital earns a blended rate: SOFR on off-protocol assets + 7-day trailing sUSDe rate on on-chain assets, plus token-specific spread.
6. **Redemptions & Curve LPs** → Liquidity sourced first from the vault, second from Curve pools.

### Capital Stack & Loss Absorption

The capital stack determines who bears losses first:

| Layer       | Who                            | Role                                                                                                         |
| ----------- | ------------------------------ | ------------------------------------------------------------------------------------------------------------ |
| Most junior | **Reinsurance company equity** | Absorbs losses first — the reinsurer puts its own capital at risk before any protocol capital.               |
| Junior      | **reUSDe (Alpha ICL)**         | Absorbs losses after the reinsurer's equity is exhausted. Higher spread (850 bps) compensates for this risk. |
| Senior      | **reUSD (Basis-Plus ICL)**     | Protected by both layers below. Lower spread (250 bps), greater liquidity.                                   |

### Current ICLs

| Token  | Layer Name     | Risk Profile | Capital Use                                  |
| ------ | -------------- | ------------ | -------------------------------------------- |
| reUSD  | Basis-Plus ICL | Low          | Regulatory collateral in §114 Trust (senior) |
| reUSDe | Alpha ICL      | Medium-High  | Loss reserve for claims (junior)             |

#### Key Characteristics

| Feature                  | Description                                                                                                                     |
| ------------------------ | ------------------------------------------------------------------------------------------------------------------------------- |
|                          | Each ICL has its own Fireblocks storage vault and on‑chain vault contract.                                                      |
| **Token Binding**        | One ICL ↔ one ERC‑20 yield token (e.g. **reUSD** or **reUSDe**).                                                                |
| **Daily Sweeps**         | All idle stablecoins sweep into the vault every 24 h, minimizing contract exposure.                                             |
| **Surplus Note Gateway** | Capital can only exit the ICL after a Surplus Note is signed between Re Protocol and a licensed reinsurer.                      |
| **Transparency**         | Draw‑downs and repayments are emitted on‑chain between the protocol and reinsurance counterparties.                             |
| **Audit Trail**          | Off‑chain balances (Primary operating a/c or 114 Trust accounts) are reported daily by **The Network Firm** → Chainlink oracle. |

#### How ICLs Fit in the Capital Stack

1. **User Deposits** → Mint yield token (**reUSD** or **reUSDe**).
2. **ICL Vault** → Holds deposits; performs daily Fireblocks sweep.
3. **Surplus Note** → When signed, allows reinsurer to draw capital (up to a pre‑agreed limit).
4. **114 Trust** → For reUSD, funds regulatory collateral; for reUSDe, funds loss reserve.
5. **Claims & Premiums** → Flow back; repayments credited to the ICL → reflected in token NAV.
6. **Redemptions & Curve LPs** → Liquidity sourced first from vault, second from Curve pools.

#### Current ICLs

| Token      | Layer Name     | Risk Profile | Capital Use                                 |
| ---------- | -------------- | ------------ | ------------------------------------------- |
| **reUSD**  | Basis‑Plus ICL | Low          | Regulatory collateral in 114 Trust (senior) |
| **reUSDe** | Alpha ICL      | Medium‑High  | First‑loss reserve for claims (junior)      |


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