> For the complete documentation index, see [llms.txt](https://docs.re.xyz/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.re.xyz/capital-stack-and-loss-waterfall/loss-waterfall-order.md).
# Loss waterfall order
How losses flow through Re's capital structure.
As mentioned earlier, Re’s capital stack consists of three components:
* reUSD: the senior layer. The most liquid, but earns less rewards than reUSDe.
* reUSDe: the mezzanine layer. Accepts less liquidity than reUSD (redemptions are quarterly rather than instant), but earns a greater spread in exchange.
* Re capital: the junior layer. Re’s accumulated capital, which acts as a first-loss layer to absorb any potential underwriting losses before reUSDe or reUSD are touched.
Reinsurance premiums serve as a default foundational layer for any reinsurer; claims and expenses are always paid out of premiums, with additional capital only drawn upon if losses are significantly greater than expected (that is, they exceed premiums). \
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To put it simply, losses flow from the bottom up. In the event that Re’s portfolio-wide combined ratio exceeds 100, Re's accumulated capital ($77M as of October 2026) absorbs losses first. Should an extreme scenario deplete the junior layer, then reUSDe will absorb further losses before reUSD is impacted. Given the highly diversified composition of Re's portfolio, depletion of the junior layer would in all likelihood require a heretofore-unseen cascade of losses across the industry.
The November 2025 stress test modeled a 1.9% probability of the junior capital layer being depleted at a 110% combined ratio. 110% is a far cry from the 92% combined ratio Re has run across all lines of reinsurance to date (as of June 2026). Re keeps its combined ratio in profitable territory (<100%) by maintaining a disciplined and balanced underwriting approach, with an emphasis on lines of business with long histories of stable results and only modest exposure to catastrophe lines.\
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For information on how combined ratio is calculated, see [How to read the dashboard](/transparency-and-data-show-me-the-receipts/how-to-read-the-dashboard.md).\
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