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)