> 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/products/risks.md).

# Risks

## Underwriting loss

Underwriting loss serves as the core risk to stakers. If losses and expenses exceed premiums in any given year, NAV could conceivably decline (though Re's accumulated capital and reserves stand as a considerable barrier to this). Re mitigates the chance of underwriting loss through diversification across lines of business and geography, strict limits to catastrophe exposure, and defined per-program loss limits.

## Liquidity and redemption constraints

Insurance collateral is locked into treaties for their duration. This stands in the way of instant redemptions, especially for reUSDe.

reUSD maintains an onchain liquid reserve for redemptions. Should that reserve be exhausted, however, redemption requests will queue until capacity replenishes. reUSDe processes redemptions in quarterly windows only. Secondary liquidity is available via Curve pools, but at market price (and subject to inherent liquidity constraints).

## What can make NAV decrease

NAV goes down when claims and expenses exceed premiums earned in a given period. Re's capital is transferred to its partner reinsurer, Cover Re SPC, to be used as collateral for backing of new reinsurance treaties. Should insured losses in the portfolio prove to be greater than expected, the protocol absorbs the overall loss. Re's insurance underwriting strategy is deliberately conservative, with a focus on low-volatility, catastrophe-lite lines. That said, it should be borne in mind that no reinsurer enjoys total immunity from loss.

As mentioned, however, Re's Insurance Capital Layers structure helps to shield reUSD and reUSDe from losses. Actual impairment of reUSDe would require severe losses across the breadth of Re's diversified portfolio. Impairment of reUSD is less likely still.

***

<sub>*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*</sub> [<sub>*Disclosures*</sub>](https://re.xyz/disclosure) <sub>*for important additional information.*</sub>