Insurance Capital Layer ( ICL )
The Insurance Capital Layer (ICL) is the financial foundation of the Re Protocol. It acts as the initial deposit and staging area for participant funds before they are allocated to Risk Pools. By securely holding, strategically managing, and transparently deploying assets, the ICL maximizes capital efficiency and enhances participant returns.
Purpose and Role of the ICL
Asset Aggregation: The ICL collects admitted assets from participants, including USDC, DAI, USDe, sUSDe, and other supported tokens, securely storing them until deployment.
Yield Optimization: While awaiting deployment into Risk Pools, idle assets are actively reallocated:
Dynamic Yield Capture: For reUSD, idle funds are automatically swapped into the best yield-bearing opportunities available in the market.
Ethena-Specific Strategy: For reUSDe (and future Ethena-dedicated ICLs), idle assets remain in sUSDe to align with Ethena’s yield offerings.
Capital Deployment: Funds are strategically allocated to Risk Pools managed by vetted Cell Managers, ensuring efficient and targeted use of capital in reinsurance contracts.
Transparency: Participants enjoy full visibility into ICL holdings and operations, with real-time updates on-chain and regular NAV reporting.
Structure and Features
ICL Tokenization: Each ICL has its own proprietary token (e.g., reUSD, reUSDe) that represents ownership and claim on the underlying assets and returns. Future ICLs will follow this model, each with tailored yield strategies and risk profiles.
Full Collateralization: All funds in the ICL are fully collateralized, reducing counterparty risk and ensuring that participant obligations are met.
Dynamic NAV Calculations:
Daily Updates: The protocol recalculates each ICL’s projected Net Asset Value (NAV) daily at UTC 0.
Quarterly Performance: A comprehensive NAV is also calculated quarterly to reflect the realized earnings from deployed capital and the projected returns from active reinsurance contracts.
Dual Yield Components: Each ICL’s NAV incorporates both the yield from idle assets and the returns from Risk Pool contracts, accruing value at its own rate based on its unique strategy.
Future ICL Expansion: As the Re Protocol evolves, additional ICLs will be introduced to cater to specific asset strategies. This allows participants to select their preferred asset types and expected return profiles—whether that be dynamic yield swapping for optimal returns (as seen with reUSD) or Ethena-specific yield retention (as seen with reUSDe).
How the ICL Works
Deposit: Participants stake their assets into the ICL via the Re Protocol platform.
Yield Generation: Undeployed funds are actively managed:
For reUSD, idle assets are reallocated to the best yield-bearing instruments.
For reUSDe, idle funds remain in sUSDe, ensuring yield consistency through Ethena’s ecosystem.
Risk Pool Deployment: Once approved, funds are allocated to Risk Pools managed by qualified Cell Managers, where they are invested in diversified reinsurance contracts.
NAV and Reporting: The performance and value of the ICL are monitored through daily projected NAV updates and detailed quarterly calculations. This dual approach ensures transparent and real-time insight into capital performance.
The Insurance Capital Layer is not just a holding mechanism; it is the engine powering the Re Protocol’s ability to connect decentralized capital with real-world reinsurance opportunities. By combining yield optimization with strategic capital allocation, the ICL ensures stability, transparency, and robust growth for all protocol participants.
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