How Collateralized Reinsurance Earns Returns

Collateralized reinsurance is a structure where capital providers supply collateral to back insurance policies, earning returns in the process. By doing so, capital providers assume risk in exchange for a premium, which becomes their profit after claims are paid and obligations are met.

Re Protocol's Focus

The Re Protocol focuses on backing non-catastrophic, low-volatility, short-duration program business. This conservative approach targets stable returns while limiting high-risk exposure. These programs generally include:

• Automobile insurance portfolios

• Commercial general liability coverage

• Property insurance with limited catastrophic exposure

Yield Generation

Protocol capital earns a blended yield from two sources:

• Off-protocol capital deployed to the reinsurance company earns at the SOFR rate.

• On-chain capital held within the protocol earns at the 7-day trailing average sUSDe basis trade rate.

The final yield for each token adds a spread on top: +250 bps for reUSD (senior), +850 bps for reUSDe (junior).

Capital Protection

An additional layer of protection distinguishes Re Protocol from typical collateralized reinsurance structures: the reinsurance company puts its own capital at risk junior to all protocol capital. This means protocol participants benefit from the reinsurer's equity absorbing losses before any protocol funds are impacted.

Profit Timeline

• Collateral release: Reinsurance programs typically begin releasing collateral back to the protocol after 18 months.

• Yield accrual: While capital is deployed, yield accrues daily to token prices via the blended rate model.

• Steady returns: This structure provides predictable cash flows, with reUSD and reUSDe holders benefiting from consistent, transparent earnings.