What is Re?
Re is a regulated reinsurance protocol that brings insurance-backed yield onchain. Capital providers absorb insurance risk through licensed reinsurance entities, earning premiums disconnected from crypto market dynamics.
How it works
Reinsurance is insurance for insurance companies. When insurers want to reduce their risk exposure, they pay premiums to reinsurers who agree to absorb a portion of potential claims. Re brings this model onchain.
Capital deposited into Re flows to regulated reinsurance entities that underwrite insurance contracts. These contracts generate premium income — the yield that Re passes to capital providers.
Re operates through licensed insurance subsidiaries, meaning the actual underwriting follows traditional regulatory frameworks. The onchain component handles capital coordination and yield distribution.
Premium-based yield
Unlike DeFi yields from token emissions or trading fees, Re's returns come from insurance premiums. Businesses and individuals pay to transfer risk, and that payment stream funds Re's yield.
This creates returns uncorrelated with crypto markets. When DeFi yields compress, insurance premiums continue because people still need insurance. The income source is fundamentally different.
Insurance premiums represent actual economic activity — risk transfer from individuals and businesses who value protection. This creates yield backed by real-world cash flows rather than purely financial mechanisms.
Risk and claims
Capital providers take on insurance risk. If claims exceed premiums in a given period, capital absorbs the difference. Reinsurance diversifies across many risks to smooth outcomes, but catastrophic events can still cause losses.
Re's regulated structure means claims are paid according to insurance contract terms, handled by licensed entities with actuarial and claims expertise. Capital providers don't manage claims directly.
Risks to understand
Insurance risk is the primary concern. Catastrophic events, whether natural disasters or large-scale claims, can exceed premium income and draw down capital reserves.
Regulatory risk exists because Re operates within insurance regulatory frameworks. Changes in regulations or licensing requirements could affect operations.
Smart contract risk applies to the onchain components. Issues with contracts handling capital coordination could affect deposits and withdrawals.