A Capital Stack Built on Underwriting.

Reinsurance underwriting produces predictable outcomes over long periods, but any capital structure built on underwriting must be transparent about how losses are absorbed. Re's capital stack makes that process explicit: premiums flow in from diversified reinsurance portfolios, losses are absorbed in a defined order, and different capital layers carry a different level of exposure to underwriting performance.

The structure is similar to senior and junior tranching in structured finance. Each layer sits at a distinct position in the loss waterfall, and that position determines both how much exposure the layer carries and what return it offers.

Put simply: Re's own capital absorbs first losses. reUSDe then sits as the mezzanine tranche. reUSD is the senior tranche — the most protected.

What the Combined Ratio Measures.

Insurance and reinsurance performance is measured using the combined ratio: claims plus expenses, divided by premiums. When the combined ratio is below 100%, underwriting is profitable — premiums exceed the total cost of claims and operating expenses. When it rises above 100%, underwriting generates a loss.

For many diversified insurance lines, combined ratios cluster comfortably below 100% over time. Workers' compensation insurance has historically produced combined ratios around 86%. Diversified commercial lines often run between 90–93%. Re has produced a combined ratio near 92% across cycles.

In contrast, catastrophe-heavy lines — hurricane, flood, or wildfire insurance — can produce combined ratios well above 150% in severe disaster years, because a single event can generate large losses across an entire region. Re's underwriting strategy avoids that type of concentrated severity exposure.

Re's underwriting strategy focuses on diversified, frequency-driven insurance lines where many smaller claims occur across different geographies and policyholders. That diversification helps stabilize underwriting results over time in a way that concentrated catastrophe exposure cannot.

A Typical Underwriting Year.

At a 92% combined ratio, Re operates profitably: premium income exceeds claims and expenses. In these conditions, losses never enter the capital stack and all protection layers remain untouched.

Instead, the surplus accumulates as retained capital and reserves on Re's balance sheet, strengthening the equity layer within the capital structure. Over time, profitable underwriting years compound this buffer. As retained capital grows, future losses would need to pass through an increasingly larger layer before reaching the mezzanine or senior tranches.

When Claims Exceed Premiums.

If claims and expenses exceed premiums in a stress year, the combined ratio rises above 100% and the system enters a loss scenario. When this happens, losses are absorbed through the capital stack in a strict, defined order.

Putting It in Perspective.

Because the structure contains multiple layers, a senior capital impairment requires an extreme sequence of events. Re's own capital — premiums and accumulated reserves — would first need to be fully exhausted. The mezzanine tranche would then also need to be depleted. Only after both layers are consumed would the senior tranche be reached.

If the combined ratio were to exceed roughly 135%, the modeled probability of losses reaching the senior tranche is approximately 0.03%. In practical terms, this would mean an unprecedented loss scenario: all lower protection layers have already been fully exhausted before reUSD principal protection is triggered.

For this to happen, losses would need to reach levels far beyond any insurance event ever recorded.

The goal is not to eliminate risk. It is to structure it clearly, define how losses flow, and align return with position in the capital stack.

Position in the Stack Shapes the Return.

The yield difference between reUSDe and reUSD reflects where each sits in the capital structure. Position in the loss waterfall determines both exposure to underwriting variability and the return associated with that exposure.