Reinsurance is effectively a hidden layer in more ways than that. Traditional reinsurance has long been the realm of a relatively small number of industry giants, and it’s a black box. The market has always operated behind closed doors: pricing, deals, and performance data are typically private and inaccessible to outsiders. Treaties are negotiated privately between insurers and reinsurers; terms are disclosed to the counterparties involved and to regulators, and hardly anyone else gets access to them.

The market itself has also typically been closed to anyone outside of those industry giants. Though reinsurance is a highly desirable market, the capital requirements, the necessary industry relationships, and that very opacity of it all have historically created a barrier to entry for non-institutions. Re changes that. It opens up the ability for individuals to access the reinsurance capital markets by contributing to the capital pool that backs reinsurance programs, from which depositors can earn yield drawn from real-world reinsurance premiums and other protocol sources.

The necessity of transparency.

The standard black box reinsurance model doesn’t work here. Public transparency isn’t necessary in the reinsurance market, because the parties with money at stake can see what they need to see privately. The insurers negotiating a treaty and the regulators overseeing the reinsurer get access to its books directly. The general public never does, and never needed to, because it was never in the market.

A depositor participating onchain has none of that. For an onchain reinsurer to work, those who are providing capital need to know the details of what they’re putting money into. They can’t simply be asked to take it on trust. It would be the same black box, just with a lesser barrier to participation.

How Re does it differently.

Re backs the same underlying reinsurance business and provides the same capital, but with full transparency.

Bringing it together.

For a century, reinsurance was both closed and hidden. It was closed because getting in demanded enormous capital and industry relationships that almost no one outside the club could assemble. It was hidden because a market that insular had no reason to open its books to anyone beyond the counterparties and regulators who needed to see them.

Re changes both. The same reinsurance business, capital, and real risk are involved, but it’s open to anyone and visible to everyone. The latter sets an entirely new standard for a traditionally opaque industry. The whole business of reinsurance is based upon trust. In Re’s model, nobody, whether participants or regulators, needs to simply trust the protocol from the outside; everything is transparent, from the audited financials down to the performance of any single treaty.