Author: Noveleader (Castle Labs)
Compiled by: DeepChain TechFlow
DeepChain Summary: Currently, nearly 40% of on-chain RWA yields rely on short-term U.S. Treasuries, whose performance closely mirrors macroeconomic interest rate cuts and crypto lending trends. In contrast, the $760 billion reinsurance industry generates inherently non-correlated, stable cash flows through its physical underwriting business. As a pioneer in on-chain reinsurance, Re Protocol unlocks an alternative asset channel for DeFi depositors, offering high liquidity and excess stable returns through its tiered vault structure and highly compliant, transparent ledger system.
Today, the majority of on-chain real-world asset (RWA) yields come from short-term U.S. Treasury bills (T-bills), which are tokenized across more than 100 tokenized Treasury products, including BlackRock’s BUIDL, Circle’s USYC, Ondo’s OUSG, and Franklin Templeton’s BENJI. These products collectively manage $14.7 billion in assets, accounting for 38% of total on-chain RWA, and belong to a very low-risk category with a 7-day average annual percentage yield (APY) of approximately 3.48%.
Similarly, we can see in the private credit space, such as Maple’s syrupUSDC, with a 30-day average APY of approximately 5.1%; and in the crypto funding rate, DeFi, and institutional lending sectors, such as Ethena’s sUSDe, with an APY of approximately 4.7%.
Although these products differ in category and structure, the benchmark interest rate, borrower creditworthiness, and demand for crypto leverage are highly correlated and often move in the same direction.
In other words, if macro interest rates decline, credit typically tightens, which in turn affects perpetual contract trading volume and funding rates.
To explore more yield-generating RWA assets, this article turns its attention to a distinctly different and largely unrelated source of income: reinsurance.
We use Re as a case study. As of October 20, 2026, the protocol reported total deposits exceeding $375 million, with cumulative earnings paid to depositors reaching $12 million.
This article will delve into why reinsurance is an exceptionally attractive RWA asset class, how the Re protocol operates, and how its yields are generated.
Reinsurance, or "insurance for insurance companies," is a massive industry worth $760 billion as of October 2026.
Compared to other RWA, this concept may seem slightly obscure, but the basic logic is as follows: whenever you purchase an insurance policy, the insurer bundles your risk with thousands of other policies. To reduce their own risk exposure and smooth out earnings volatility, insurers sell a portion of their risk portfolio to reinsurers. Reinsurers can then choose to further resell a portion of that risk to other reinsurers (known as retrocession).
The reinsurance market also serves as an attractive source of non-correlated returns by offering unique risk exposure: it generates returns through actual reinsurance underwriting activities, rather than relying on macro market fluctuations. In traditional finance, certain reinsurance products, such as the Re Global Catastrophe Bond Index, achieved an annualized return of 11.40% in 2025.
Migrating these products on-chain offers three key advantages:
• Broader access: Democratizing markets that were previously characterized by extremely high barriers and strict restrictions.
• Ultimate transparency: Enforced through daily reconciliation of off-chain funds, a public reinsurance ledger, and regular rigorous audits.
• Instant liquidity: Unlock idle funds. Under traditional models, capital supporting reinsurance risk is often locked off-chain, but on-chain tokenized representations keep funds highly liquid and readily accessible throughout the entire reinsurance lifecycle.
Based on the above understanding, we next explore the core protocol: Re, which introduces reinsurance on-chain.
Re is an on-chain reinsurance protocol that allows depositors to stake stablecoins, with these funds used to underwrite regulated reinsurance contracts.
A portion of the deposited funds is held as collateral in a U.S. trust bank account to secure the reinsurer’s obligations. Prior to underwriting a reinsurance treaty, collateral must be deposited that meets both the regulatory requirements of the Cayman Islands Monetary Authority (CIMA) and the original insurer’s standards. The remaining funds are kept on-chain as a liquidity buffer to meet redemption demands. The portfolio’s performance (underwriting profit) supports token returns by increasing the token’s net asset value (NAV). For Re, NAV measures the accumulation of returns, not the total value of assets.
The current total deposit exceeds $375 million, a 45% increase since September, making it the largest on-chain reinsurance protocol by deposited funds.
All key data metrics can be tracked on the official dashboard: https://app.re.xyz/metrics
To attract depositors with varying risk appetites and effectively manage risk, Re employs a three-tiered tranched structure to absorb potential claims:
• Regarding Re’s own capital and reserves (junior tranche): At the bottom layer is Re’s own capital, serving as the first-loss absorption layer, prioritizing the absorption of any potential underwriting losses before user capital is utilized.
• reUSDe holders (mezzanine tranche): If insured losses exhaust the junior tranche, this layer will absorb additional losses before affecting senior tranches. It accepts a lower priority in loss allocation and reduced liquidity (quarterly redemptions) in exchange for a higher yield.
• reUSD holders (priority / senior tranche): At the top tier is reUSD, earning relatively stable returns, deeply insulated from loss risk, and offering high liquidity (instant redemption).
The protocol operates differently on deposited funds in priority and sandwich layers.
reUSD deposits serve a dual function: providing on-chain redemption liquidity and acting as off-chain collateral deployed to reinsurance operations.
When funds are moved off-chain, at least 50% of the historical peak deposit total of reUSD is maintained on-chain to meet immediate redemption demands. This portion is primarily held as sUSDe, earning yields generated by Ethena. As the USDe collateral reserve expands to include stock basis perpetual contracts, sUSDe yields are expected to rise further, benefiting Re depositors.
The remaining funds can be transferred to an off-chain trust account to serve as collateral for underwriting reinsurance contracts.
As of October 2026, off-chain funds earn the risk-free benchmark rate (Secured Overnight Financing Rate, SOFR) plus a protocol-set spread of 250 basis points (bps), funded by reinsurance business earnings; on-chain funds earn the 7-day moving average yield of sUSDe plus a 250-basis-point spread.
reUSD can support instant redemptions as long as there is available liquidity buffer. As of October 2026, on-chain funds available for redemption have never fallen below 40% of the circulating supply.
In contrast, reUSDe funds are entirely allocated off-chain and used solely as reinsurance collateral. It earns the risk-free SOFR rate plus an 850-basis-point spread generated from reinsurance operations.
The redemption schedule for reUSDe is conducted quarterly, subject to collateral requirements and cash flow recoveries from expiring reinsurance contracts.
To date, Re has focused on more stable underwriting businesses, adhering to the principle of "minimal or near-zero catastrophe exposure" to build a more robust investment portfolio and strategy framework. This is fully reflected in its asset allocation, which includes small business commercial property and liability insurance, commercial vehicle and liability insurance, homeowners property insurance, workers' compensation insurance, and commercial property and personal auto insurance.
They are now preparing to gradually expand their business scope by piloting catastrophe risk coverage.
Re's yield consists of a base rate plus a protocol spread funded by reinsurance underwriting profits: a 250-basis-point spread for reUSD and an 850-basis-point spread for reUSDe.
Once on-chain, these returns significantly exceed those of tokenized Treasuries (averaging around 3.7%), private credit (around 5.1%), and funding rates (around 4.7%). As of writing, the reUSD yield is approximately 300 basis points higher than tokenized Treasuries on an APY basis, while reUSDe is approximately 800 basis points higher.
Base Yield
Off-chain funds earn approximately the SOFR rate. On-chain buffers are primarily held as sUSDe, earning Ethena yields.
In October 2026, Re reported approximately $200 million in on-chain funds and approximately $250 million in off-chain reserves (covering reUSD and reUSDe deposits). The allocation between on-chain and off-chain funds depends on multiple factors and does not reflect a single strategy. It is primarily determined by the maintenance requirements for the reUSD liquidity buffer (the previously mentioned 50% of historical peak deposit levels) and the timing of fund deployment into reinsurance operations. Additionally, the initial destination for all funds is always on-chain; the immediate deposit of stablecoins explains the temporary bias toward on-chain holdings, as Re periodically performs dynamic rebalancing.
Growth drivers and DeFi integration
One of re's core strategies is to deeply integrate reUSD as a core collateral in DeFi, and recent integration advancements confirm this direction.
Expanding the Solana ecosystem is one of the team’s most strategic initiatives: Solana ranks third among major blockchains in RWA asset size, making it a core market for Re.
In August, the integration on Kamino reached $20 million in size just over a week after launch, while Jupiter Lend attracted $6 million in less than three hours, demonstrating strong market demand for this yield.
With its unique risk-return profile, reUSD is a highly attractive differentiated RWA yield source that aligns closely with the Solana ecosystem.
Solana is one of the fastest-growing RWA ecosystems, a direction Re bet on early and an ideal environment for scaling Re’s yield-bearing asset applications.
reUSD continues to serve as the underlying asset in a vault powered by Morpho, whose total value has recently surpassed $100 million: users holding idle USDC can lend their funds against PT-reUSD collateral to earn an APY of over 7%.
As of September 28, reUSD became the largest looping market on Pendle for PT-reUSD maturing in December 2026, with a maximum looping APY exceeding 32% and a total value locked (TVL) surpassing $200 million.
Additionally, the Fluid protocol on Arbitrum has launched three different reUSD vaults:
• reUSD / USDC
• reUSD / USDT
• reUSD-USDC LP / USDC
For a more detailed integration map of reUSD in the DeFi space, please refer to the table below:
However, these DeFi deployments also come with secondary risks.
If any lending market generates bad debt, liquidators will rush to sell assets on the open market, draining on-chain liquidity and potentially causing reUSD to experience severe depegging risks in the secondary market.
For example, if a third-party price oracle relies on volatile on-chain liquidity pools, leveraged PT-reUSD positions could be exposed to oracle risk, potentially triggering widespread liquidations.
This vulnerability has recently become apparent: a large purchase of YT-reUSD caused the price of PT-reUSD to drop by approximately 3%, triggering $36.4 million in cascading liquidations on Morpho.
Although the incident was not caused by Re itself, and its own smart contract and reUSD remain unaffected, this highlights the importance of carefully considering third-party risks in leveraged assets, such as oracle risk and market leverage.
Finally, since Re's on-chain liquidity depends on sUSDe support (53% of reUSD funds are invested in sUSDe), any secondary depegging or large-scale redemption pressure within the Ethena ecosystem could directly result in restricted or impaired assets for Re depositors.
This article introduces Re as a highly valuable exploration of bringing differentiated yields on-chain. Compared to the $76 billion reinsurance market, its deployed capital of approximately $320 million remains negligible, highlighting the immense future opportunity: the adoption of alternative RWA yield assets in the crypto world has only just begun.
Through a layered hierarchy system, the protocol creates two tokens, each with distinct asset liquidity characteristics.
In addition to this differentiated advantage, reUSD is already functioning as core collateral in Kamino, Jupiter Lend, and Morpho vaults, and is available for yield trading on Pendle.
Although these products offer double-digit returns, they also carry secondary risks stemming from DeFi integration, as illustrated by the Morpho liquidation event in August.
Re has never had any lapses in risk underwriting and has maintained steady profitability every year since its founding.
Re is moving in the right direction by targeting the large traditional reinsurance sector, leading RWA yields toward differentiation and breaking beyond the limitations of existing interest-bearing assets such as short-term government bonds.