Capital & Reinsurance Pools

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Both the Reinsurance and the Capital pools are internal pools within Bridge Mutual protocol. That is to say, users cannot interact directly with those pools, however, they have the potential to significantly enhance the protocol's usability and capital efficiency, ultimately generating value for the users.
The Reinsurance Pool is a protocol-owned vault that acts as an internal coverage provider and significantly de-risks the protocol at no additional expense for regular coverage providers. The Reinsurance pool, acts as a de-facto Leveraged Portfolio, with a few key differences:
It uses only protocol-owned funds
It has a lower risk profile compared to regular leveraged portfolios
It receives a lot lower APY from Coverage Pools (it receives APY comparable to those of a regular Coverage Provider, while at the same time being exposed to risk similar to those of a leveraged portfolio) 
Furthermore, the Reinsurance Pool accumulates the yield generated by the 3rd party protocols and re-introduces it to the Capital pool. 
In a nutshell, the Reinsurance pool Increases the supply of much cheaper coverage on selected pools and improves operations, and increases capital efficiency.
Reinsurance Pool
The Reinsurance Pool is a protocol-owned vault that acts as an internal coverage provider and significantly de-risks the protocol at no additional expense for regular coverage providers.
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What is the Capital pool?
​The Capital Pool is a BMI-platform-owned pool that manages and distributes funds both internally and externally. It is responsible for coverage liquidity withdrawals, policy payouts, as well as for investing in 3rd party DeFi protocols to generate protocol-owned yield. Its “liquidity cushion” is rebalanced daily to always guarantee continuous operations and payouts.
Capital Pool is an administration and investment vehicle, that interacts with users and other Decentralized Finance crypto protocols.
What money does the Capital Pool use to invest in 3rd party DeFi protocols?
It uses the funds provided by Coverage Providers and participants in the leveraged portfolios.
Doesn't this expose the capital to extra risk?
It does add some risk, but the Capital Pool invests only in the most well-known, tested, and liquid protocols in order to bring the risk down to a minimum.
How do coverage providers benefit from this? Do they get a share of the yield?
Coverage providers do not get a share of the yield, however, all of the yield is deposited in the Reinsurance pool. It, in turn, decreases the risk exposure of coverage providers while also reducing the price for policyholders thus creating a win-win scenario for all protocol participants.
Further down the line, the Bridge Mutual DAO will be able to operate and decide what to do with the yield generated by the Capital Pool (and residing in the reinsurance pool). Some of the potential ideas include executing BMI buy-backs from exchanges or deploying the yield as liquidity into different protocols.
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Providing Leveraged Coverage

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Contents

Reinsurance Pool

What is the Capital pool?

What money does the Capital Pool use to invest in 3rd party DeFi protocols?

Doesn't this expose the capital to extra risk?

How do coverage providers benefit from this? Do they get a share of the yield?