Fee income from policyholders 49 414 463 Net investment income – non-participating business 1 097 1 331 135 938 –70 5 3 436 Net realised investment gains/losses – non-participating business 445 310 142 275 34 1 206 Net investment result – unit-linked and with-profit business 42 772 814
Interest on contingent capital instruments –19 –49 –68 Net income/loss attributable to common shareholders 2 977 939 340 422 –81 0 4 597
Management expense ratio in % 7.3 Operating margin in % 9.9
Business segments – balance sheet As of 31 December 2014 USD millions
FINANCIAL STATEMENTS Notes to the Group financial statements 176 Swiss Re 2015 Financial Report
Liabilities Unpaid claims and claim adjustment expenses 39 366 9 653 10 619 1 022 –5 142 55 518 Liabilities for life and health policy benefits 15 472 257 14 408 –6 30 131
b) Property & Casualty Reinsurance business segment – by line of business For the year ended 31 December 2014 USD millions Property Casualty Specialty Total
Expenses Claims and claim adjustment expenses –3 013 –4 513 –967 –8 493
Net investment income 1 076 Net realised investment gains/losses 699 Other revenues 69 Interest expenses –255 Income before income tax expense 4 137
Other expenses –689 –401 –157 –1 247 Total expenses before interest expenses –4 454 –6 593 –1 928 –12 975
Fee income from policyholders 53 53 Net investment income – non-participating business 944 600 1 544 Net investment income – unit-linked and with-profit business 37 37 Net realised investment gains/losses – unit-linked and with-profit business 38 38 Net realised investment gains/losses – insurance-related derivatives 121 –7 114 Total revenues before non-participating realised gains/losses 8 359 4 639 12 998
Net premiums earned and fee income from policyholders by country for the years ended 31 December
Premiums earned, thereof: Intra-group transactions (assumed and ceded) –157 272 157 –272 0
Premiums earned, thereof: Intra-group transactions (assumed and ceded) 57 244 –57 –244 0
Claims before receivables from retrocession to external parties –10 603 –9 358 –1 640 –1 915 –10 –23 526
Claims and claim adjustment expenses; life and health benefits –8 493 –9 194 –2 054 –1 415 –32 –21 188 2014 USD millions
Claims before receivables from retrocession to external parties –9 390 –9 629 –1 987 –1 612 –38 –22 656
Claims and claim adjustment expenses; life and health benefits –7 892 –8 290 –1 955 –790 –1 –18 928 2015 USD millions
Acquisition costs, thereof: Gross acquisition costs with external parties –3 898 –2 229 –492 –141 –6 760 Intra-group transactions (assumed and ceded) –6 –1 6 1 0
Acquisition costs before impact of retrocession to external parties –3 904 –2 230 –486 –140 –6 760
Reinsurance recoverable on unpaid claims and policy benefits As of 31 December 2014 and 2015, the Group had a reinsurance recoverable of USD 6 950 million and USD 6 578 million, respectively. The concentration of credit risk is regularly monitored and evaluated. The reinsurance programme with Berkshire Hathaway and subsidiaries accounted for 60% of the Group’s reinsurance recoverable as of year-end 2014 and 52% as of year-end 2015.
Receivables invoiced from ceded re/insurance business 341 201 Assets arising from the application of the deposit method of accounting and meeting the definition of financing receivables 779 171 Recognised allowance –86 –56
Gross premiums written, thereof: Intra-group transactions (assumed) 288 244 192 –724 0
FINANCIAL STATEMENTS Notes to the Group financial statements 188 Swiss Re 2015 Financial Report
The liability for unpaid claims and claim adjustment expenses as of 31 December is analysed as follows: A reconciliation of the opening and closing reserve balances for non-life unpaid claims and claim adjustment expenses for the period is presented as follows: The Group does not discount liabilities arising from prospective property and casualty insurance and reinsurance contracts, including liabilities which are discounted for US statutory reporting purposes. Liabilities arising from property and casualty insurance and reinsurance contracts acquired in a business combination are initially recognised at fair value in accordance with the purchase method of accounting.
Reinsurance recoverable –6 029 –4 746 Deferred expense on retroactive reinsurance –56 –14 Net balance as of 1 January 44 307 41 873
Line of business: Property –277 –539 Casualty –62 –571 Specialty –499 –284
FINANCIAL STATEMENTS Notes to the Group financial statements 190 Swiss Re 2015 Financial Report
The percentage of PVFP which is expected to be amortised in each of the next five years is 9%, 9%, 8%, 8% and 7%.
Effect of foreign currency translation –66 –136 –3 –205 Closing balance as of 31 December 1 756 2 723 360 1 4 840 2015 USD millions
Opening balance as of 1 January 1 451 2 086 3 537 1 294 2 003 3 297 Effect of acquisitions/disposals and retrocessions 165 165 2 2 Amortisation –156 –261 –417 –159 –191 –350 Interest accrued on unamortised PVFP 44 103 147 40 84 124 Effect of foreign currency translation –45 –90 –135 –41 –77 –118 Effect of change in unrealised gains/losses 0 9 9 Closing balance as of 31 December 1 294 2 003 3 297 1 134 1 830 2 964
Share in earnings of equity-accounted investees includes an impairment of the carrying amount of an equity-accounted investee of USD 83 million for 2015.
Realised gains and losses Realised gains and losses for fixed income, equity securities and other investments (excluding unit-linked and with-profit business) were as follows: USD millions 2014 2015
Equity securities 100 105 Policy loans, mortgages and other loans 133 128 Investment real estate 144 158 Short-term investments 111 77 Other current investments 127 155 Share in earnings of equity-accounted investees 321 52 Cash and cash equivalents 42 35 Net result from deposit-accounted contracts 149 95 Deposits with ceding companies 571 462
Investment expenses –358 –362 Interest charged for funds held –35 –22 Net investment income – non-participating business 4 103 3 436
Fixed income securities available-for-sale: Gross realised gains 814 889 Gross realised losses –231 –283
Equity securities available-for-sale: Gross realised gains 686 372 Gross realised losses –84 –69
Investment income – fixed income securities 109 92 90 77 Investment income – equity securities 621 32 556 28
Total investment income – unit-linked and with-profit business 752 137 678 121 Realised gains/losses – fixed income securities 132 168 –75 –58 Realised gains/losses – equity securities 206 –1 124 –19 Realised gains/losses – other 5 –18 28 15 Total realised gains/losses – unit-linked and with-profit business 343 149 77 –62 Total net investment result – unit-linked and with-profit business 1 095 286 755 59
Mortgage- and asset-backed securities 5 739 231 –23 –2 5 945 Fixed income securities available-for-sale 77 867 6 954 –367 –4 84 450 Equity securities available-for-sale 3 133 959 –68 4 024 2015 USD millions
States of the United States and political subdivisions of the states 1 236 55 –10 1 281
Mortgage- and asset-backed securities 4 970 118 –38 –3 5 047 Fixed income securities available-for-sale 76 155 4 279 –985 –14 79 435 Equity securities available-for-sale 4 294 632 –207 4 719
FINANCIAL STATEMENTS Notes to the Group financial statements 194 Swiss Re 2015 Financial Report
Collateral accepted which the Group has the right to sell or repledge As of 31 December 2014 and 2015, the fair value of the equity securities, government and corporate debt securities received as collateral was USD 3 907 million and USD 7 030 million, respectively. Of this, the amount that was sold or repledged as of 31 December 2014 and 2015 was USD 494 million and USD 2 429 million, respectively. The sources of the collateral are securities borrowing, reverse repurchase agreements and derivative transactions.
Debt securities issued by governments and government agencies 1 997 2 710 Corporate debt securities 60 52 Mortgage- and asset-backed securities 162 134 Fixed income securities trading – non-participating 2 219 2 896 Equity securities trading – non-participating 65 68
Other invested assets 435 332 Total investments for unit-linked and with-profit business 22 095 3 230 25 327 2 914
Mortgage- and asset-backed securities with no fixed maturity 5 564 5 768 4 723 4 800 Total fixed income securities available-for-sale 77 867 84 450 76 155 79 435
Gross amounts of recognised financial assets Collateral set off in the balance sheet
Gross amounts of recognised financial liabilities Collateral set off in the balance sheet
FINANCIAL STATEMENTS Notes to the Group financial statements 196 Swiss Re 2015 Financial Report
Gross amount of recognised liabilities for repurchase agreements and securities lending 3 995
Unrealised losses on securities available-for-sale The following table shows the fair value and unrealised losses of the Group’s fixed income securities, aggregated by investment category and length of time that individual securities were in a continuous unrealised loss position as of 31 December 2014 and 2015. As of 31 December 2014 and 2015, USD 52 million and USD 161 million, respectively, of the gross unrealised loss on equity securities available-for-sale relates to declines in value for less than 12 months and USD 16 million and USD 46 million, respectively, to declines in value for more than 12 months.
Mortgage- and asset-backed securities 1 506 12 329 13 1 835 25
States of the United States and political subdivisions of the states 325 9 6 1 331 10
Mortgages, loans and real estate As of 31 December, the carrying values of investments in mortgages, policy and other loans, and real estate (excluding unit-linked and with-profit business) were as follows: The fair value of the real estate as of 31 December 2014 and 2015 was USD 2 482 million and USD 3 211 million, respectively. The carrying value of policy loans, mortgages and other loans approximates fair value.
Depreciation expense related to income-producing properties was USD 26 million and USD 36 million for 2014 and 2015, respectively. Accumulated depreciation on investment real estate totalled USD 539 million and USD 504 million as of 31 December 2014 and 2015, respectively.
The fair values of assets are adjusted to incorporate the counterparty risk of non-performance. Similarly, the fair values of liabilities reflect the risk of non-performance of the Group, captured by the Group’s credit spread. These valuation adjustments from assets and liabilities measured at fair value using significant unobservable inputs are recognised in net realised gains and losses. For 2015, these adjustments were not material. Whenever the underlying assets or liabilities are reported in a specific business segment, the valuation adjustment is allocated accordingly. Valuation adjustments not attributable to any business segment are reported in Group items.
FInanCIaL STaTEMEnTS notes to the Group financial statements 200 Swiss Re 2015 Financial Report
Valuation techniques US government securities typically have quoted market prices in active markets and are categorised as level 1 instruments in the fair value hierarchy. non-US government holdings are generally classified as level 2 instruments and are valued on the basis of the quotes provided by pricing services, which are subject to the Group’s pricing validation reviews and pricing vendor challenge process. Valuations provided by pricing vendors are generally based on the actual trade information as substantially all of the Group’s non-US government holdings are traded in a transparent and liquid market.
Values of mortgage- and asset-backed securities are obtained both from third-party pricing vendors and through quoted prices, some of which may be based on the prices of comparable securities with similar structural and collateral features. Values of certain asset-backed securities (aBS) for which there are no significant observable inputs are developed using benchmarks to similar transactions or indices. For both residential mortgage-backed securities (RMBS) and commercial mortgage-backed securities (CMBS), cash flows are derived based on the transaction-specific information, which incorporates priority in the capital structure, and are generally adjusted to reflect benchmark yields, market prepayment data, collateral performance (default rates and loss severity) for specific vintage and geography, credit enhancements, and ratings. For certain RMBS and CMBS with low levels of market liquidity, judgements may be required to determine comparable securities based on the loan type and deal-specific performance. CMBS terms may also incorporate lock-out periods that restrict borrowers from prepaying the loans or provide disincentives to prepay and therefore reduce prepayment risk of these securities, compared to RMBS. The factors specifically considered in valuation of CMBS include borrower-specific statistics in a specific region, such as debt service coverage and loan-to-value ratios, as well as the type of commercial property. Mortgage- and asset-backed securities also includes debt securitised by credit card, student loan and auto loan receivables. Pricing inputs for these securities also focus on capturing, where relevant, collateral quality and performance, payment patterns, and delinquencies.
Assets and liabilities measured at fair value on a recurring basis as of 31 December, the fair values of assets and liabilities measured on a recurring basis by level of input were as follows: USD millions
US agency securitised products 3 252 3 252 Debt securities issued by non-US governments and government agencies 30 692 30 692
Funds held by ceding companies2 273 273 Total assets at fair value 43 968 89 814 2 773 –3 530 133 025
Liabilities Derivative financial instruments –13 –3 107 –757 2 969 –908
Interest rate contracts –5 –2 113 –2 118 Foreign exchange contracts –407 –407 Equity contracts –8 –564 –130 –702 Credit contracts –1 –11 –12 Other contracts –22 –616 –638
US agency securitised products 2 952 2 952 Debt securities issued by non-US governments and government agencies 27 877 27 877
Funds held by ceding companies2 245 245 Total assets at fair value 44 478 79 674 2 469 –1 953 124 668
Liabilities Derivative financial instruments –24 –1 574 –581 1 477 –702
Assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (level 3) as of 31 December, the reconciliation of the fair values of assets and liabilities measured on a recurring basis using significant unobservable inputs were as follows:
Transfers out of level 31 0 0 Impact of foreign exchange movements –1 –19 –20 0
Quantitative information about level 3 fair value measurements Unobservable inputs for major level 3 assets and liabilities as of 31 December were as follows: USD millions 2014 2015
Private placement credit tenant leases 71 51 Discounted Cash Flow Model Illiquidity premium 75 bps–175 bps (132 bps)
Weather contracts –40 –82 Proprietary Option Model Risk Margin 8%-11% (10%) Correlation –90%–80% (21%) Volatility (power/gas) 28%–115% (53%) Volatility (temperature) 0–356 (140) HDD/CaT2
Index value (temperature) 6–6032 (1969) HDD/CaT2 1 Represents average input value for the reporting period. 2 Heating Degree Days (HDD); Cumulative average Temperature (CaT).
Sensitivity of recurring level 3 measurements to changes in unobservable inputs The significant unobservable input used in the fair value measurement of the Group’s private placement corporate debt securities and private placement credit tenant leases is illiquidity premium. a significant increase (decrease) in this input in isolation would result in a significantly lower (higher) fair value measurement. The significant unobservable input used in the fair value measurement of the Group’s infrastructure loan is valuation spread. a significant increase (decrease) in this input in isolation would result in a significantly lower (higher) fair value measurement.
The significant unobservable input used in the fair value measurement of the Group’s OTC equity option referencing correlated equity indices is correlation. Where the Group is long correlation risk, a significant increase (decrease) in this input in isolation would result in a significantly higher (lower) fair value measurement. Where the Group is short correlation risk, a significant increase (decrease) in this input in isolation would result in a significantly lower (higher) fair value measurement.
The significant unobservable inputs used in the fair value measurement of the Group’s weather contracts are risk margin, correlation, volatility and index value. Where the Group has a long position, a significant increase (decrease) in the risk margin input in isolation would result in a significantly higher (lower) fair value measurement. Where the Group has a long volatility or correlation position Swiss Re a significant increase (decrease) in the correlation and volatility inputs would result in a significantly higher (lower) fair value measurement. Where the Group has a long index position, an increase (decrease) in the index value input in isolation would result in a significantly higher (lower) fair value measurement. Where the Group has a short position, a significant increase (decrease) in the risk margin input in isolation would result in a significantly lower (higher) fair value measurement. Where the Group has a short volatility or correlation position a significant increase (decrease) in the correlation and volatility inputs would result in a significantly lower (higher) fair value measurement. Where the Group has a short index position, an increase (decrease) in the index value input in isolation would result in a significantly lower (higher) fair value measurement.
The redemption frequency of hedge funds varies depending on the manager as well as the nature of the underlying product. additionally, certain funds may impose lock-up periods and redemption gates as defined in the terms of the individual investment agreement.
The Group elected the fair value option for positions in the following line items in the balance sheet: Other invested assets The Group elected the fair value option for certain investments classified as equity method investees within other invested assets in the balance sheet. The Group applied the fair value option, as the investments are managed on a fair value basis. The changes in fair value of these elected investments are recorded in earnings.
Funds held by ceding companies For operational efficiencies, the Group elected the fair value option for funds held by the cedent under three of its reinsurance agreements. The assets are carried at fair value and changes in fair value are reported as a component of earnings.
Private equity funds 710 686 150 non-redeemable n.a. Hedge funds 344 135 redeemable1 45‒95 days2
FInanCIaL STaTEMEnTS notes to the Group financial statements 208 Swiss Re 2015 Financial Report
Assets and liabilities measured at fair value pursuant to election of the fair value option Pursuant to the election of the fair value option for the items described, the balances as of 31 December were as follows: Changes in fair values for items measured at fair value pursuant to election of the fair value option Gains/losses included in earnings for items measured at fair value pursuant to election of the fair value option including foreign exchange impact for the years ended 31 December were as follows: Fair value changes from other invested assets and funds held by ceding companies are reported in “net investment income — non-participating business”. Fair value changes from the GMDB reserves are shown in “Life and health benefits”.
Assets of which at fair value pursuant to the fair value option 444 449 Funds held by ceding companies 11 222 9 870 of which at fair value pursuant to the fair value option1 273 245 Liabilities Liabilities for life and health policy benefits –33 605 –30 131 of which at fair value pursuant to the fair value option –187 –165 1 The Group revised the scope of the fair value option disclosure to include certain assets held under three of its reinsurance agreements. These assets have been managed on a fair value basis since inception.
The fair values represent the gross carrying value amounts at the reporting date for each class of derivative contract held or issued by the Group. The gross fair values are not an indication of credit risk, as many over-the-counter transactions are contracted and documented under ISDa master agreements or their equivalent. Management believes that such agreements provide for legally enforceable set-off in the event of default, which substantially reduces credit exposure.
Amount offset Where a right of set-off exists –2 554 2 554 Due to cash collateral –976 415 Total net amount of derivative financial instruments 841 –908 –67
Amount offset Where a right of set-off exists –1 162 1 162 Due to cash collateral –791 315 Total net amount of derivative financial instruments 760 –702 58
Maximum potential loss In consideration of the rights of set-off and the qualifying master netting arrangements with various counterparties, the maximum potential loss as of 31 December 2014 and 2015 was approximately USD 1 817 million and USD 1 551 million, respectively. The maximum potential loss is based on the positive market replacement cost assuming non-performance of all counterparties, excluding cash collateral.
The total fair value of derivative financial instruments containing credit risk-related contingent features amounted to USD 112 million and USD 106 million as of 31 December 2014 and 2015, respectively. For derivative financial instruments containing credit risk-related contingent features, the Group posted collateral of USD 6 million and nil as of 31 December 2014 and 2015, respectively. In the event of a reduction of the Group’s credit rating to below investment grade, a fair value of USD 106 million additional collateral would have had to be posted as of 31 December 2015. The total equals the amount needed to settle the instruments immediately as of 31 December 2015.
FInanCIaL STaTEMEnTS notes to the Group financial statements 214 Swiss Re 2015 Financial Report
The transaction has enhanced the position of the Group’s Business Unit admin Re® as a leading closed life book consolidator in the UK, adding approximately 900 000 policies including a mixture of annuities, life insurance and pensions. as a result, the policyholder and asset base of the Group has expanded and admin Re® has diversified its current business mix, with a total of over four million policies in force.
Guardian previously prepared its financial statements in accordance with International Financial Reporting Standards (IFRS). Given the unavailability of US GaaP financial information prior to the issuance of this report, pro forma financial statements and other US GaaP financial information are not presented in the Group financial statements and related notes for 2015. The Purchase GaaP process is in progress and is expected to be completed and reflected in the first quarter 2016 financial statements.
Senior financial debt 654 Senior operational debt 1 047 765 Subordinated financial debt 1 069 Short-term debt – financial and operational debt 1 701 1 834
Long-term debt – financial and operational debt 12 615 10 978
in USD millions 2019 Syndicated revolving credit facility 2014 GBP 550 variable 808
Various Payment undertaking agreements various USD 383 various 467 Total senior long-term debt as of 31 December 2015 4 155 Total senior long-term debt as of 31 December 2014 4 226 1 assumed in the acquisition of GE Insurance Solutions.
Total subordinated long-term debt as of 31 December 2015 6 823 Total subordinated long-term debt as of 31 December 2014 8 389
Interest expense on long-term debt and contingent capital instruments Interest expense on long-term debt for the years ended 31 December was as follows: In addition to the above, interest expense on contingent capital instruments classified as equity was USD 69 million and USD 68 million for the years ended 31 December 2014 and 2015, respectively.
In april 2015, Swiss Reinsurance Company Ltd issued EUR 750 million face amount of perpetual subordinated fixed-to-floating rate callable loan notes with a first optional redemption date on 1 September 2025. The notes bear interest through the first optional redemption date at 2.60% per annum. The notes were issued in connection with a concurrent exchange of part of the EUR 1 billion 5.252% Perpetual Subordinated Step-Up Loan notes issued by Swiss Reinsurance Company Ltd.
Subordinated debt facility established in 2015 In november 2015, Swiss Re Ltd established a subordinated debt facility with a termination date of 15 august 2025. The facility allows Swiss Re Ltd to issue at any time subordinated fixed-to-floating rate callable notes with a face value of up to USD 700 million, having a first optional redemption date of 15 august 2025 and a maturity date of 15 august 2050. Swiss Re Ltd pays a fee of 3.53% per annum on the available commitment under the facility. notes issued under the facility have a fixed coupon of 5.75% per annum until the first optional redemption date.
Contingent capital instruments In February 2012, Swiss Reinsurance Company Ltd issued a perpetual subordinated instrument with stock settlement. The instrument has a face value of CHF 320 million, with a fixed coupon of 7.25% per annum until the first optional redemption date (1 September 2017).
FInanCIaL STaTEMEnTS notes to the Group financial statements 218 Swiss Re 2015 Financial Report
all of the Groupʼs companies prepare statutory financial statements based on local laws and regulations. Most jurisdictions require reinsurers to maintain a minimum amount of capital in excess of statutory definition of net assets or maintain certain minimum capital and surplus levels. In addition, some jurisdictions place certain restrictions on amounts that may be loaned or transferred to the parent company. The Groupʼs ability to pay dividends may be restricted by these requirements.
Earnings per share for the years ended 31 December were as follows: at the 151st annual General Meeting held on 21 april 2015, the Group’s shareholders authorised the Group Board of Directors to repurchase up to a maximum CHF 1 billion purchase value of the Group’s own shares prior to the 2016 annual General Meeting by way of a buy-back programme for cancellation purposes. as of 31 December 2015, 4.4 million shares were repurchased.
Deferred and other non-current taxes the components of deferred and other non-current taxes were as follows: as of 31 December 2015, the aggregate amount of temporary differences associated with investment in subsidiaries, branches and associates and interests in joint ventures, for which deferred tax liabilities have not been recognised amount to approximately UsD 4.4 billion. in the remote scenario in which these temporary differences were to reverse simultaneously, the resulting tax liabilities would be very limited due to participation exemption rules.
the Group also had capital loss carryforwards of UsD 1 266 million, expiring as follows: UsD 82 million in 2019, UsD 71 million in 2020 and UsD 1 113 million never expire.
net operating tax losses of UsD 1 424 million and net capital tax losses of UsD 321 million were utilised during the period ended 31 December 2015.
Deferred tax assets income accrued/deferred 291 295 technical provisions 620 685 Pension provisions 289 330 Benefit on loss carryforwards 3 980 3 467 currency translation adjustments 412 394 Unrealised gains in income 422 226
Deferred tax liabilities Present value of future profits –640 –514 income accrued/deferred –929 –923 Bond amortisation –374 –639 Deferred acquisition costs –730 –914 technical provisions –3 104 –2 685 Unrealised gains on investments –1 657 –702 Untaxed realised gains –394 –224 foreign exchange provisions –279 –352 Other –671 –760 Total deferred tax liabilities –8 778 –7 713 liability for unrecognised tax benefits including interest and penalties –667 –380 Total deferred and other non-current tax liabilities –9 445 –8 093
interest and penalties related to unrecognised tax benefits are recorded in income tax expense. such expense in 2015 was UsD 35 million (UsD 19 million in 2014). as of 31 December 2014 and 31 December 2015, UsD 112 million and UsD 72 million, respectively, were accrued for the payment of interest (net of tax benefits) and penalties. the accrued interest balance as of 31 December 2015 is included within the deferred and other non-current taxes section reflected in the balance sheet.
During the year, certain tax positions and audits in switzerland, france, italy and Germany were effectively settled.
Germany 2007-2015 slovakia 2011-2015 Hong Kong 2009-2015 south africa 2011-2015 india 2005-2015 spain 2011-2015 ireland 2010-2015 switzerland 2012-2015 israel 2008-2015 United Kingdom 2008, 2011-2015 italy 2011-2015 United states 2009-2015
Benefit obligation as of 1 January 3 685 2 389 371 6 445
Benefits paid –189 –74 –16 –279 Employee contribution 26 26 Acquisitions/disposals/additions 1 1 Effect of settlement, curtailment and termination 2 2 Effect of foreign currency translation –25 –138 –163 Fair value of plan assets as of 31 December 3 479 2 235 0 5 714 Funded status –398 29 –363 –732
Non-current assets 208 208 Current liabilities –3 –15 –18 Non-current liabilities –150 –240 –356 –746 Net amount recognised –150 –35 –371 –556
FINANCIAl STATEmENTS Notes to the Group financial statements 224 Swiss Re 2015 Financial Report
Other changes in plan assets and benefit obligations recognised in other comprehensive income for the years ended 31 December were as follows: The estimated net loss and prior service credit for the defined benefit pension plans that will be amortised from accumulated other comprehensive income into net periodic benefit cost in 2016 are USD 87 million and USD 9 million, respectively. The estimated net gain and prior service credit for the other defined post-retirement benefits that will be amortised from accumulated other comprehensive income into net periodic benefit cost in 2016 are USD 4 million and USD 9 million, respectively.
The accumulated benefit obligation (the current value of accrued benefits excluding future salary increases) for pension benefits was USD 5 980 million and USD 6 016 million as of 31 December 2014 and 2015, respectively.
FINANCIAl STATEmENTS Notes to the Group financial statements 226 Swiss Re 2015 Financial Report
Equity securities include Swiss Re common stock of USD 6 million (0.1% of total plan assets) and USD 6 million (0.1% of total plan assets) as of 31 December 2014 and 2015, respectively.
Real estate positions classified as level 1 and level 2 are exchange traded real estate funds where a market valuation is readily available. Real estate reported on level 3 is property owned by the pension funds. These positions are accounted for at the capitalised income value. The capitalisation based on sustainable recoverable earnings is conducted at interest rates that are determined individually for each property, based on the property’s location, age and condition. If properties are intended for disposal, the estimated selling costs and taxes are recognised in provisions. Sales gains or losses are allocated to income from real estate when the contract is concluded.
Equity securities: Equity securities held for proprietary investment purposes 917 572 1 489
Assets measured at fair value using significant unobservable inputs (Level 3) For the years ended 31 December, the reconciliation of fair value of pension plan assets using significant unobservable inputs were as follows: Expected contributions and estimated future benefit payments The employer contributions expected to be made in 2016 to the defined benefit pension plans are USD 158 million and to the post-retirement benefit plan are USD 16 million.
As of 31 December 2015, the projected benefit payments, which reflect expected future service, not adjusted for transfers in and for employees’ voluntary contributions, are as follows: Defined contribution pension plans The Group sponsors a number of defined contribution plans to which employees and the Group make contributions. The accumulated balances are paid as a lump sum at the earlier of retirement, termination, disability or death. The amount expensed in 2014 and in 2015 was USD 79 million and USD 77 million, respectively.
Purchases, issuances and settlements 13 –4 9 Impact of foreign exchange movements –66 –8 –74 Closing balance as of 31 December 578 139 717
Balance as of 1 January 578 139 717 Realised/unrealised gains/losses: Relating to assets still held at the reporting date 10 –13 –3 Relating to assets sold during the period 17 17
Total compensation cost for share-based compensation plans recognised in net income was USD 76 million and USD 61 million in 2014 and 2015, respectively. The related tax benefit was USD 17 million and USD 13 million, respectively.
A summary of the activity of the Group’s stock option plans for the year ended 31 December 2015 is as follows: The weighted remaining contractual life is 0.3 years and all stock options outstanding are also exercisable. The fair value of each option grant was estimated on the date of grant using a binomial option-pricing model. The underlying strike price for the outstanding options has been adjusted for the special dividend payout in 2013, 2014 and 2015.
Restricted shares The Group granted 25 153 and 7 776 restricted shares to selected employees in 2014 and 2015, respectively. moreover, as an alternative to the Group’s cash bonus programme, 302 260 and 288 125 shares were delivered during 2014 and 2015, respectively, which are not subject to forfeiture risk.
A summary of the movements in shares relating to outstanding awards granted under the restricted share plans for the year ended 31 December 2015 is as follows: Weighted average exercise price in CHF
Delivery of restricted shares 75 –343 719 Outstanding as of 31 December 79 531 018 1 Equal to the market price of the shares on the date of grant.
The fair value assumptions included in the grant valuation are based on market estimates for dividends (and an additional special dividend of CHF 4.00 for the lPP 2013, a special dividend of CHF 4.15 for the lPP 2014, and a special dividend of CHF 3.00 for the lPP 2015 respectively) and the risk free rate based on the average of the 5-year US government bond rate taken monthly over each annual period in the performance period. This resulted in risk free rates between 1.0 and 3.1% for all lPP plans.
For the year ended 31 December 2015, the outstanding units were as follows: RSUs LPP 2012 LPP 2013 LPP 2014 LPP 2015
FINANCIAl STATEmENTS Notes to the Group financial statements 232 Swiss Re 2015 Financial Report
The number of shares authorised for the Group’s share-based payments to employees was 3 930 229 and 3 554 592 as of 31 December 2014 and 2015, respectively. The Group’s policy is to ensure that sufficient treasury shares are available at all times to settle future share-based compensation plans.
At maturity, either the employee receives shares or cash equal to the accumulated savings balance, or the employee may elect to exercise the options.
The disclosure requirements under Swiss Company law in respect of compensation and loans to the members of the Board of Directors and of the Group Executive Committee, as well as closely related persons, are detailed in the Compensation report on pages 147–151 of the Financial Report of the Swiss Re Group.
As part of the consolidation process, transactions between Swiss Re ltd and subsidiaries are eliminated in consolidation and are not disclosed in the notes.
As of 31 December 2014 and 2015, the Group’s investment in mortgages and other loans included USD 285 million and USD 287 million, respectively, of loans due from employees, and USD 210 million and USD 196 million, respectively, due from officers. These loans generally consist of mortgages offered at variable and fixed interest rates.
Contributions made to defined benefit pension plans and post-retirement benefit plans are disclosed in Note 14 Benefit plans. Plan assets of the defined benefit pension plans include Swiss Re common stock of USD 6 million (0.1% of total plan assets) and USD 6 million (0.1% of total plan assets) as of 31 December 2014 and 2015, respectively.
Leasing commitments As part of its normal business operations, the Group enters into a number of lease agreements. As of 31 December, such agreements, which are operating leases, total the following obligations for the next five years and thereafter: The following schedule shows the composition of total rental expenses for all operating leases as of 31 December (except those with terms of a month or less that were not renewed): Other commitments As a participant in limited and other investment partnerships, the Group commits itself to making available certain amounts of investment funding, callable by the partnerships for periods of up to ten years. The total commitments remaining uncalled as of 31 December 2015 were USD 1 557 million.
Total operating lease commitments 584 less minimum non-cancellable sublease rentals 30 Total net future minimum lease commitments 554
USD millions 2014 2015 minimum rentals 69 63 Sublease rental income 0 0
Switzerland European Reinsurance Company of Zurich ltd, Zurich CHF 312 100 f Swiss Re Asset management Geneva S.A., Carouge CHF 0 100 f Swiss Re Corporate Solutions ltd, Zurich CHF 100 100 f Swiss Re Direct Investments Company ltd, Zurich CHF 0 100 f Swiss Re Investments Company ltd, Zurich CHF 0 100 f Swiss Re Investments Holding Company ltd, Zurich CHF 0 100 f Swiss Re Investments ltd, Zurich CHF 1 100 f Swiss Re life Capital ltd, Zurich CHF 0 100 f Swiss Re management ltd, Adliswil CHF 0 100 f Swiss Re Principal Investments Company ltd, Zurich CHF 0 100 f Swiss Re Reinsurance Holding Company ltd, Zurich CHF 0 100 f Swiss Reinsurance Company ltd, Zurich CHF 34 100 f
United Kingdom Admin Re UK limited, Shropshire GBP 73 100 f Admin Re UK Finance limited, Shropshire GBP 0 100 f Reassure limited, Shropshire GBP 289 100 f Swiss Re Services limited, london GBP 2 100 f Swiss Re Specialised Investments Holdings (UK) limited, london GBP 1 100 f
United States Claret Re Inc., Burlington USD 5 100 f Facility Insurance Holding Corporation, Dallas USD 0 100 f First Specialty Insurance Corporation, Jefferson City USD 5 100 f North American Capacity Insurance Company, manchester USD 4 100 f North American Elite Insurance Company, manchester USD 4 100 f North American Specialty Insurance Company, manchester USD 5 100 f Pillar RE Holdings llC, Wilmington USD 0 100 f SR Corporate Solutions America Holding Corporation, Wilmington USD 0 100 f Sterling Re Inc., Burlington USD 218 100 f Swiss Re America Holding Corporation, Wilmington USD 0 100 f Swiss Re Capital markets Corporation, New York USD 0 100 f Swiss Re Corporate Solutions Global markets Inc., New York USD 0 100 f Swiss Re Financial markets Corporation, Wilmington USD 0 100 f Swiss Re Financial Products Corporation, Wilmington USD 2 116 100 f Swiss Re life & Health America Holding Company, Wilmington USD 0 100 f Swiss Re life & Health America Inc., Jefferson City USD 4 100 f Swiss Re Partnership Holding, llC, Dover USD 368 100 f Swiss Re Risk Solutions Corporation, Wilmington USD 0 100 f Swiss Re Treasury (US) Corporation, Wilmington USD 0 100 f Swiss Reinsurance America Corporation, Armonk USD 10 100 f Washington International Insurance Company, manchester USD 4 100 f Westport Insurance Corporation, Jefferson City USD 6 100 f
Australia Swiss Re Australia ltd, Sydney AUD 845 100 f Swiss Re life & Health Australia limited, Sydney AUD 980 100 f
China Alltrust Insurance Company of China limited, Shanghai CNY 2 178 5 fv Swiss Re Corporate Solutions Insurance China ltd, Shanghai CNY 500 100 f
The Group enters into arrangements with variable interest entities (VIEs) in the normal course of business. The involvement ranges from being a passive investor to designing, structuring and managing the VIEs. The variable interests held by the Group arise as a result of the Group’s involvement in certain insurance-linked and credit-linked securitisations, swaps in trusts, debt financing and other entities which meet the definition of a VIE.
The party that has a controlling financial interest is called the primary beneficiary and consolidates the VIE. An enterprise is deemed to have a controlling financial interest if it has both of the following: ̤ the power to direct the activities of the VIE that most significantly impact the entity’s economic performance; and ̤ the obligation to absorb losses of the entity that could potentially be significant to the VIE or the right to receive benefits
FINANCIAl STATEmENTS Notes to the Group financial statements 240 Swiss Re 2015 Financial Report
The Group consolidates a debt financing vehicle as it has power over the investment management in the vehicle, which is considered to be the activity that most significantly impacts the entities’ economic performance. In addition, the Group absorbs the variability of the investment return so that both criteria for a controlling financial interest are met.
Investment vehicles Investment vehicles are private equity limited partnerships, in which the Group is invested as part of its investment strategy. Typically, the Group’s variable interests arise through limited partner ownership interests in the vehicles. The Group does not own the general partners of the limited partnerships, and does not have any significant kick-out or participating rights. Therefore the Group lacks power over the relevant activities of the vehicles and, consequently, does not qualify as the primary beneficiary. The Group is exposed to losses when the values of the investments held by the vehicles decrease. The maximum exposure to loss equals the carrying amount of the ownership interest.
Consolidated VIEs The following table shows the total assets and liabilities on the Group’s balance sheet relating to VIEs of which the Group is the primary beneficiary as of 31 December:
Other invested assets 16 26 Cash and cash equivalents 25 25 147 147
Fixed income securities available-for-sale 69 52 Policy loans, mortgages and other loans 84 1
Accrued expenses and other liabilities 167 45 Total liabilities 167 45
life and health funding vehicles 1 683 1 683 2 1 1 777 1 776 1 maximum exposure to loss is the loss the Group would absorb from a variable interest in a VIE in the event that all of the assets of the VIE are deemed worthless. 2 The maximum exposure to loss for swaps in trusts cannot be meaningfully quantified due to their derivative character.
FINANCIAl STATEmENTS Notes to the Group financial statements 244 Swiss Re 2015 Financial Report
Report of the statutory auditor to the General meeting of Swiss Re ltd Zurich
Board of Directors’ responsibility The Board of Directors is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America and the requirements of Swiss law. This responsibility includes designing, implementing, and maintaining an internal control system relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.
Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company at 31 December 2015, the results of their operations and their cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America and comply with Swiss law.
Liabilities Unpaid claims and claim adjustment expenses 77 829 78 195 70 944 68 412 64 690 64 878 63 670 61 484 57 954 55 518 liabilities for life and health policy benefits 36 779 44 187 37 497 39 944 39 551 39 044 36 117 36 033 33 605 30 131
Expenses Claims and claim adjustment expenses –9 405 –10 035 –9 222 –8 336 –7 254 –8 810 –7 763 –9 655 –10 577 –9 848
Other operating costs and expenses –3 679 –4 900 –4 358 –3 976 –3 620 –3 902 –3 953 –4 268 –3 876 –3 882
Income/loss attributable to non-controlling interests –154 –172 –141 –2 0 –3 Net income after attribution of non-controlling interests 3 637 3 460 –663 699 1 980 2 626 4 257 4 511 3 569 4 665
Interest on contingent capital instruments –203 –1 117 0 –56 –67 –69 –68 Net income/loss attributable to common shareholders 3 637 3 460 –663 496 863 2 626 4 201 4 444 3 500 4 597
Income statement net income for 2015 amounted to cHf 3 865 million (2014: cHf 4 110 million) and was mostly driven by cash dividends from subsidiaries and affiliated companies of cHf 3 539 million.
the company earned trademark licence fees of cHf 306 million and other revenues of cHf 156 million, mainly consisting of net realised foreign exchange gains of cHf 143 million. in addition, the company incurred administrative expenses of cHf 112 million, of which cHf 107 million were charges for services provided by swiss Reinsurance company ltd, and other expenses of cHf 20 million, due to financing costs of cHf 11 million and capital and indirect taxes of cHf 9 million.
investments in subsidiaries and affiliated companies increased from cHf 17 340 million as of 31 December 2014 to cHf 17 561 million as of 31 December 2015 due to capital contributions made to a subsidiary of swiss Re investments Holding company ltd of cHf 129 million and subsidiaries of swiss Re Principal investments company ltd of cHf 92 million.
short-term liabilities increased from nil as of 31 December 2014 to cHf 118 million as of 31 December 2015, mainly due to withholding tax payable of cHf 89 million related to the share buy-back programme and deferred income of cHf 25 million. Provisions decreased by cHf 87 million, mainly due to a reduction in the provision for currency fluctuations of cHf 102 million, partly offset by an increase in the tax provision of cHf 15 million.
Shareholders’ equity shareholders’ equity increased from cHf 20 503 million as of 31 December 2014 to cHf 21 469 million as of 31 December 2015, mainly due to net income of cHf 3 865 million and net gains from transactions in own shares of cHf 65 million, partly offset by dividends to shareholders of cHf 2 490 million and net purchases of own shares of cHf 474 million.
fdg the accompanying notes are an integral part of swiss Re ltd’s financial statements.
Income before income tax expense 4 122 3 892 income tax expense –12 –27
Balance sheet swiss Re ltd as of 31 December assets the accompanying notes are an integral part of swiss Re ltd’s financial statements.
Liabilities Short-term liabilities Payables to subsidiaries and affiliated companies – 0 Other liabilities and accrued expenses 0 118 Total short-term liabilities 0 118
Retained earnings brought forward 4 4 net income for the financial year 4 110 3 865 Own shares (directly held by the company) 8 –956 –1 430
financial statements swiss Re ltd notes swiss Re ltd 1 significant accounting principles
Basis of presentation On 1 January 2013, new swiss accounting and financial reporting legislation entered into force based on partial revision of the swiss code of Obligations which required implementation in 2015. swiss Re ltd adopted the new regulation for the financial statements 2015 and chose to adopt the presentation of the 2014 financial statements to be comparable with 2015. this resulted in changes to the presentation of the balance sheet and the notes as well as a reclassification of own shares from assets to shareholders’ equity. this reclassification reduced the 2014 previously reported total non-current assets, total assets, total shareholders’ equity and total liabilities and shareholders’ equity by cHf 956 million.
Use of estimates in the preparation of annual accounts the preparation of the annual accounts requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses as well as the related disclosures. actual results could differ from these estimates.
Loans to subsidiaries and affiliated companies loans to subsidiaries and affiliated companies are carried at nominal value. Value adjustments are recorded where the expected recovery value is lower than the nominal value.
Investments in subsidiaries and affiliated companies these assets are carried at cost, less necessary and legally permissible depreciation.
Accrued expenses accrued expenses consist of both income received before the balance sheet date but relating to a subsequent financial year, and charges relating to the current financial year but payable in a subsequent financial year.
Other legal capital reserves Other legal capital reserves reflect gains and losses from sale of own shares (directly held by the company).
Trademark licence fees trademark licence fees are charged by the company to its direct and indirect subsidiaries and their branches that benefit from the use of the swiss Re brand.
Capital and indirect taxes capital and indirect taxes related to the financial year are included in other expenses. Value-added taxes are included in the respective expense lines in the income statement.
Income tax expense as a holding company incorporated in switzerland, swiss Re ltd is exempt from income taxation at cantonal/communal level. On the federal level, dividends from subsidiaries and affiliated companies are indirectly exempt from income taxation (participation relief). However, income tax is payable on trademark licence fees charged to certain subsidiaries and affiliated companies.
financial statements swiss Re ltd 2 investment income and expenses 3 administrative expenses and personnel information swiss Re ltd receives management and other services from swiss Reinsurance company ltd and has no employees of its own.
cHf millions 2014 2015 cash dividends from subsidiaries and affiliated companies 3 964 3 539 Realised gains on sale of investments 1 4 income from short-term investments 0 2 income from loans to subsidiaries and affiliated companies 9 17 investment management income 0 1 Other interest revenues 0 0 cHf millions 2014 2015
6 commitments in november 2015, the company established a subordinated debt facility with a termination date of 15 august 2025. the facility allows the company to issue at any time subordinated fixed-to-floating rate callable notes with a face value of up to UsD 700 million, having a first optional redemption date of 15 august 2025 and a maturity date of 15 august 2050. the company pays a fee of 3.53% per annum on the available commitment under the facility. notes issued under the facility have a fixed coupon of 5.75% per annum until the first optional redemption date. notes, when issued under the facility, will be classified as subordinated debt. as of 31 December 2015, no notes have been issued under the facility.
in november 2015, the company entered into a subordinated funding facility with its subsidiary swiss Reinsurance company ltd under which swiss Reinsurance company ltd has the right, among others, to issue subordinated notes to the company of up to UsD 700 million at any time before august 2030. for its various rights, swiss Reinsurance company ltd owes the company an unconditional fixed commitment fee, payable in annual instalments calculated as 5.80% on the total facility amount. annually, swiss Reinsurance company ltd receives a partial reimbursement of the commitment fee equal to 2.22% per annum on the undrawn facility amount. as of 31 December 2015, the facility was undrawn.
swiss Reinsurance company ltd Zurich cHf 34.4 100 100 swiss Re corporate solutions ltd Zurich cHf 100.0 100 100 swiss Re life capital ltd Zurich cHf 0.1 100 100 swiss Re investments Holding company ltd Zurich cHf 0.1 100 100 swiss Re Principal investments company ltd Zurich cHf 0.1 100 100 swiss Re specialised investments Holdings (UK) ltd london GBP 1.0 100 100 as of 31 December 2014 Domicile currency share capital
swiss Reinsurance company ltd Zurich cHf 34.4 100 100 swiss Re corporate solutions ltd Zurich cHf 100.0 100 100 swiss Re life capital ltd Zurich cHf 0.1 100 100 swiss Re investments Holding company ltd Zurich cHf 0.1 100 100 swiss Re Principal investments company ltd Zurich cHf 0.1 100 100 swiss Re specialised investments Holdings (UK) ltd london GBP 1.0 100 100
financial statements swiss Re ltd shareholder number of shares % of voting rights and share capital1 creation of the obligation to notify 1 the percentage of voting rights is calculated at the date the obligation was created and notified.
Opening balance of shareholders’ equity 19 349 20 503 share buy-back programme - –430 Other movements in own shares –215 –44 net realised gains from sale of own shares - 65 Dividend payments for the previous year –2 741 –2 4901 net income for the financial year 4 110 3 865 Shareholders’ equity as of 31 December before proposed dividend payment 20 503 21 469 Proposed dividend payment –2 481 –1 5542
Shareholders’ equity as of 31 December after proposed dividend payment 18 022 19 915 1 since the Board of Directors’ proposal for allocation of disposable profit, included in the annual Report 2014, the number of registered shares eligible for dividend, at the dividend payment date of 27 april 2015, increased due to the transfer of 1 180 649 shares for employee participation purposes from not eligible to eligible for dividend. this resulted in a higher dividend of cHf 9 million, compared to the Board of Directors’ proposal, and in lower legal reserves from capital contributions by the same amount.
2 Details on the proposed dividend payments for the financial year 2015 are disclosed on page 262.
The section below is in line with articles 663c para. 3 and 959c para. 2 cif. 11 of the Swiss Code of Obligations, which requires disclosure of shareholdings, options and related instruments held by Swiss Re’s members of the Board of Directors and Group Executive Committee (Group EC) at the end of the reporting year and of share-based compensation for the Board of Directors during the reporting year. Further disclosures in respect of board and management compensation, and persons closely related, are detailed in the Compensation Report on pages 147 to 151 of the Financial Report of the Swiss Re Group.
Share ownership The number of shares held as of 31 December were: Members of the Board of Directors 2014 2015
Jean-Pierre Roth, Member 8 234 8 443 Philip K. Ryan, Chairman of the Finance and Risk Committee2 3 394 Susan L. Wagner, Chairman of the Investment Committee3 1 267 3 485 1 Term of office expired as of 21 April 2015 and did not stand for re-election. 2 Elected to Swiss Re’s Board of Directors at the Annual General Meeting of 21 April 2015. 3 Elected to Swiss Re’s Board of Directors at the Annual General Meeting of 11 April 2014.
Michel M. Liès, Group CEO 187 690 262 808 David Cole, Group Chief Financial Officer 28 755 54 207 John Dacey, Group Chief Strategy Officer, Chairman Admin Re®1 45 171 Guido Fürer, Group Chief Investment Officer 32 315 42 302 Agostino Galvagni, CEO Corporate Solutions 64 860 65 816 Jean-Jacques Henchoz, CEO Reinsurance EMEA 38 280 35 476 Christian Mumenthaler, CEO Reinsurance 40 000 50 000 Moses Ojeisekhoba, CEO Reinsurance Asia 14 369 26 404 J. Eric Smith, CEO Swiss Re Americas 0 16 990 Matthias Weber, Group Chief Underwriting Officer 57 649 25 410 Thomas Wellauer, Group Chief Operating Officer 75 973 116 111 1Chairman Admin Re® until May 2015.
Philip K. Ryan, Chairman of the Finance and Risk Committee8,9 168 1 894 Susan L. Wagner, Chairman of the Investment Committee10 94 1 267 197 2 218 1 Represents the portion (40%) of the total fees for the members of the Board of Directors that is delivered in Swiss Re Ltd shares, with a four-year blocking period. 2 The number of shares is calculated by dividing the 40% portion of the total fees with the average closing price of the shares on the SIX Swiss Exchange during the ten trading days
preceding the AGM less the amount of any dividend resolved by the AGM. 3 Acting as the Lead Independent Director. Chairman of the Audit Committee since 11 April 2014. 4 Term of office expired as of 11 April 2014 and did not stand for re-election. 5 Term of office expired as of 21 April 2015 and did not stand for re-election. 6 Vice Chairman until 21 April 2015. 7 Includes fees received for duties on the board of Luxembourg Group companies. 8 Elected to Swiss Re’s Board of Directors at the Annual General Meeting of 21 April 2015. 9 Includes fees received for duties on the board of US Group companies. 10 Elected to Swiss Re’s Board of Directors at the Annual General Meeting of 11 April 2014.
The Board of Directors proposes to the Annual General Meeting to be held in Zurich on 22 April 2016 to approve the following allocations and dividend payment: Dividend If the Board of Directors’ proposal for allocations and dividend payment is accepted, an ordinary dividend of CHF 4.60 per share will be paid on 28 April 2016 from voluntary profit reserves.
Voluntary profit reserves brought forward 5 440 9 550 Allocation from retained earnings 4 110 3 865 Reclassification of legal reserves from capital contributions into voluntary profit reserves 2 4812 Ordinary dividend payment out of voluntary profit reserves –1 4542 –1 5543
Special dividend payment out of voluntary profit reserves –1 0272 Voluntary profit reserves after allocation and dividend payment 9 550 11 861 1Some line items in the above table have been renamed based on the adoption of the new provisions of the Swiss Code of Obligations.
2 Since the Board of Directors’ proposal for allocation of disposable profit, included in the Annual Report 2014, the number of registered shares eligible for dividend, at the dividend payment date of 27 April 2015, increased due to the transfer of 1 180 649 shares for employee participation purposes from not eligible to eligible for dividend. This resulted in a higher dividend of CHF 9 million, compared to the Board of Directors’ proposal, and in lower legal reserves from capital contributions by the same amount.
3 The Board of Directors’ proposal to the Annual General Meeting of 22 April 2016, is subject to the actual number of shares outstanding and eligible for dividend.
Share structure per 31 December 2015 Number of registered shares Nominal capital in
Report of the statutory auditor on the Financial Statements As statutory auditor, we have audited the financial statements of Swiss Re ltd (the “Company”), which comprise the income statement, balance sheet and notes (pages 251 to 261), for the year ended 31 December 2015.
Opinion In our opinion, the financial statements for the year ended 31 December 2015 comply with Swiss law and the Company’s Articles of Association.
We further confirm that the proposal for allocation of disposable profit complies with Swiss law and the Company’s Articles of Association. We recommend that the financial statements submitted to you be approved.
Headquartered in Zurich, Switzerland, Swiss Re has operations across the globe. Our success is built on our solid client relationships, capital strength and knowledge company approach. We make the world more resilient.
insurance of accident and liability risks, as well as hull damage, connected with the operation of aircraft.
insurance covering the loss of earnings resulting from, and occurring after, destruction of property; also known as “loss of profits” or “business income protection insurance”.
maximum amount of risk that can be accepted in insurance. Capacity also refers to the amount of insurance coverage allocated to a particular policyholder or in the marketplace in general.
insurance that is reinsured: the passing of the insurer’s risks to the reinsurer against payment of a premium. the insurer is referred to as the ceding company or cedent.
activities in connection with the investigation, settlement and payment of claims from the time of their occurrence until settlement.
all claims payments plus the adjustment in the outstanding claims provision of a business year and claim adjustment expenses.
arrangement by which a number of insurers and/or reinsurers share a risk.
insurance and reinsurance protection of one or more specific risk exposures based on a contractual agreement.
insurance against financial losses sustained through the failure, for commercial reasons, of policyholders’ clients to pay for goods or services supplied to them.
Generic term applying to all types of insurance indemnifying or reimbursing for losses caused by bodily injury or sickness or for expenses of medical treatment necessitated by sickness or accidental bodily injury.
Section of cover in a non-proportional reinsurance programme in which total coverage is divided into a number of consecutive layers starting at the retention or attachment point of the ceding company up to the maximum limit of indemnity. individual layers may be placed with different insurers or reinsurers.
line of insurance which includes coverage for property in transit (cargo), means of transportation (except aircraft and motor vehicles), offshore installations and valuables, as well as liabilities associated with marine risks and professions.
line of insurance which offers coverage for property, accident and liability losses involving motor vehicles.
Premiums an insurance company has recorded as revenues during a specific accounting period.
Principal investments and acquisitions is a unit of Swiss Re that manages all strategic acquisition activities of the Group as well as a portfolio of minority holdings in primarily insurance and insurance-related businesses with the goal of generating long-term value.
form of reinsurance arrangement in which the premiums earned and the claims incurred of the cedent are shared proportionally by the cedent and the reinsurer.
intangible asset primarily arising from the purchase of life and health insurance companies or portfolios.
form of proportional reinsurance in which a defined percentage of the premiums earned and the claims incurred by the cedent in a specific line is reinsured for a given period. Quota share reinsurance arrangements represent a sharing of business in a fixed ratio or proportion.
management tool for the comprehensive identification and assessment of risks based on knowledge and experience in the fields of natural sciences, technology, economics and statistics.
new regulatory framework for eU re/insurance solvency rules that introduces comprehensive, economic and risk-based regulation and includes prudential requirements on solvency capital, risk modelling, supervisory control and disclosure.
Sureties and guarantees issued to third parties for the fulfilment of contractual liabilities.
form of proportional reinsurance in which risks are reinsured above a specified amount.
a life insurance contract which provides policyholder funds linked to an underlying investment product or fund. the performance of the policyholder funds is for the account of the policyholder.
maximum possible loss in market value of an asset portfolio within a given time span and at a given confidence level. 99% VaR measures the level of loss likely to be exceeded in only one year out of a hundred, while 99.5% VaR measures the loss likely to be exceeded in only one year out of two hundred. 99% tail VaR estimates the average annual loss likely to occur with a frequency of less than once in one hundred years.
Certain statements and illustrations contained herein are forward-looking. these statements (including as to plans, objectives, targets and trends) and illustrations provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to a historical fact or current fact.
forward-looking statements typically are identified by words or phrases such as “anticipate”, “assume”, “believe”, “continue”, “estimate”, “expect”, “foresee”, “intend”, “may increase” and “may fluctuate” and similar expressions or by future or conditional verbs such as “will”, “should”, “would” and “could”. these forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause Swiss Re’s actual results of operations, financial condition, solvency ratios, capital or liquidity positions or prospects to be materially different from any future results of operations, financial condition, solvency ratios, capital or liquidity positions or prospects expressed or implied by such statements or cause Swiss Re to not achieve its published targets.
Such factors include, among others: ̤ instability affecting the global financial system and developments related thereto; ̤ deterioration in global economic conditions; ̤ Swiss Re’s ability to maintain sufficient liquidity and access to capital markets, including sufficient liquidity to cover potential recapture of reinsurance agreements, early calls of debt or debt-like arrangements and collateral calls due to actual or perceived deterioration of Swiss Re’s financial strength or otherwise; ̤ the effect of market conditions, including the global equity and credit markets, and the level and volatility of equity prices, interest rates, credit spreads, currency values and other market indices, on Swiss Re’s investment assets; ̤ changes in Swiss Re’s investment result as a result of changes in its investment policy or the changed composition of its investment assets, and the impact of the timing of any such changes relative to changes in market conditions; ̤ uncertainties in valuing credit default swaps and other credit-related instruments; ̤ possible inability to realise amounts on sales of securities on Swiss Re’s balance sheet equivalent to their mark-to-market values recorded for accounting purposes; ̤ the outcome of tax audits, the ability to realise tax loss carryforwards and the ability to realise deferred tax assets (including by reason of the mix of earnings in a jurisdiction or deemed change of control), which could negatively impact future earnings; ̤ the possibility that Swiss Re’s hedging arrangements may not be effective; ̤ the lowering or loss of one of the financial strength or other ratings of one or more Swiss Re companies, and developments adversely affecting Swiss Re’s ability to achieve improved ratings; ̤ the cyclicality of the reinsurance industry; 272 Swiss Re 2015 financial Report
this communication is not intended to be a recommendation to buy, sell or hold securities and does not constitute an offer for the sale of, or the solicitation of an offer to buy, securities in any jurisdiction, including the United States. any such offer will only be made by means of a prospectus or offering memorandum, and in compliance with applicable securities laws.
Despite signs of moderate increase in global growth forecasts and positive macroeconomic trends in the United States, growth forecasts among the principal global economies remain uneven and uncertain, and that uncertainty has been compounded by significant volatility in equity, currency and commodities markets. Slower growth rates in China, together with the actions taken on its currency, and drastic reductions in the price of oil, together with volatility in foreign currency and investment markets caused by interest rate action in the United States; continued concerns over the implications of austerity-driven economic policies in europe and the ability of the european Union to address significant ongoing structural challenges; concerns over a possible exit of the United Kingdom from the european Union; deceleration in GDP growth and other negative trends in emerging markets; and geopolitical instability, reflecting the political and military situations in the middle east and north africa, the rise of the islamic State, concerns over further terrorist attacks across the globe and the political, economic and social crises caused by massive waves of migration into and through europe, have contributed to downward pressure on the capital markets and in turn on market capitalization of many listed companies, call into question the likelihood of continued recovery of the global economies and are beginning to raise the spectre of another global recession.
Other changes are focused principally on banking institutions, but some could have direct applicability to insurance or reinsurance operations and others could have a general impact on the regulatory landscape for financial institutions, which might indirectly impact capital requirements and/or required reserve levels or have other direct or indirect effects on the Group or its securities. Changes are particularly likely to impact financial institutions designated as “systemically important,” a designation which is expected to result in enhanced regulatory supervision and heightened capital, liquidity and diversification requirements under evolving reforms.
there is an emerging focus on classifying certain insurance companies as systemically important as well. the Group could be designated as a global systemically important financial institution (Sifi) under the framework for systemically important financial institutions developed by the financial Stability Board, or as a systemically important non-bank financial company by the financial Stability Oversight Council (the fSOC) in the United States. Separately, the international association of insurance Supervisors, an international body that represents insurance regulators and supervisors, published a methodology for identifying global systemically important insurers (“G-Siis”) and on a framework for supervision of internationally active insurance groups. initial designation of insurers as G-Siis took place in July 2013, and initial designation of reinsurers as G-Siis has been postponed pending further development of the methodology due by november 2015, to be applied to new designations in 2016. if and when reinsurers are included in the list of G-Siis, the Group could be so designated. Were the Group to be designated as a G-Sii, it could be subject to one or both of the resulting regimes, once implemented, including capital standards under both regimes (the Basic Capital Requirement for G-Siis and the insurance Capital Standard for internationally active insurance Groups). in addition, the Group ultimately will be subject to oversight of its Swiss regulator in respect of recovery and resolution planning.
the Group is exposed to changes in the level and volatility of equity prices, as they affect the value of equity securities themselves as well as the value of securities or instruments that derive their value from a particular equity security, a basket of equity securities or a stock index. the Group is also subject to equity price risk to the extent that the values of life-related benefits under certain products and life contracts, most notably variable annuity business, are tied to financial market values; to the extent market values fall, the financial exposure on guarantees related to these contracts would increase to the extent this exposure is not hedged. While the Group has discontinued writing new variable annuity business and has an extensive hedging programme covering its existing variable annuity business that it believes is sufficient, certain risks cannot be hedged, including actuarial risks, basis risk and correlation risk. exposure to foreign exchange risk arises from exposures to changes in spot prices and forward prices as well as to volatile movements in exchange rates.
obligations. the Group’s uses of funds include obligations arising in its reinsurance business (including claims and other payments as well as insurance provision repayments due to portfolio transfers, securitisations and commutations), which may include large and unpredictable claims (including catastrophe claims), funding of capital requirements and operating costs, payment of principal and interest on outstanding indebtedness and funding of acquisitions. the Group also has unfunded capital commitments in its private equity and hedge fund investments, which could result in funding obligations at a time when it is subject to liquidity constraints. in addition, the Group has potential collateral requirements in connection with a number of reinsurance arrangements, the amounts of which may be material and the meeting of which could require the Group to liquidate cash equivalents or other securities.
Counterparty risks the Group is exposed to the risk of defaults, or concerns about defaults, by its counterparties. Securities trading counterparties, counterparties under swaps and other derivative contracts, and financial intermediaries may default on their obligations due to bankruptcy, insolvency, lack of liquidity, adverse economic conditions, operational failure, fraud or other reasons, which could have a material adverse effect on the Group.
Risks relating to credit rating downgrades Ratings are an important factor in establishing the competitive position of reinsurance companies, and market conditions could increase the risk of downgrade. third-party rating agencies assess and rate the financial strength of reinsurers and insurers. these ratings are intended to measure a company’s ability to repay its obligations and are based upon criteria established by the rating agencies.
the Group’s ratings reflect the current opinion of the relevant rating agencies. One or more of its ratings could be downgraded or withdrawn in the future. Rating agencies may increase the frequency and scope of ratings reviews, revise their criteria or take
other actions that may negatively impact the Group’s ratings. in addition, changes to the process or methodology of issuing ratings, or the occurrence of events or developments affecting the Group, could make it more difficult for the Group to achieve improved ratings which it would otherwise have expected.
the Group is also involved, from time to time, in investigations and regulatory proceedings, certain of which could result in adverse judgements, settlements, fines and other outcomes. the number of these investigations and proceedings involving the financial services industry has increased in recent years, and the potential scope of these investigations and proceedings has also increased, not only in respect of matters covered by the Group’s direct regulators, but also in respect of compliance with broader business conduct rules, including those in respect of market abuse, bribery, money laundering, trade sanctions and data protection and privacy. the Group also is subject to audits and challenges from time to time by tax authorities, which could result in increases in tax costs, changes to internal structures and interest and penalties. the Group could be subject to risks arising from alleged, or actual, violations of any of the foregoing, and could also be subject to risks arising from potential employee misconduct, including non-compliance with internal policies and procedures and malfeasance, such as undertaking or facilitating cyber attacks on internal systems. Substantial legal liability could materially adversely affect the Group’s business, financial condition or results of operations or could cause significant reputational harm, which could seriously affect its business.
the Group also publishes, on an annual basis, a report of its results, including financial statements and an accompanying independent assurance report, prepared in accordance with the Group’s proprietary economic value management (“eVm”) principles (“eVm report”). financial information included in the eVm report contains non-GaaP financial measures. the eVm principles differ significantly from US GaaP and, accordingly, the Group’s results prepared in accordance with US GaaP will differ from its eVm results, and those differences could be material. the Group’s annual eVm results are available after release of its annual audited US GaaP results and can be more volatile than the US GaaP results because, among other things, assets and liabilities are measured on a market-consistent basis, profit recognition on new contracts is recognised at inception rather than over the life time of the contract, and life and health actuarial assumptions are on a best estimate basis as opposed to generally being locked-in. the Groupʼs eVm financial statements should not be viewed as a substitute for the Group’s US GaaP financial statements.
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Corporate calendar 22 April 2016152nd annual General meeting first quarter 2016 results
Design: merchantCantos, london Swiss Re Corporate Real estate & logistics/ media Production, Zurich
the 2015 annual Report is also available in German. the web version of the 2015 annual Report is available at: reports.swissre.com
The Principles for Sustainable Insurance (PSI): Our Public Disclosure of Progress 80
GRI Content Index, with UN Global Compact Communication on Progress (COP) references 81
The 2015 Corporate Responsibility Report sets out our commitment as a responsible company and describes the actions we have taken to put this commitment into practice.
The 2015 Corporate Responsibility Report describes in detail our commitment to sustainable progress and reviews our main actions and achievements over the past year. Our strategic priorities remained largely unchanged in 2015 and are mirrored by the main chapters you can see in the report. As in recent years, our Corporate Responsibility Report also serves as our official disclosure document for two important commitments we have made to the United Nations: the UN Global Compact and the UNEP Principles for Sustainable Insurance (PSI). We remain committed to both of them and will continue to take an active role in the PSI.
In our core re/insurance business, we continued to create effective solutions that help our private and public sector clients manage the risks they face. In particular, our solutions offer protection for natural catastrophes, volatile weather, construction risks of offshore wind farms and potential funding gaps of pension funds. Highlights of our work included setting up reinsurance support for the Florida Hurricane Catastrophe Fund, a cat bond insuring Istanbul against earthquake damage, completion of two new Economics of Climate Adaptation studies in Bangladesh and El Salvador, and insuring the first-ever offshore wind farm project in the US. We also report on our progress towards meeting two quantitative commitments we have made – to the United Nations and to the Grow Africa Partnership.
Ongoing dialogue with you, our stakeholders, has remained essential for our efforts to enable sustainable progress and to make the world more resilient. In our role as ultimate risk taker, we need to have a very sound understanding of key risks. Our partners expect us to share this knowledge with them and help set the agenda. In turn, we also benefit from this exchange to sharpen our expertise, making us “smarter together”. In 2015, our dialogue focused on topics such as climate change, building resilient energy infrastructure, financial repression, autonomous cars and 3D printing.
To summarise, we believe the past year was a highly successful one for Swiss Re in terms of our contribution to sustainable progress and in meeting your expectations, dear stakeholders. Of course, this would not have been possible without the dedication of the people who work for Swiss Re, day in, day out. We would like to thank them sincerely for their passion to perform. In the present report, we describe in detail what we, in turn, do to help our people unleash their full potential towards making the world more resilient.
Swiss Re Ltd, the Group’s holding company, is a joint stock company, listed in accordance with the International Reporting Standard on the SIX Swiss Exchange, domiciled in Zurich, and organised under the laws of Switzerland. No other Group companies have shares listed.
Our global presence * Counting all Zurich premises as one office
* Counting all Zurich premises as one office www.reports.swissre.com/2015/business-report/our-strategy/strategy-in-action.html www.reports.swissre.com/2015/business-report/our-strategy/strategy-in-action.html www.reports.swissre.com/2015/business-report/our-strategy/strategy-in-action.html
Reinsurance is Swiss Re’s largest business in terms of income and the foundation of our strength, providing about 85% of gross premiums and fee income through two segments – Property & Casualty and Life & Health. The unit aims to extend Swiss Re’s industry-leading position with disciplined underwriting, prudent portfolio management and diligent client service.
Against up-front premium payments, our solutions enable our clients to reduce peak risks, reduce earnings volatility, free up capital and finance growth, and achieve capital management targets for solvency and ratings.
We compensate for our clients’ losses, using effective claims management procedures that are based on industry best practice, providing speed of payment when clients need us most.
Premiums earned and fee income 31 262 30 214 Net investment income – non-participating 4 103 3 436 Net investment result – unit-linked and with-profit 1 381 814
50% P&C Reinsurance 36% L&H Reinsurance 11% Corporate Solutions 3% Admin Re®
Swiss Re has a long-standing commitment to being a responsible company. A key element in our understanding of what this means is the desire to contribute to sustainable value creation, for the benefit of our clients and society at large. This longterm view helps us to pursue our vision of making the world more resilient and is embedded in our value framework, which means “doing business the Swiss Re way”.
Based on our commitment to long-term value creation, we have signed up to a number of external charters and initiatives: ̤ Principles for Responsible Investment (PRI): see page 35
̤ UN Global Compact: for our Communication on Progress, see pages 81–85
In order to identify the most material sustainability issues, we use both our internal risk expertise and ongoing dialogue with our stakeholders.
In our core re/insurance business, we have special units, such as our Global Partnerships function in the Group or the Environmental & Commodity Markets department in our Corporate Solutions Business Unit, that identify underinsured markets and risks, and seek to expand re/insurance protection through commercially viable solutions.
In our risk management, meanwhile, we have a process and the capabilities to identify risks we feel we should not re/insure, be it for ethical reasons, because they might lead to losses, or both. We conduct this analysis through our Sustainability Risk Framework and other tailor-made risk management tools.
We also have a formal process to identify emerging risks, called SONAR (“Systematic observation of notions associated with risk”). This enables us to spot, at an early stage, newly developing or changing risks that may have an impact on our business, including risks related to environmental, social and governance (ESG) issues.
Complementing the insights we gain directly through dialogue with our stakeholders, we also utilise data provided by third-party organisations such as RepRisk, Sigwatch, MSCI and Sustainalytics, and the results of acacemic research.
Sustainability Risk unit; ̤ Interviews with key internal decision makers, our sustainability risk stakeholders (eg investor meetings, events at the Centre for Global Dialogue, project and business related interactions) and external experts (academia, NGOs, consulting firms); ̤ Validation of final topics by the Group Sustainability Risk unit; ̤ Approval and endorsement by the Risk Management ET, Group Executive Committee, Board of Directors; ̤ List of material topics finalised by Group Sustainability Risk unit; ̤ Development/adjustment of sustainability strategy based on final materiality map.
Climate change Climate change has been our most important material issue for many years: For a reinsurer, it constitutes a key material topic because it will lead to an increase in the frequency and severity of natural catastrophes such as floods, storms, excessive rainfall and drought. In combination with growing asset concentrations in exposed areas and more widespread insurance protection, this will cause a steady rise in losses. Of our key material topics listed above, two are directly connected to climate change (managing climate and natural disaster risk, advancing sustainable energy solutions).
̤ Funding longer lives ̤ Partnering for food security ̤ Supporting financial resilience ̤ Managing sustainability risks ̤ Empowering our people ̤ Ensuring good governance and compliance
Goals for our material issues For all material issues we have set qualitative objectives and, for some of them, quantitative ones, as well: Managing climate and natural disaster risk ̤ For general goals, see special section on our climate change strategy on page 11; ̤ Based on our commitment made to the UN, offer USD 10 billion protection against climate risks to sovereign and sub-sovereigns by 2020; ̤ Keep per-capital CO2 emissions from our own operations at 2013 levels, which we had reduced by 49.3% since 2003; ̤ Reduce our energy intensity by an average 2% per year.
Funding longer lives ̤ Use our capacity, technical expertise and natural offset of our mortality business to offer our clients risk transfer solutions for their longevity risk.
Ensuring good governance and compliance ̤ Continuously assess our corporate governance against best practices and new stakeholder demands; ̤ Regularly update our compliance policies as appropriate, oversee effective implementation thereof and deliver meaningful training and communication to our employees.
We seek to address the issues we have determined as material across all the areas of our business where our activities can make a contribution to sustainable value creation. These areas are listed below: Business solutions Within our core business of re/insurance and asset management, we strive to develop innovative solutions that help to tackle key environmental and social challenges. To achieve this, we work together with our clients and partners, both in the private and public sectors.
Stakeholder dialogue Through regular dialogue with our clients and other stakeholders, we help to develop effective responses to sustainability and other key issues, by raising awareness of both the risks and the opportunities arising from them.
Advancing sustainable energy solutions pages 23–24 page 39 pages 49–50 SRF
The overview below shows in which of these areas we address which material topics and where you can find corresponding information in the present report or in “The Swiss Re Foundation in 2015”.
To get a complete overview of our actions as a responsible company, this report should be read in conjunction with the annual report published by the Swiss Re Foundation (see page 73).
Reporting frameworks The present report incorporates our 2015 Communication on Progress for the UN Global Compact (www. unglobalcompact.org). References to the Compact’s ten principles are incorporated into the GRI Content Index (see pages 81–85). For the third consecutive year, we also report against the Principles for Sustainable Insurance, PSI (www.unepfi.org/psi). You can find our Public Disclosure of Progress on page 80.
Regarding the development and adoption of relevant policies and strategies, the role of the Board of Directors is to endorse them, while the Group Executive Committee approves them. Risk Management is responsible for maintaining a suitable risk policy framework, and the Business Units drive strategic implementation within their respective areas.
Content definition The structure of the present report primarily reflects the main areas of our business where we address material issues: each of them is covered by an individual chapter – with one exception: Our role as an active citizen in society is described in a separate report published by the Swiss Re Foundation (see page 73). Thus, the report includes the following six main chapters: ̤ Creating solutions for sustainability ̤ Extending our risk intelligence ̤ Exploring and shaping the risk landscape ̤ Reducing our environmental footprint ̤ Empowering our people ̤ Ensuring good governance and compliance
The content presented in these chapters primarily reflects the material issues we address in these areas, as illustrated in the overview matrix on page 13.
Scope and publishing rhythm Our Corporate Responsibility Report covers the whole Swiss Re Group as it was organised by 31 December 2015, ie the publicly listed holding company Swiss Re Ltd., its three Business Units Reinsurance, Corporate Solutions and Admin Re®, and all directly or indirectly held subsidiaries. There were no changes to the Group’s organisational structure in 2015. Our new Life Capital Business Unit was established on 1 January 2016. Likewise, we have not made any data restatements in the report.
̤ We do, however, carefully analyse what kind of information key sustainability raters request of us and include this in our reporting if we perceive a widespread demand (see below).
Note on Indicators G4-21 and G4-22 on internal and external “aspect boundaries”: Of the “material aspects” to which we refer in the present report, we regard almost all as material “inside the organisation”. The two exceptions are “Water” and “Effluents and Waste”: as Swiss Re is not an industrial company, the environmental impacts we cause through water consumption and waste generation are very small in comparison. We still include information and data on them because many rating organisations expect this even from companies in the financial services sector. Hence we consider these aspects as being merely “material outside the organisation”.
As a rule, all the material aspects we cover in the report are “material for all entities within the organisation”, that is, for the Swiss Re holding company and all three of its Business Units. This statement only needs to be qualified for two indicators of the Financial Services Sector Supplement: FS7 and FS8 on products with a specific social or environmental benefit are not relevant for our Admin Re® Business Unit.
By managing risks and covering losses, re/insurance creates stability and enables economic growth. However, some environmental and social challenges can undermine sustainable progress if left unaddressed. Helping our clients and society at large to tackle such risks is a key component of our commitment as a responsible company and our overarching vision of making the world more resilient.
Currently, we focus on the following themes: climate and natural disaster risks, agricultural risks, sustainable energy, and funding longer lives. We develop our solutions as part of our established risk modelling and underwriting activities or by creating innovative new products, in close cooperation with our clients and partners.
This general trend will continue. But crucially, losses will be further aggravated by climate change. The scientific consensus is that a continued rise in average global temperatures will have a significant effect on weatherrelated natural catastrophes. According to the Special Report on Extremes (SREX, 2012) and the Fifth Assessment Report (AR5, 2014) published by the Intergovernmental Panel on Climate Change (IPCC), a changing climate gradually leads to shifts in the frequency, intensity, spatial extent, duration and timing of extreme weather events.
If climate change remains unchecked, the makeup of the main drivers will thus gradually shift, with climate change accounting for an increasingly large share of natural catastrophe losses.
In our Financial Report we detail the insurance risk currently posed to our business by severe instances of four types of natural catastrophes.
In addition to providing re/insurance covers, we offer our clients strategic expertise and integral risk assessments of natural disasters and climate adaptation. These include our Economics of Climate Adaptation (ECA) studies, free access for our clients to Swiss Re’s CatNet® tool and our expertise publications. (You can see a sample of our recent publications on pages 46 and 74–75.)
Through the ECA methodology, we also analyse the effects of climate change on a longer timescale, enabling us to provide our clients with strategic advice and integral risk assessments about natural disasters and climate adaptation. ECA studies quantify today’s climate risks, the potential increase of populations and assets at risk due to economic development, plus the additional risk posed by climate change, with a time horizon of up to 30 years. In a second step, our studies identify cost-effective measures to minimise and adapt to these risks. In this way, they give decision makers important information needed to integrate climate adaptation with economic development, paving the way for sustainable growth.
In 2015, we completed two new ECA studies, both at the request and with the support of the German Development Bank (KfW): one for Barisal in Bangladesh and one for San Salvador in El Salvador (see page 18). They are the first two ECA studies for which KfW has provided the funding in order to systematically identify adaptation measures with a high potential. The bank then helps to finance their implementation, together with the local city government.
Insurance stress tests In our Financial Report we describe the insurance risk associated with natural catastrophes and disclose the expected impact on our economic capital of four types of single event losses with a 200-year return period (ie with a 0.5% probability): Atlantic hurricane, Californian earthquake, European windstorm and Japanese earthquake. See 2015 Financial Report, pages 66–67.
Our ECA study for Barisal Barisal is the administrative capital of Barisal Division in south-central Bangladesh and has a population of approximately 330 000. Lying on the banks of the Kirtankhola River, it is one of the country’s most important river ports. The biggest climate risks the city faces are cyclones and floods. At present, they pose a particular threat to citizens, residential and commercial buildings and cause most damage in the poorer Western parts of the city.
Our ECA study for San Salvador San Salvador is the capital of El Salvador and by far the country’s largest city; the municipality itself has a population of slightly more than half a million, while the whole metropolitan area counts almost two and a half million inhabitants. The three major climate-related risks are floods, tropical cyclones and landslides.
Our ECA study revealed that the annual expected damage from flooding around Acelhuate River is likely to increase almost four-fold by 2040. However, urban planning (such as river bank reinforcements), ecological restoration and the construction of absorption wells could protect many people against flooding and reduce the risk by approximately USD 150 million. Ecological restoration would have particular benefits for people living in the city’s poorer neighbourhoods: Strengthening the buffer capacity of the ecosystem in the Acelhuate catchment area through reforestation could reduce the risk of flood damage there by up to USD 50 million over three decades.
Damage from landslides must also be expected to increase substantially in vulnerable areas with steep slopes and a high potential for water accumulation. Here, effective adaptation measures are reforestation and the construction of terraces, as well as finding more suitable places for San Salvador’s most vulnerable people to live.
Supporting the African Risk Capacity As a provider of reinsurance capacity and expertise, in 2014 we helped to launch the African Risk Capacity (ARC), the continent’s first parametric natural disaster insurance pool. It offers governments insurance protection against drought, which poses a recurring threat in large parts of Africa and puts the livelihoods of millions of citizens at risk.
ILS are particularly well-suited to provide protection against peak risks – events that happen infrequently but tend to lead to high losses, for example earthquakes or windstorms. ILS are used for both risk and capital management purposes in the P&C and the L&H business. For reinsurers they are attractive because they free up scarce capital; for insurers and corporate clients they provide multiyear collateralised protection; and for investors they offer attractive diversification possibilities, as they are relatively uncorrelated with other asset classes.
Protecting the Florida Hurricane Catastrophe Fund The state of Florida has over USD 3 trillion of coastal assets, one of the highest concentrations anywhere in the world. But as the state lies within the infamous “hurricane alley”, its population faces a latent natural disaster risk. In response, the state-run Florida Hurricane Catastrophe Fund (FHCF) established its first-ever reinsurance programme in 2015 and chose Swiss Re as one of its leaders.
This is why the FHCF has purchased reinsurance protection for the first time in its 22-year history. By adding USD 1 billion of private capital, it can further build the financial stability it needs to ensure Florida’s economic resilience in the face of disasters.
Helping to develop insurance markets in China Throughout 2015, we continued to take an active role in the expanding insurance markets of China. For example, we helped to develop China’s first weather index insurance programme to protect cotton production against low temperatures. It was launched as a pilot in the Xinjiang region, which grows 60% of the country’s cotton. While perils such as drought, hail and wind are covered by a government-subsidised agricultural insurance programme, this has not been the case for yield losses due to low temperatures. If the pilot providing protection of RMB 7.6 million (USD 1.2 million) proves to be effective, it will be expanded to the whole region.
Protecting Vietnamese farmers against livestock loss We also helped to relaunch an important agricultural insurance pilot in Vietnam. It will protect the livelihoods of poor smallholder farmers in the provinces of Vinh Phuc and Ha Giang by insuring them against the effects a major natural catastrophe or disease may have on their livestock. In total, the scheme covers more than 150 000 cattle and buffalo.
Our commitments ... to the United Nations Many of our recent efforts to expand insurance protection cover losses from natural catastrophes and weather volatility (eg drought or excessive rainfall). As climate change is predicted to increase these losses, such transactions also help communities to strengthen their climate resilience. Furthermore, we have found that partnering with public sector clients, especially national and regional governments, is an effective way to develop solutions.
We have agreed with the United Nations to report publicly on the progress we make on this commitment. By the end of 2015, we had advised 13 sovereigns and sub-sovereigns on climate risk resilience and offered them a total of USD 2.1 billion in re/insurance protection.
... to the Grow Africa Partnership In our work to bring risk protection to underinsured communities, in recent years we have put a focus on the African continent, in particular Sub-Saharan Africa. In 2012, we made an important commitment to the Grow Africa Partnership (www.growafrica.org). This initiative was launched by a number of organisations to promote public-private collaboration and investment in African agriculture. As most smallholder farmers in Sub-Saharan Africa have had no access to insurance protection to date, addressing this problem is crucial to protect families’ livelihoods, facilitate economic development and reduce poverty.
Our commitment to the Grow Africa Partnership thus centres on the following three goals: ̤ Give farmers in Sub-Saharan Africa access to tools such as weather and yield index insurance products; ̤ Invest in resources equivalent to about USD 2 million per year to support the development of sustainable agricultural risk management markets; ̤ Provide agricultural insurance for up to 1.4 million smallholder farmers.
The foundations for the turbines of Block Island Wind Farm are being put in place. We insure construction and start-up delay risks of this project, the first-ever offshore wind farm in the US.
The two wind farms will consist of a total of 97 highly efficient, quiet Siemens turbines generating 6 megawatts each – 55 at Gode Wind 1 and 42 at Gode Wind 2. With a combined capacity of 582 megawatts, they will supply CO2free power equivalent to the annual electricity consumption of approximately 600 000 German households. The two wind farms are expected to become fully operational in the second half of 2016.
Longevity and health insurance remained two of our strategic priorities in the L&H business. The demand for longevity solutions is expected to grow further as demographics shift. We have invested in research and development to improve our ability to predict mortality and longevity trends. In the last few years, we have completed several longevity insurance contracts with pension funds in the UK.
Demand for commercial health insurance solutions has also been growing, driven by several major demographic and socio-economic trends. These include: the greater healthcare needs of ageing societies; rising healthcare expectations of the
18 Offshore wind farm projects we were involved in during 2015 www.dongenergy.com www.dongenergy.com
new middle class, especially in growth markets; and healthcare finance reform, particularly in mature markets. We offer a variety of health reinsurance solutions to meet these needs, from short-term protection against the risk of volatility in medical expenses for insurers or employers, to very long-term protection against the financial impact of disability or critical illness.
Risk management is an integral part of Swiss Re’s business model and key to the controlled risk-taking that underpins our financial strength. It is embedded throughout our business and ensures that the Group and the three Business Units have the necessary expertise, frameworks and infrastructure to support good risk-taking. (See 2015 Financial Report, pages 50–51 and 59–73.)
Sound risk management is essential for a re/insurer: Tight control of our exposures guarantees that we can fulfil our role in society as ultimate risk-taker and be a reliable partner to our clients when they need us. The core categories of our risk landscape comprise insurance risk (property and casualty, life and health) as well as financial market and credit risk. In addition, we consider it essential for a responsible company to pay attention to further significant risks we may be exposed to, especially in the longer term.
This extended risk awareness is also key to managing our assets responsibly. The risk assessments we make through our Sustainability Risk Framework, in particular, flow directly into our investment decisions.
For companies this situation can bring dilemmas: A specific business transaction may be economically beneficial and perfectly fine from a legal and regulatory perspective, yet may have significant environmental or social downsides. Swiss Re recognises that such dilemmas exist and develops effective responses through a welldefined approach and by taking decisions based on ethical principles.
communities, workforces and the environment. This framework applies to all of our business transactions in re/insurance as well as investments, to the extent that we can influence their various aspects.
Policies Our Sustainability Risk Framework is based on the overarching principles of respecting human rights and protecting the environment. Through detailed policies, the framework applies these principles to seven sectors or issues in which we perceive major sustainability risks: the defence industry; oil and gas (including oil sands and hydraulic fracturing); mining; dams; animal testing; forestry, pulp & paper and oil palm; and nuclear weapons proliferation.
Main concerns in key sectors Human rights and environmental protection ̤ Human rights violations and abuses such as murder, torture, deprivation of liberty, forced labour or harmful child labour; ̤ Countries that lack an operational, effective and internationally recognised government; ̤ Companies that are causing ongoing, severe and unmitigated damage to the environment, flora and fauna of a particular place and biodiversity in general, especially in industries and activities that have had a problematic track record in this area in the past.
Oil and gas ̤ Human rights abuses; ̤ Significant adverse environmental or social impacts, particularly where critical natural habitats, vulnerable groups and/or critical cultural heritages are impacted.
Mining ̤ Human rights abuses; ̤ Significant adverse environmental or social impacts, particularly where critical natural habitats, vulnerable groups and/or critical cultural heritages are impacted; ̤ Poor occupational health & safety record and risk of increasing HIV penetration.
The Sensitive Business Risks process Each of the eight policies of our Sustainability Risk Framework contains criteria and qualitative standards which define precisely when a transaction may present a “sustainability risk”. In 2015, we introduced a new online Sensitive Business Risk (SBR) assessment tool, which enables our underwriters to screen potentially sensitive transactions for their impacts on the local environment and on the human rights of the affected people and workforces.
309 Sensitive business transactions referred to our team of sustainability experts 3 550 Due diligence checks carried out by our underwriters to detect potential sustainability risks
 Proceed  Proceed with conditions  Abstain  Not materialised
Country exclusions Swiss Re also excludes certain countries from its business that have particularly poor human rights records. This step goes further than compliance with international trade controls (ITCs). Our goal is to refrain from directly underwriting risks or making investments in entities that are based in these countries.
Independent internal reviews In 2014, we started to formally involve our internal Insurance Risk Review (IRR) unit. An IRR is an independent assessment of underwriting and costing activities to review the quality of the technical work carried out and the decisions made, which includes checking whether mandatory underwriting standards have been adhered to.
During an IRR, our underwriting teams are now automatically asked a number of specific questions about their potential exposure to sustainability risks. The results and recommendations for improvement are reported to the Group
Sustainability Risk unit, which can then respond appropriately, eg by providing additional training or reviewing underwriting practices.
Training Since we introduced our Sustainability Risk Framework in 2009, we have made considerable efforts to raise awareness of sustainability issues among our underwriters and client managers. Through training we ensure that they know how to properly apply the framework with its underlying principles of respecting human rights and protecting the environment. In recent years, we have focused on high growth markets where we want to expand our business.
In 2015, 403 employees completed our eLearning course on the Sustainability Risk Framework. For 325 employees who started to work in underwriting and with our clients, this training was mandatory.
In addition, we provided training personally or via web-based conference to 328 experienced underwriters and graduates, and held five Lunch & Learn sessions, which were attended by 104 people. Through all our personally delivered training and outreach activities, we reached a total of 484 employees in 2015.
In 2015, we partnered with the UN Environment Programme (UNEP) to cohost a roundtable on “Insurance 2030: Policies and partnerships for sustainable development” at our Centre for Global Dialogue near Zurich. Around 60 leaders and executives from re/insurance companies and regulatory bodies, the UN, governments, think tanks and civil society reflected on the policies and partnerships needed to realise the full potential of re/insurance in promoting sustainable development. The roundtable underscored the importance of systemic responses, integrated approaches and collaborative efforts. Key insights were later presented in the landmark report “Insurance 2030: Harnessing insurance for sustainable development”.
Our understanding of political risks is also highly relevant to ensuring sustainable business operations in line with ESG principles: Several of the sectors and issues covered by the eight policies of our Sustainability Risk Framework (see pages 27–28) have a significant political dimension. Implementing these policies, both through SBR assessments and exclusion policies, thus requires a solid grasp of political risks. This is particularly true with regard to human rights violations, the proliferation of armaments into conflict areas and the identification of areas prone to civil unrest.
Regulatory risks Regulatory risks represent the potential impact of changes in the regulatory and supervisory regimes of the countries in which we operate. In 2015, the global regulatory agenda continued to accelerate. Governments and regulators rolled out new policies and conducted numerous consultations and field tests on regulations with a direct impact on the re/insurance sector. Furthermore, regulators are increasing their work on compliance and market conduct issues.
Climate change In view of the strategic importance climate change has for our core business, we closely monitor related regulatory developments. Governments’ and regulators’ interest in climate change and natural catastrophes has continued to build, leading to an increase in climate-related reporting requirements. For example, in a number of US states insurance companies that are domiciled or licensed there and write USD 100 million or more in direct premiums are required to complete a survey on climate change risks; and in the UK listed companies need to disclose their greenhouse gas emissions in their annual reports. Governments’ growing awareness of the risks posed by climate change has helped to prepare the ground for a new global climate deal on which they agreed at the 2015 United Nations Climate Change Conference in Paris (COP21). Its central objective is to cap global warming at 2°C over pre-industrial levels. (See special section on page 41.)
This complex landscape gives rise to “emerging risks” – newly developing or changing risks that are difficult to quantify and whose potential impact on our business is not yet sufficiently taken into account.
Emerging risks We define emerging risks as newly developing or changing risks that are difficult to quantify and whose potential impact on our business is not yet sufficiently taken into account.
Secondly, our emerging risk specialists periodically cluster and further assess these risk notions for their potential impact on our business. Based on this, they subsequently carry out more indepth investigations of selected topics. In 2015, they focused on the challenges of the Internet of Things, for example (see page 33). To share some of our key insights on this and other emerging risks with external audiences, we published the third edition of our comprehensive Swiss Re SONAR report.
The multitude of available (micro-) sensors, data collectors and software to manage these large data flows is already huge. Our connectivity is growing exponentially regarding variety, speed and relevance.
While the benefits of IoT are obvious in terms of individual consumer experiences and managing organisations and societies, the risks should not be ignored. The top challenges concern network and data security. Generally speaking, security is not the number one priority of device developers and, the more connected individual devices and protocols are, the more vulnerable they become to malfunction, loss of data or hacking. Growing interconnectivity also leads to accumulating loss potential, meaning that a small local incident can have significant cascading effects.
Further activities on emerging risks identified in the past The emerging risks we have previously examined in more detail and featured in our Corporate Responsibility Reports since 2007 are: 2007: Electromagnetic fields 2008: Critical infrastructure 2009: Carbon nanotubes 2010: Smart grids 2011: Cyber attacks 2012: 3D printing 2013: New forms of mobility 2014: Electronic cigarettes
In 2015, we contributed to the CRO Forum’s position paper “The Smart Factory – Risk Management Perspectives” www.thecroforum.org/wp-content/ uploads/2015/12/CROF-ERI-2015The -Smart-Factory1.pdf
Swiss Re is committed to investing its assets responsibly via a controlled and structured investment process, integrating environmental, social and governance (ESG) criteria. We believe that considering these factors can have a positive impact on the long-term financial performance of our investment portfolio. Thus, we apply sustainabilityrelated risk information consistently across our entire investment portfolio.
Critical infrastructure Infrastructure private debt mandates, page 36 Financial repression: the unintended consequences, pages 42–43
Cyber attacks Cyber Security Risk Governance Workshop, page 44 3D printing Expert Forum on 3D printing: changing the world one print at a time, page 44
New forms of mobility The autonomous car 2015: Risks and opportunities for the re/insurance industry, page 43 www.thecroforum.org/emerging-riskinitiative-2/
The overall responsibility for sustainable investing lies with the Group Chief Investment Officer, who is advised by the Asset Management Executive Team and the Asset Management Investment Committee. Furthermore, an ESG Advisory Group, formed by representatives of all investment units, legal, compliance and risk management, oversees and monitors the progress of our responsible investment activities.
In 2007 we signed the UN Principles for Responsible Investment (PRI) and in 2012 the Principles for Sustainable Insurance (PSI), thereby formally endorsing our commitment to corporate responsibility. The PRI and PSI are considered in Swiss Re’s comprehensive responsible investment framework.
Overarching approach Swiss Re is a long-term investor. Therefore, it follows that we take a long-term view on the risk factors that may have an adverse impact on our investment portfolio. We continue to be actively engaged in the dialogue on key requirements for long-term investors and periodically publish related research, including a report in 2015 entitled “Financial repression: The unintended consequences” (see pages 42 and 46).
The framework consists of an overarching human rights and environmental protection policy and seven policies on sensitive sectors or issues: the defence industry; oil and gas (including oil sands); mining; dams; animal testing; forestry, pulp & paper and oil palm; and nuclear weapons proliferation. Each policy contains a number of predefined criteria and qualitative standards that may lead to the exclusion of a company or a country from our investment scope.
Specific approaches per asset class In addition to the overarching approach described above, we have identified some key investment areas in which we apply further, specific ESG criteria to cater for the different risk characteristics of responsible investing. These key investment areas include rates products, credit products, equities and real estate: Rates products Rates products2 constitute the largest asset class in our investment portfolio, with a share of 51% at the end of 2015. At 39% of total assets under management, government bonds (incl. agency) are the largest holding within rates products.
At country level, we have implemented political risk and sustainability assessments to guide our responsible investment decisions and to guarantee the quality of our government bond portfolio in this respect. Our rates products portfolio is screened against such political country risk and sustainability rating considerations on a semi-annual basis. Furthermore, the rating measures are used to define investment mandates for our portfolio managers.
39% Government bonds 27 % Corporate bonds 4% Securitised products 7% Equities*
3% Mortgages and other loans 8% Other investments incl. policy loans 6% Cash and cash equivalents 6% Short-term investments
Overall investment portfolio USD 116.8 bn, as of 31 December 2015 * Includes equity securities, private equity and Principal Investments www.unpri.org/explore/?q=&hd=on&hg=on&he=on&ptv=&tv=76&sp=pub&sc=line&se=start www.unpri.org/explore/?q=&hd=on&hg=on&he=on&ptv=&tv=76&sp=pub&sc=line&se=start www.unpri.org/explore/?q=&hd=on&hg=on&he=on&ptv=&tv=76&sp=pub&sc=line&se=start
Sustainability Rating The Sustainability Rating, a derivative of the Political Country Risk Rating, measures the overall social, environmental and human rights situation in a country, and supports Swiss Re’s alignment with relevant United Nations principles.
We work closely with the external managers to ensure they consider ESG aspects in their investment processes. Before external managers are appointed, Swiss Re performs thorough due diligence to confirm their compliance with our responsible investment principles. This includes ESG considerations in investment decisions and monitoring, as well as a review of their commitment to responsible investing. After being mandated, the managers’ individual performances are monitored in line with our Responsible Investment Policy, and they are required to report regularly on their responsible investment activities.
For more systematic and regular monitoring of the actual integration of ESG factors into our externally managed portfolio, we have engaged the services of a leading ESG research company. We apply their ratings to our investment portfolio to assess the quality of the portfolio and gain further insight into ESG risk exposures.
We apply ambitious sustainability standards for these real estate investments. For projects in Switzerland, the applicable criteria are defined in the Energy Mission Statement of Swiss Re. This stipulates that all new buildings need to conform to the MINERGIE® standard (www.minergie.ch), a Swiss quality label specifying high levels of energy efficiency and superior user
A new building with 16 apartments, which will meet the MINERGIE® standard, is currently under construction. Completion is expected in 2016.
In line with our voting framework, we review the voting policies of external managers during due diligence processes to confirm compliance with our own policy. In addition, external managers are required to report on voting activities conducted on Swiss Re’s behalf.
Due to our large- and mid-cap company focus and the moderate size of our equity exposure, we generally hold a very small portion of total issued share capital. This means Swiss Re rarely controls the outcome of a vote.
This is why we attach great importance to ongoing dialogue with our stakeholders. Using the expertise from our core business, we identify key risk topics and take an active role in discussions on them. We share and exchange knowledge through many channels, eg our renowned publications including the sigma series, international dialogue platforms, events at our Centre for Global Dialogue, and cooperation with governments and academic institutions. Through this ongoing dialogue, our stakeholders give us valuable feedback and new insights for our risk management and product development.
Group Issue Management With Group Issue Management (GIM), we have a formal process to identify topics that are strategically important to us, our clients and society at large. These Top Topics denote the global challenges we want to help address and set an important focus for our stakeholder dialogue.
The GIM process involves our risk specialists, product experts and other professionals from across the Group. We share their risk expertise and solutions with key stakeholders, ie clients, investors, regulators, policy makers, academics and civil society groups. Through our Top Topics dialogue, we also aim to help shape public policy in a way that facilitates the development of effective responses to the issues identified.
In 2015, we again worked on these Top Topics with many partners from the public and private sectors. In the following sections we provide a brief introduction to each topic, explain why we consider it to be important and give examples of our dialogue activities: Exploring and shaping the risk landscape We engage in regular dialogue with our stakeholders. By sharing expertise and knowhow, we help society to develop effective responses to key risks.
Council (www.worldenergy.org), we published our first report on energy infrastructure and extreme weather, outlining the steps that need to be taken to make our energy supplies resilient for the future; ̤ As a founding member of the RE100 initiative (www.theRE100.org), we started to work towards our goal of obtaining 100% of our energy from renewable sources. By increasing demand for clean power in a joint effort with our partners, we expect RE100 to make it more viable for energy companies in challenging markets to build renewable energy plants (for more details, see page 49); ̤ We extended Swiss Re Corporate Solutions’ partnership with Solar Impulse (www.solarimpulse.com) on the world’s first round-the world flight with a solar-powered airplane, underscoring our commitment to supporting cutting-edge innovations in the field of sustainability.
Decentralised power generation through renewable energy sources can help to make energy infrastructure more resilient. A report we produced together with the World Energy Council discusses what can be done to better protect our energy supplies against extreme weather events.
Our notable achievements in 2015: ̤ We provided our research and expertise for the COP21 Climate Change Conference (www.cop21.
gouv.fr) in Paris in December 2015 and were personally represented by our Group CEO (see page 41); ̤ We continued to share our data on the potential impact of major natural catastrophe events on cities. Following on from last year’s publication “Mind the risk: a global ranking of cities under threat from natural disasters”, we extended our “Risky Cities” series in 2015, providing more detailed data for Istanbul and Bangkok; ̤ We launched a “Flood Focus” series of publications starting with Vietnam, released “Four earthquakes in 54 days” and an updated version of “Closing the protection gap”.
Having played a major role in the climate change debate for over two decades, we actively supported the COP21 negotiation process, both before and during the conference.
“In support of this, we welcome the adoption of a new, universal climate agreement at COP21 in Paris, which is a critical step on the path to solving climate change. We pledge our support to ensuring that the level of ambition set by the agreement is met or exceeded.”
Michel Liès also took part in the COP21 Action Day in Paris. Speaking at the Protect the Planet session and later at the launch of the new G7 InsuResilience initiative, he explained the important role re/insurance plays in tackling climate change and strengthening climate resilience: Firstly, by putting a price tag on the risk, which creates an incentive to invest in prevention measures; secondly, by offering solutions that make socioeconomic systems more resilient to climate change. He emphasised, however, that in order to maintain the insurability of severe weather events at reasonable cost, it would be essential to limit global warming to 2°C. This requires a framework to channel financial flows into low-carbon economic development.
On our website you can watch a video in which Michel Liès offers his analysis of the COP21 conference: You can learn more about how we help to tackle climate change in these sections: ̤ Our climate change strategy →
page 11 ̤ The impact of climate change on natural catastrophe re/insurance and selected solutions pages 16–22
̤ Our UN commitment to provide sovereigns and sub-sovereigns with climate risk protection of USD 10 billion → page 22
̤ Our active involvement in a regulatory initiative to establish a set of climate-related financial disclosures → page 31
̤ Our long-standing efforts to minimise our own carbon footprint → pages 47–57
indexinsuranceforum.org) in Paris, where governments, banks, multilateral donors, food companies, development experts and international organisations gathered.
However, unconventional monetary policies implemented by central banks following the financial crisis of 20082009 present a challenge for our industry and have contributed to an environment that is not conducive to sustainable economic growth.
Our notable achievements in 2015: ̤ We published the report “Financial repression: The unintended consequences”, highlighting the costs of unconventional monetary policies for savers and long-term investors as well as the broader implications for financial resilience; ̤ We remained at the forefront of the policy call to make infrastructure debt a tradable asset class – as we believe that bridging the large infrastructure financing gap is key to sustainable economic growth; ̤ We continued to keep a close eye on the regulatory reform agenda, sharing our knowledge at important forums such as an IIF panel discussion hosted during the World Bank and International Monetary Fund Annual Meeting (www.imf.org/external/ am/2015/index.htm).
Participants of the roundtable expressed concern about public sector policies that are keeping interest rates at historically low levels. This financial repression not only results in an invisible tax on savers since it prevents them from earning interest on their deposits; it also means that future generations will have to shoulder the long-term costs – including the underfunding of pension provisions. Furthermore, people have had to compensate by increasing their savings, which, in turn, has weakened consumption growth and slowed down the economic recovery.
Expert Forum on 3D printing: changing the world one print at a time 3D printing is the name given to additive manufacturing, a process of making three-dimensional solid objects from a digital file. It is widely seen as a technology that will change the course of global manufacturing and the supply chain. Today, a number of industries already apply 3D printing for various purposes, from rapid prototyping to endproduct manufacturing.
After five breakout sessions, Eric Schuh, Head of the Casualty Centre at Swiss Re, gave a keynote speech on some of the lines of business that could be affected as 3D printing becomes more widespread. 3D printing experts and legal scholars then joined Jayne Plunkett, our Head Casualty Underwriting Reinsurance, in an interactive panel discussion. Points made during the discussion concerned the difficulty to regulate 3D printing
Cyber Security Risk Governance Workshop: This event was organised by the International Risk Governance Council and hosted by us at the Centre for Global Dialogue. “Cyber attacks” are yet another emerging risk we identified and showcased a few years ago, namely in the 2011 Corporate Responsibility Report.
Impressions from the Expert Forum on 3D Printing we held at our Centre for Global Dialogue. Together with our partners, we seek to understand both the risks and opportunities this “disruptive” technology will create for re/insurers.
Integrative Risk Management and Economics project at the Swiss Federal Institute of Technology (ETH) Zurich, which aims to advance a holistic approach to managing risks and educate a new generation of researchers; ̤ As a member of the steering committee of Swiss-based ProClim – Forum for Climate and Global Change – we support integrated research activities and get access to the latest scientific findings; ̤ We support the “20th Century Reanalysis” project of the NOAA Earth System Research Laboratory and the University of Colorado, Boulder. It contains objectively-analysed fourdimensional weather maps and their uncertainty from the late 19th to the 21st century.
The publications and other media we produce in-house or in cooperation with our partners play an important role in our efforts to help clients and society form effective responses to key risks. Listed below are publications mentioned in this chapter. Further Swiss Re publications are displayed on pages 74–75.
With the World Energy Council: World Energy Perspective: The road to resilience – managing and financing extreme weather risks
Agro insurance hotspot (on Uganda, Nigeria, Cameroon, Zambia, Angola, Senegal and Zimbabwe)
Closing the protection gap – Disaster risk financing: Smart solutions for the public sector
Flood Focus: Vietnam Food safety in a globalised world: Keeping our food safe in the 21st century
Epicenters Magnitude ● 5.5–5.9 ● 6.0–6.4 ● 6.5–6.9 ● 7.0–7.4 ● 7.5–7.9 ● >8.0
Risky Cities: Istanbul Istanbul is Turkey‘s powerhouse, generating more than 40% of the country‘s GDP. The 14 million people in its metropolitan area live under the constant threat of severe earthquakes. And the next one could very well be just around the corner. The government is acutely aware of this threat and has already done a lot to strengthen its resilience to destructive seismic activity. That said, should a Magnitude 7 (M7) or stronger quake strike the city, the loss of life would be immense, not to mention economic losses as high as USD 120 bn. Using Swiss Re‘s models and detailed hazard data available in CatNet®, we have analysed the potential impact of this risk and other natural perils for the greater Istanbul area. This analysis is part of Swiss Re’s report: “Mind the Risk – a global ranking of cities under threat from natural disasters” which compares the human and economic exposure of 616 cities around the world.
Flood Focus: Vietnam Vietnam is one of the important high growth economies in Asia. Because of its consistent GDP growth, it is regarded as one of the best performing economies in the world. Over the last decade, the country‘s real GDP growth has exceeded 5%, reaching as high as 7.8% in 2004. Vietnam‘s business hubs are concentrated in and around Hanoi, Hai Phong and Ho Chi Minh City. In the event of flooding, the proximity of these cities to the coast or floodplains of major rivers means they could suffer major economic and insurance losses, in addition to the consequent social impact.
World Energy Perspective The road to resilience − managing and financing extreme weather risks Project Partners Marsh & McLennan Companies and Swiss Re Corporate Solutions
We operate an integrated global management system (GMS) at our Corporate Real Estate & Logistics division, which interlinks quality and environmental management and ensures that similar processes are seamlessly managed. Through a systematic, Group-wide reporting process, we monitor our environmental performance and implement appropriate improvement measures.
Our Greenhouse Neutral Programme has been the principal initiative to achieve this goal. Originally launched in 2003 for a ten-year period, it combined two commitments: firstly, to reduce our CO2 emissions per employee (full-time equivalent or FTE) by a specified amount; secondly, to fully offset all the remaining emissions by purchasing high-quality emission reduction credits, thus making the company greenhouse neutral for the whole period between 2003 and 2013.
Goals and scope of the programme’s second phase Seamlessly continuing from the Greenhouse Neutral Programme’s first ten years, we launched a second commitment phase, which runs until 2020. However, after almost halving our CO2 emissions per employee in the previous ten years, the potential for further reductions is now much smaller. Our new target is to keep our CO2 emissions per employee stable at the level of 2013. In view of our expansive business strategy, especially in high growth markets, we consider this to be an ambitious goal.
After a slight increase in 2014, total CO2 emissions per employee (FTE) decreased by 4.3% during 2015, mainly driven by a further reduction in the energy intensity of our offices and decreases in the emissions from commuting and business travel (see page 49). The latter was due to the fact that our employees made fewer business trips in carbon-intense flight classes, even though the total distance they travelled increased slightly on average. Compared with 2013, our CO2 emissions per employee were 3.2% lower in 2015.
Goals of Phase 2 of the Greenhouse Neutral Programme: ̤ Maintain the emissions reductions we achieved between 2003 and 2013 regarding power consumption, heating and business travel; ̤ Fully offset the remaining emissions; ̤ Continuously reduce energy intensity (power consumption and heating) by 2% per year (kWh/FTE); ̤ Obtain 100% of power from renewable sources by 2020.
Change in % since 2013 1 Calculation based on a market-based approach taking into account the purchase of renewable energy instruments, with the exception of the UK where the government requires companies to report an average grid factor (see table below for our reporting of emissions from electricity).
Even though 90% of the electricity we consume in the UK comes with Renewable Energy Guarantees of Origin (REGOs), we report the same emission figures for location-and market-based approaches.
4 The country with our next biggest share of electricity consumption is Slovakia, accounting for 2% of the Group’s total consumption.
RE100 In a number of countries where we want to grow our business, there is a lack of renewable energy supplies in reliable quality. At the end of 2015, approximately 87% of the power we purchased across the Group thus came from renewable energy sources. We are committed to raising this figure to 100%, which is why we helped to establish the Climate Group’s RE100 initiative in 2014 as a founding member.
Using renewable power Purchasing power from renewable rather than conventional sources has been a key measure of our Greenhouse Neutral Programme. After starting to use renewable power at four European locations in 2005, we set ourselves the goal of using 100% renewable power at all locations where it is available in reliable and trustworthy quality by the end of 2013. Based on our quality assessments of available energy sources, we believe we reached this goal and used 100% renewable power at 25 locations in Asia, Europe, North America and Oceania as per the end of 2013.
The UK is one of our most important markets and we have several offices there. Currently, renewable energy supplies available in the country cannot be taken into account for emission reductions as the UK government asks companies to calculate emissions from renewable electricity supplied via the grid by using an average grid emission factor.
Reducing energy consumption In parallel with our switch to using renewable power, we have made continuous efforts to lower the actual amount of energy consumed per employee, ie to reduce our energy intensity. In the first phase of our Greenhouse Neutral Programme, we set ourselves a 20% reduction target compared with 2003 levels, measured in kWh per employee. Through many small measures to improve energy efficiency and by concentrating backoffice tasks in fewer and more energyefficient buildings, we actually achieved a reduction of 46.5% by 2013.
Recently, we have also stepped up efforts to create more flexible and modern office environments that offer our employees optimal working conditions while, at the same time, use space and resources more effectively. The spread of digital communication and devices makes it possible to work seamlessly across different locations and devices, creating the foundation for a more flexible and informal workplace set-up that encourages team work. Although further reducing our environmental footprint is not the primary driver of these efforts, their potential to lower the energy intensity of our locations is nevertheless substantial. In 2015, we partly refurbished our offices in Bratislava, Hong Kong, London and Munich (see page 61).
Despite these measures, the amount of kilometres travelled per employee and the associated emissions have been rising in recent years. A key driver has been our continued expansion into highgrowth markets. In 2015, too, the total distances our employees travelled on average increased slightly. But because they made fewer business trips in carbon intense flight classes, per-capita emissions still fell by 2.1%.
Concerning the ecological quality of the paper we use, our Group Sourcing Policy and our “minimum standard for copy paper” make clear demands: All our locations are required to give priority to recycled and/or FSC-labelled paper and to avoid paper made from virgin fibres (see page 54). In 2015, the share of recycled paper fell slightly from 70% to 68%, while that of FSC-labelled paper increased from 94% to 97%.
Waste generation decreased by 16.1% per employee in 2015, while water consumption remained stable. It needs to be stressed, though, that data quality is moderate at best for both categories.
By making these biogas digesters available to low-income livestock farmers in Vietnam, the project helps them to tackle two common problems: costly and unhealthy cooking and heating practices, and untreated animal waste. Biogas digesters generate a reliable supply of clean and affordable energy, and reduce the health problems associated with animal waste and using wood as fuel. The economic savings a family can make on cooking fuel are estimated at USD 120 per year, meaning that a digester pays for itself in four or five years.
Coupled with these significant social, environmental and economic benefits for the farming families, the project generates massive greenhouse gas reductions. These come from three sources: less use of fossil fuels, prevention of methane release from animal waste and reduction of deforestation. On top of this, biogas digesters produce a by-product called bio-slurry, which the farmers can use to improve soil fertility.
A farmer in Vietnam uses a cooker supplied with fuel from a newly installed biogas digester. We supported this award-winning carbon offsetting programme by buying our Voluntary Emissions Reductions from it.
In 2015, we started to participate in a collaborative platform for sustainable supply chain management, which covers a wide range of screening criteria across the topics of environmental impacts, human rights, labour practices and impacts on society. Once it is incorporated into our sourcing processes, this collaborative platform will allow us to assess the sustainability performance of our suppliers more systematically and to engage them in improvements. The collaboration will thus help to improve the goods and services we buy and reduce the risks associated with our supply chain. Implementation of the project will be completed in 2016.
As a re/insurance company, Swiss Re does not have an extensive supply chain. Our core business does not require us to buy intermediate inputs like a manufacturing company. However, to run our operations, we need a range of goods and services.
When selecting new products and suppliers, we examine whether they comply with these requirements as part of the overall evaluation process. We take a fresh look at existing strategic suppliers in our periodical contract reviews, and we visit individual suppliers to inspect them onsite. Internally, we hold regular awareness trainings with all our sourcing staff.
For construction projects in Switzerland, the applicable criteria are defined in detail in the Energy Mission Statement of Swiss Re, Zurich. They stipulate that new buildings need to conform to the MINERGIE® standard (www.minergie. ch), a Swiss quality label specifying high levels of energy efficiency and superior user comfort. When we renovate old buildings, this standard is to be applied if feasible from an architectural, technical and financial perspective. Our pension fund in Switzerland applies the same criteria for all its direct investments into real estate projects.
In practice, we usually go beyond these requirements and use further standards such as MINERGIE-ECO® – which also includes health criteria and demands on building materials – and MINERGIE-PECO ®, which specifies the characteristics of a “passive house” that consumes even less energy than a MINERGIE®-certified building.
Swiss Re Next Under the title of Swiss Re Next, we are currently constructing a replacement building for the former Neubau (“new building”) at the Group’s Zurich headquarters. From the start, sustainability was defined as one of the key features of the project. Our goal is to be awarded the MINERGIE-P-ECO® certificate as well as the highest
certification level of the US LEED system (usgbc.org/leed) – LEED Platinum. We have already received the preliminary MINERGIE-P-ECO® certificate and successfully passed the LEED design review.
Upgrading to a climate-friendly cooling agent Originally, the heating and cooling system of Swiss Re Next was planned with equipment that uses a specific type of natural cooling agent (NH3), in line with the requirements of the MINERGIEP -ECO® und LEED Platinum labels. During 2015, we decided in talks with the planning engineers to switch to a different type of cooling unit that uses a newly developed cooling agent (HFO).
In 2015, we granted a total of 2 361 subsidies spread across three product categories: home appliances, home infrastructure and mobility. For home infrastructure we introduced two new products in 2015: solar window films which can lower household energy consumption, and connection of homes to district heating. Over the past two years, electric-powered mobility has become more prominent with subsidies including e-bikes, e-cars and plug-in hybrid electric cars. In line with this trend, we introduced e-car charging stations at several locations.
COyou2 payouts in 2015, by category 42% Home appliances 19% Home infrastructure 39% Mobility
Since becoming operational in 2009, the Swiss Climate Foundation has supported more than 1 200 SMEs in Switzerland and Liechtenstein with CHF 14 million in total. In 2015, 263 SMEs were supported with a total of CHF 1.2 million. These projects are expected to help avoid about 40 000 tonnes of CO₂ emissions over the next ten years.
In 2015, Swiss Re communicated a new compelling vision: “We make the world more resilient”. To fulfil this ambition, we are committed to building a diverse organisation in which our leaders inspire and engage their teams to unleash their full potential.
For this reason, we have developed a new People Strategy. This sets out our ambition to adapt to a changing and more diverse workforce and its needs, develop a more commercial edge as regards people management, improve the skills of our leaders so they can inspire and engage our employees, and create a culture of collaboration where employees feel empowered to act.
Average tenure regular staff (in years) 9.1 9.3 9.0 For more information see swissre.com/careers/
We have already implemented a number of changes that are aligned with this strategy and make it more concrete for our workforce: ̤ Listen to our people and act upon what they say: This is crucial and is why we introduced a new Employee Engagement Survey in 2015. By listening to the feedback and measuring the level of engagement of our people, we can identify the changes we need to implement in support of our People Strategy.
̤ State clearly the behaviours we expect of all employees: Both our Leadership Imperatives and Personal Imperatives clearly define the behaviours we wish to see as a responsible company and which are needed to drive our success. Since their introduction in 2014, we have run more than 200 leader-led dialogue sessions to make sure our people understand why these imperatives are important and what is expected of them. We have also factored the imperatives into how we measure performance and reward our employees.
We recently introduced a newly designed Employee Engagement Survey to hear from our employees what we can collectively improve to live the spirit of our new People Strategy. In May 2015 we carried out the new survey for the first time and the reaction was overwhelming, with a response rate of 85% (9 889 employees responded) and more than 20 000 written comments. The results indicated that 64% of
In 2015, we launched our new employer brand “Let’s be smarter together”. We first addressed graduates, highlighting the culture and opportunities that come with our vision of “making the world more resilient”.
Swiss Re employees are engaged, which is within the Financial/Insurance benchmark of 61% and the Global High Performance benchmark of 72%.
We are committed to this vision because it supports an environment in which our employees value each others’ differences and where they can all bring their authentic selves to the workplace – an environment in which high performance is then a natural consequence. A diverse workforce, driven by a culture of inclusivity and collaboration, will thus enable us to truly live our “smarter together” brand promise within and outside the company.
Our 2015 Employee Engagement Survey tells us that our employees are positive about Swiss Re’s open and inclusive culture, and see the value we place on diversity (favourable score of 76%, nine points above the industry average). But we have set our sights on reaching a top-quartile performance level and, to achieve this, we need to do more.
of our workforce, followed by Generation Y (born 1981–2000) at 32% and Baby Boomers (born before 1966) at 23%.
To effectively manage the multigenerational dynamics in Swiss Re’s work environment, we have fostered a culture of open dialogue about and among different generations. Our Employee Engagement Survey results showed very little difference in employee perceptions across generations, and this has helped to challenge stereotypes. Reverse, or cross-generation, mentoring programmes have also become popular across Swiss Re.
New functional zones for concentration and communication in our Munich office support our employees’ individual working modes and styles.
We design and organise events as well as face-to-face and web-based training so that employees can participate in dialogues to increase their selfawareness of unconscious biases such as those related to generations, sexual orientation and gender. Our leadership development and management training also highlights the importance of overcoming unconscious bias in all kinds of decision-making situations in people processes such as recruiting, talent nominations and performance evaluation.
Last year, the number of leadership training hours doubled in comparison to the previous year. We also designed and piloted a number of “masterclasses” for leaders on topics such as “Driving performance through effective leadership communication and feedback” and “Managing performance and reward decisions”. Given our focus on this area, we are pleased to see that our Employee Engagement Survey indicates that a more open feedback culture is emerging.
Similar to Talent Broker, our Virtual Career Centre (VCC) provides employees with a clear oversight of career opportunities at Swiss Re. It includes extensive information on different roles in the organisation and brings together useful tools that our employees can use to raise their self-awareness, to reflect on and to plan their career. The number of employees who used the VCC averaged 1 530 per month in 2015, with a peak of 1 893 in July.
We also continued with our “speed mentoring”, involving 27 mentors and mentees. This offers a more informal way of mentoring where an equal number of mentees and mentors meet in pairs and chat for a few minutes before they move on to the next person. “Speed mentoring” gives mentees a chance to meet all prospective mentors in the room and to make their best-suited selection afterwards. It continues to be a greatly appreciated initiative.
In 2015, all our employees took part in our development and training programmes. They completed 204 225 hours of training overall, averaging 15.5 hours and learning costs of USD 1 024 per employee. This drop in per-capita training expenses is directly related to the increase in on-line learning and the decrease in classroom trainings. In addition, each of our Business Units organises a considerable amount of specialist training.
In line with our flexible development and training philosophy, the Swiss Re Academy intranet site gives our employees easy access to our global learning catalogue, links to regional learning offerings and a multimedia library. Close to 74% of our training is delivered through eLearning formats. This reduces the need for our employees to travel and spend time away from the office, while supporting our commitment to reducing our carbon footprint (see pages 48–52).
Our graduates were asked to complete a survey on their work experience at Swiss Re. The survey covered questions such as: what are the best things about your company, what attracted you to the company, how do you rate the work/life balance, training and ethical/environmental balance. The results from our graduates were overwhelmingly positive.
Not only did we come top in the accountancy & insurance sector, we also ranked number three across all industries.
Over a period of 18 months, the graduates receive on-the-job training in their respective functions. They also attend a number of classroom-based training sessions which are specifically designed for the programme and focus on Swiss Re’s core business areas. At the end of 2015, around 350 graduates had either completed the programme since its launch in 2007 or were participating in it. They are employed across many different functions and regions.
Participants of our Early Joiner programmes have said that they particularly appreciate the multicultural and open environment we offer, as well as the daily exchange with specialists from various disciplines.
We know that the nature of these activities is sensitive to local specifics – such as culture or local regulations. Therefore, we have decided to implement a consistent model across all regions where these services will be provided out of the local Human Resources units, supported by external partners when required.
A healthy mind is as important as a healthy body. We offer a free, globally available Employee Assistance Programme, through which our employees can get confidential, impartial and professional assistance on issues of a personal or work-related nature. In this way, our employees can benefit from personalised support on emotional, family, financial and legal issues.
We also organise various local events on topics such as work stress, mental health and awareness trainings. For example, in China we held a tea tasting event, dedicated to the topic of managing work stress and becoming more engaged with each other. In Australia we regularly organise a Caring Week, where employees can participate in mental health awareness trainings, mindfulness sessions and physical checks. In the UK we organise wellbeing talks with external speakers and offer free flu jabs. Other health checks and services are also available to employees depending on what benefits package they select every year. We also offer employees access to free mortgage advice.
The Parents@Swiss Re brochure provides our parents with important information on pregnancy and parenthood. From how to inform their line manager, to balancing family and work, the brochure contains helpful background information on labour law and the solutions Swiss Re offers.
In general, our employees can count on diverse options such as additional family allowance, one-off childbirth allowance, additional paid maternity and paternity leave, or the option to take unpaid leave. These benefits are tailored to the local needs of our workforce and therefore differ from region to region. In Bratislava – one of our high-growth locations – we introduced the concept of maternity buddies in 2015: Every mother on maternity leave has a “maternity buddy”, who informs her about current activities in the team while she is on maternity leave.
To accommodate the needs of working parents, we have a number of initiatives in place. Last year, approximately 130 children in Switzerland attended our one-week vacation programmes during the spring and summer school holidays, enabling their parents to continue working. We also offer a number of reserved places at day care centres in and around Zurich. Furthermore, our external childcare provider helps parents find emergency nannies and gives guidance in all questions related to childcare.
These bodies are elected by local employees and have clearly defined information and consultation rights. Although there are significant local differences in the applicable legislation, their rights typically concern: ̤ Working conditions ̤ Benefits ̤ Reorganisation and restructuring ̤ Redundancies ̤ Disciplinary actions and conflict cases
At our Munich office we have a Works Council, with clearly defined codetermination rights in several areas. It has the legal obligation to support topics such as diversity, development and training, career opportunities and work-life balance. The eleven members of the Works Council are elected by the employees for a four-year term.
Compensation and benefits Swiss Re is committed to a compensation framework that is balanced and performance-oriented, and which aligns the interests of both shareholders and employees. Our compensation framework is designed to attract, motivate and retain the qualified talent the Group needs to succeed, while creating a tangible link between performance and pay. The aim is to provide compensation that is competitive in local labour markets, while ensuring that employees focus on delivering outstanding results in line with our business strategy, targets, risk awareness and corporate values.
For most employees, total compensation comprises the base salary and the Annual Performance Incentive (API), which is linked to both individual and business/company performance.
Health benefits and financial protection in case of ill-health are also an important part of our overall packages. We provide medical, life and disability insurance in excess of state provisions in many of our locations. Furthermore, we support employees in accumulating retirement benefits to supplement any state provisions.
Further information on Swiss Re’s approach to compensation and benefits can be found in our 2015 Financial Report (pages 130–152).
Swiss Re considers good corporate governance indispensable to maintaining long-lasting, valuable relationships with its stakeholders. We recognise that transparent disclosure of our governance structure fosters assessment of the quality of our organisation and business conduct.
Ensuring good governance and compliance Swiss Re’s corporate governance and compliance regimes aim at safeguarding the sustainable interests of the company and ensuring legal and ethical behaviour.
The members of the Board of Directors are also subject to procedures to avoid any action, position or interest that conflicts with an interest of Swiss Re Ltd or the Swiss Re Group or gives the appearance of a conflict.
The organisation of the Board of Directors is set forth in the Group Bylaws, which define the organisational structure and function of Swiss Re Ltd and the responsibilities and authorities of the Board of Directors, its committees and the Group EC and their members.
They are required to possess such additional attributes as the Board of Directors may, from time to time, specify. Each member of the Audit Committee has to be financially literate. At least one member must possess the attributes to qualify as an Audit Committee financial expert, as determined appropriate by the Board of Directors.
Defence measures Swiss Re has not put in place any specific measures to defend against potential unfriendly takeover attempts. The Board of Directors believes that the company’s best protection is a fair valuation of its shares, and that the efficiency of a free market is preferable to artificial obstacles, which can have a negative impact on the share price in the long term.
Compliance: Code of Conduct Our Code of Conduct (the “Code”) is one in a series of documents governing the organisation and management of our company. It sets the framework and defines the basic legal and ethical compliance principles we adhere to globally. The Code is built on the five Swiss Re values, which guide us in making responsible decisions and achieving results using the highest ethical standards: client centricity, agility, team spirit, passion to perform and integrity.
We regularly review and update the Code to reflect changes in regulations and principles. A comprehensively overhauled version will be published in the second half of 2016.
Key topics and policies Our current version of the Code (valid as of 31 December 2015) addresses the following key compliance topics, amongst others: ̤ Antitrust (compliance with competition laws) ̤ Bribery and corruption ̤ Data protection and privacy ̤ Fraud (including tax avoidance) ̤ Inside information and insider trading ̤ International trade controls and economic sanctions ̤ Licensing and permanent establishment (including tax compliance)
In support, we implemented our Group Anti-Bribery and Corruption Policy in 2012. This clearly states that bribery, facilitation payments and hospitality where the giver is not present are always prohibited. For gifts, hospitality, sponsorships and charitable contributions, the policy and guidelines specify the correct procedures to be followed.
Training All new permanent and temporary employees joining Swiss Re must undergo mandatory eLearning training on the Code. Completion of the training is tracked and instances of noncompletion are escalated until resolution. The Code eLearning course was updated in 2015, putting the focus on ethical behaviour in accordance with the principles of the Code and its relationship to Swiss Re’s values. It has an interactive character and requires employees to assess behaviour and actions in various scenarios.
In addition, we conducted trainings for all our employees on the following topics between 2013 and 2015: ̤ Anti-money laundering and terrorist financing ̤ Fraud ̤ Inside information and insider training ̤ Data protection ̤ Information security
Validity for third parties Third parties representing Swiss Re – such as consultants, intermediaries, distributors and independent contractors – should be carefully selected and need to comply with the Code and relevant policies. When we work with such third parties we provide them with information about the relevant requirements and, in the event of any infringements, take appropriate action, up to and including terminating a contract.
How we help Disaster risk reduction We support initiatives aimed at preventing and preparing for the adverse impacts of natural disasters and the suffering they cause.
Capacity building We help people and communities develop skills to improve their living conditions and their resilience.
Emergency aid Rapid assistance can save lives in a large-scale emergency. We respond through immediate grants and donation matching programmes for Swiss Re employees.
Community support Our community programmes promote social welfare and protect the natural environment close to Swiss Re offices.
The Swiss Re Foundation in 2015 – Seeds of resilience This report presents the Swiss Re Foundation’s approach, a focus section on building resilience and an overview of its programmes.
Smart modelling can help China strengthen its resilience to typhoon risk. In this publication, Swiss Re NatCat experts describe a modelling approach that could offer Hong Kong and Shanghai a way of preparing more systematically for natural disasters.
Our publications provide the gateway to Swiss Re’s broad knowledge base and expertise. They cover a broad range of topics: from technical reinsurance issues and emerging risks to natural perils, economic trends and strategic issues in our industry. This is a selection of recent publications, in addition to those featured on page 46.
A capital market for longevity risk could help address the challenges of funding longer lives. Such a market would form part of an overall solution involving the cooperation and innovation of the public and private sectors to ensure that we continue benefiting from our ageing societies.
Floods affect more people worldwide than any other type of natural disaster. But the risk from flooding is often underestimated. In many countries, flood insurance is not widely available or affordable.
With an expanding population and world economy powered by oil, coal and gas, fossil fuels have become a large part of our daily lives. But this has come at a price: greenhouse gas emissions, which adversely affect our climate. How much higher will this price rise before we achieve a more sustainable energy system?
Mind the risk A global ranking of cities under threat from natural disasters
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We have been engaged to perform assurance procedures to provide limited assurance on the consolidated CO2 emissions reporting and CR topics and sections disclosed with the 2015 Swiss Re Corporate Responsibility Report (“CR Report 2015”).
Scope and subject matter Our limited assurance engagement focused on the following data and information disclosed in the CR Report 2015 of Swiss Re and its consolidated subsidiaries, for the financial year ended 31 December 2015: a) The management and reporting processes with respect to the consolidated CR reporting as well as the control environment in relation to the aggregation of data and information; b) The organizational measures and internal key controls in place at the corporate level regarding aggregation of information obtained from the subsidiaries and reporting functions; c) The consolidated data and information disclosed in the sections “Creating solutions for sustainability” on pages 16–25, “Extending our risk intelligence” on pages 26–37, “Exploring and shaping the risk landscape” on pages 38–46, “Reducing our environmental footprint” on pages 47–57, “Empowering our people” on pages 58–67 and “Compliance: Code of Conduct” on pages 70–71; d) The consolidated CO2 emissions 2015 (Scope 1, 2 and 3 in adherence with the Greenhouse Gas Protocol) of the tables entitled “CO2 emissions per employee (full-time equivalent, FTE), Swiss Re Group” on page 49, “Underlying environmental data, Swiss Re Group” on page 49 and “Indirect emissions from purchased electricity, Swiss Re Group” on page 49 in the CR Report 2015 covering the reporting period from 1 October 2014 to 30 September 2015; e) The retirement of 70 600 tonnes of CO2e (CO2 equivalents) described on page 52 of the CR Report 2015.
Criteria The management reporting processes with respect to the CR Report 2015 were assessed against the internal and external policies and procedures as set forth in the following: ̤ “Internal Environmental
The accuracy and completeness of CR indicators are subject to inherent limitations given their nature and methods for determining, calculating and estimating such data. In addition, the CO2 emissions quantification is subject to inherent uncertainty because of incomplete scientific knowledge used to determine emissions factors and the values needed to combine emissions of different gases. Our assurance report should therefore be read in connection with Swiss Re’s internal guidelines, definitions and procedures on the reporting of its CR performance.
Swiss Re’s responsibility The Swiss Re management is responsible for both the preparation and the presentation of the selected subject matter in accordance with the reporting criteria. Our responsibility is to form an independent conclusion, based on our limited assurance procedures, on whether anything has come to our attention to indicate that the subject matter is not stated, in all material respects, in accordance with the reporting criteria.
Our independence and quality control We have complied with the independence and other ethical requirements of the Code of Ethics for Professional Accountants issued by the International Ethics Standards Board for Accountants, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behavior.
Swiss Re CR reporting guidelines Assessing whether the methodology applied by Swiss Re is in line with the reporting criteria; ̤ Interviews and management inquiry Evaluating the CR reporting and underlying performance indicators by performing analytical procedures and interviewing selected key contacts to assess whether the internal Environmental Performance Indicators Reporting guidelines and CR guidance were consistently applied by the selected locations; performing enquiries of personnel responsible for internal CR reporting and data collection at the Swiss Re corporate level to evaluate the reporting and aggregation process and to assess its appropriateness; ̤ Reconciliation of CO2 emissions data Reconciling the CO2 emissions data for energy consumption, business travel, copy paper, waste, water, technical gases and commuting and CR data and information to the data used for the internal CR emissions reporting of the selected locations; ̤ Assessment of the key figures
Reviewing the relevant documentation on a sample basis, including Swiss Re’s CR-related policies, the management of reporting structures, the documentation and systems used to collect, analyse and aggregate reported CR data and information; ̤ Assessment of the processes and data consolidation Reviewing the appropriateness of the management and reporting processes for CR reporting; and assessing the processing and consolidation of data at Swiss Re’s Group level; and ̤ Review of verified emission reductions Reviewing the retirement of 70 600 tonnes CO2e verified emission reductions (VER) according to the Voluntary Carbon Standard or Gold Standard.
Conclusion Based on our work performed and described in this report on the identified CR Reporting 2015 nothing has come to our attention causing us to believe that in all material respects: a) Nothing has come to our attention that causes us to believe that the Swiss Re internal CR reporting guidelines are not applied in all material respects, in accordance with the reporting criteria; b) Nothing has come to our attention that causes us to believe that the internal reporting processes to collect and aggregate CR data and information is not functioning as designed and does not provide an appropriate basis for the presentation of CR data and information, in all material respects; c) Nothing has come to our attention that causes us to believe that the CR data and information disclosed in the 2015 CR Report is not stated, in all material respects, in accordance with the reporting criteria; d) Nothing has come to our attention that causes us to believe that the CO2 emissions data and information disclosed in the 2015 CR Report is not stated, in all material respects, in accordance with the reporting criteria; and e) Nothing has come to our attention that causes us to believe that the retirement of 70 600 tonnes of CO2e has not been conducted, in all material aspects, in accordance with the internal requirements.
International Risk Governance Council IRGC is an independent organisation whose purpose is to help the understanding and management of global risks that impact on human health and safety, the environment, the economy and society at large. www.irgc.org
Öbu (“Ecologically conscious enterprises” network) Öbu is a Swiss think tank for sustainability and management topics. It carries out projects focusing on corporate and economic policy, and promotes experience-sharing among its members. www.oebu.ch
Swiss Sustainable Finance Swiss Sustainable Finance (SSF) strengthens the position of Switzerland in the global marketplace for sustainable finance by informing, educating and catalysing growth. Currently SSF unites 90 members and network partners from financial service providers, investors, universities and business schools, public sector entities and other interested organisations. www.sustainablefinance.ch
European Diversity Awards 2013 Jean-Jacques Henchoz, Swiss Re’s CEO Reinsurance EMEA, won the 2013 European Diversity Award in the “Inspirational role model of the year” category.
Selected index listings and ratings Dow Jones Sustainability Indices, Industry Leader 2016
Developed by the UN Environment Programme’s Finance Initiative (UNEP FI) in collaboration with leading re/ insurance companies, the Principles for Sustainable Insurance (PSI) provide a framework for the global insurance industry to address environmental, social and governance (ESG) risks and opportunities.
As described in our “approach to corporate responsibility”, we seek to embed ESG issues in both our business solutions and risk management (see page 12).
Key actions taken in 2015: See stakeholder dialogue achievements on pages 38–46.
We support the PSI’s call for transparency and disclose our progress on implementing its principles below.
The Principles for Sustainable Insurance (PSI): Our Public Disclosure of Progress 80 Swiss Re 2015 Corporate Responsibility Report
General standard disclosures Strategy and analysis G4-1 Chairman’s and CEO’s statement Statement of continuing support 2–3 G4-2 Key impacts, risks and opportunities 11–13, 16–25, 26–30, 38–42
Organisational profile G4-3 Name of the organisation 4 G4-4 Brands, products and services 4, 6 G4-5 Headquarter location 4 G4-6 Countries of operation 4, FR 182 G4-7 Nature of ownership 4, FR 78–83 G4-8 Markets served 4–7, FR 172–182 G4-9 Scale of the organisation 4–5, 7, FR 156–160
Identified material aspects and boundaries G4-17 Scope of financial report FR 162, 237–239 G4-18 Content definition 12–14 G4-19 List of material aspects 11–13 G4-20 Internal boundaries of material issues 15 G4-21 External boundaries of material issues 15 G4-22 Restatements 14 G4-23 Changes in scope 14
Ethics and integrity G4-56 Values and Codes of Conduct 10 9, 70–71
Disclosure on management approach: We provide comprehensive disclosure on our management approach to all material aspects of the environmental category in the chapter “Reducing our environmental footprint”.
Energy G4-EN3 Direct energy consumption 7, 8 49 G4-EN4 Indirect energy consumption
Disclosure of management approach: Our management approach to all material aspects of the sub-category “labour practices and decent work” is disclosed in the chapter “Empowering our people”.
G4-LA13 Ratios of basic salaries 6 We adhere to the principle of equal pay as part of our commitment to diversity & inclusion but do not disclose such salary data.
SRF = The Swiss Re Foundation in 2015 84 Swiss Re 2015 Corporate Responsibility Report
Disclosure on management approach: We address human rights aspects relevant to our business through our Sustainability Risk Framework, our sourcing guidelines and employee relations policies. The corresponding management approaches are disclosed in the chapters “Extending our risk intelligence”, “Reducing our environmental footprint”, and “Empowering our people”, respectively.
Disclosure on management approach: We disclose our management approach to developing products with specific social or environmental benefits in the “Creating solutions for sustainability” chapter and on “active ownership” in the “Responsible investment” section of the “Extending our risk intelligence” chapter.
Photographs: Patrick Aventurier/Getty Images (Cover & back cover) Geri Krischker (page 3) Swiss Re (page 6) Swiss Re (page 11) Lea Müller/Swiss Re (page 18) Swiss Re (page 20) Deepwater Wind (page 23) Swiss Re (page 27) audioundwerbung/Getty Images (page 33) Swiss Re (page 39) Getty Images (page 41) Valeriano Di Domenico /Swiss Re (page 44) M3 Solutions (page 50) South Pole Carbon (page 53) Stefan Birrer/Swiss Re (page 55) Swiss Re (page 59) Congena, Munich (page 61) Indigo Plum (page 64)