Non-life re/insurance contracts For reinsurance business, cedents report their case reserves and their estimated IBNR to the Group. The Group develops and recognises its own estimate of IBNR claims, which includes circumstances in which the cedent has not reported any claims to the Group or where the Group‘s estimate of reserves needed to cover reported claims differs from the amounts reported by cedents. Reserving for insurance business is performed similarly, except that the Group estimates case reserves as well. Reserving is done on portfolio or contract level depending on the features of the contract: For business reviewed on a portfolio level, the expected ultimate losses are set for most lines and types of business based on analysis performed using standard actuarial techniques. In general, contracts are aggregated into portfolios by combining contracts with similar features.
The liability for unpaid claims and claim adjustment expenses for property in Property & Casualty Reinsurance shows positive development on most recent accident years. Claims in accident year 2011 were at a high level due to several large natural catastrophes including the earthquake and tsunami in Japan, the earthquakes in Christchurch, New Zealand, and floods in Thailand. The 2017 claims incurred are higher due to natural catastrophes, mainly stemming from Cyclone Debbie, hurricanes Harvey, Irma and Maria in the Americas, the two earthquakes in Mexico and the wildfires in California.
Negative IBNRs can be a feature for claims arising from property exposure, due to overstated case reserves. The IBNR reserves for 2010 and 2011 are affected by allocations of IBNR for proportional treaty business in respect of several natural catastrophe events that occurred in those years.
Liabilities for claims and claim adjustment expenses, net of reinsurance 6 927
The increase in the incurred losses for accident years 2013 to 2017 is driven by volume increases of business being written. The increases in the incurred losses in reporting year 2017 for accident years 2015 and 2016 are driven by US business.
Liabilities for claims and claim adjustment expenses, net of reinsurance 3 464
The increase in the incurred losses from accident year 2010 onwards is driven by new business volume across all regions. Proportional motor business includes both longer-tailed liability business and shorter-tailed hull business. The increase in incurred claims and claim adjustment expenses in reporting year 2017 for accident year 2016 is due to US business.
The negative IBNRs are due to overstated case reserves, mainly on the German business, and accident year 2011 includes the effects of an outwards proportional contract in inwards non-proportional business.
Liabilities for claims and claim adjustment expenses, net of reinsurance 5 827
For accident year 2011, negative claims paid in the first year are due to the commutation of an external retrocession on acquired retroactive business. The increase in claims incurred in reporting year 2017 for accident years 2015 and 2016 are due to an adverse development on the US business and to the Ogden discount changes on the UK business. These developments also affected accident year 2017.
In line with the Group‘s policy, cash flows under loss portfolio transfers are reported through claims paid. For longer-tailed lines and depending on the business volume written, timing of cash flows can lead to net inward payments across the whole portfolio in the first development year of the contract for some accident years.
This category includes credit and surety business, which was adversely affected by the financial crisis in 2007–2008. The category also contains several individual large losses on marine, aviation and space lines, including the Costa Concordia event in accident year 2012. The 2017 claims are higher due to natural catastrophes mainly stemming from hurricanes Harvey, Irma and Maria in the Americas.
Corporate Solutions Incurred claims and allocated claim adjustment expenses, net of reinsurance
The claims incurred increased due to general volume growth for accident years 2012 to 2016. Incurred claims on accident years 2012, 2015 and 2016 increased due to large loss development. Current accident year was significantly impacted by hurricanes Harvey, Irma and Maria, as well as the California wildfires and an earthquake in Mexico.
Liabilities for claims and claim adjustment expenses, net of reinsurance 2 092
Average annual percentage payout of incurred claims by age, net of reinsurance
Life & Health Reinsurance, long tail (RSI) 5.8% 16.9% 15.3% 10.8% 7.6% 6.1% 4.4% 4.1% 4.1% 2.6%
In the reporting year 2013, the Group significantly strengthened IBNR claims liabilities in Australia for some lines of business. In addition, for 2009, 2013 and 2014 the effect of business volume increases is discernible as well.
Reconciliation of gross liability for unpaid claims and claim adjustment expenses The following table reconciles the Group‘s net outstanding liabilities to the gross liabilities for unpaid claims and claim adjustment expenses.
Property 7 772 Liability, proportional 6 927 Liability, non-proportional 9 510 Accident & Health 4 800 Motor, proportional 3 464 Motor, non-proportional 5 827 Specialty 4 518
Corporate Solutions 5 935 Life & Health Reinsurance, long tail 2 092
Property 596 Liability, proportional 373 Liability, non-proportional 337 Accident & Health 238 Motor, proportional 83 Motor, non-proportional 248 Specialty 214
Exclusions: Unallocated claim adjustment expenses 966 Long duration contracts 9 449
232 Swiss Re 2017 Financial Report 6 Deferred acquisition costs (DAC) and acquired present value of future profits (PVFP)
Opening balance as of 1 January 2 051 3 020 387 13 5 471 Deferred 4 629 893 571 34 6 127 Amortisation –4 379 –312 –513 –36 –5 240 Effect of foreign currency translation –21 –136 –1 –158 2017 Property & Casualty Life & Health Corporate USD millions Reinsurance Reinsurance Solutions Life Capital Total
Opening balance as of 1 January 2 280 3 465 444 11 6 200 Deferred 4 068 1 294 553 71 5 986 Effect of acquisitions/disposals and retrocessions –5 2 5 2 Amortisation –4 255 –508 –549 –67 –5 379 Effect of foreign currency translation and other changes 53 –12 4 17 62
Retroceded DAC may arise on retrocession of reinsurance portfolios, including reinsurance undertaken as part of a securitisation. The associated potential retrocession recoveries are determined by the nature of the retrocession agreements and by the terms of the securitisation.
As of 31 December, the PVFP was as follows: Life & Health Reinsurance Life Capital Total 2016 Positive Negative USD millions PVFP PVFP Total
Life & Health Reinsurance Life Capital Total 2017 Positive Negative USD millions PVFP PVFP Total
234 Swiss Re 2017 Financial Report 7 Investments Investment income Net investment income by source (excluding unit-linked and with-profit business) was as follows: Fixed income securities 2 806 2 778 Equity securities 98 79 Policy loans, mortgages and other loans 156 148 Investment real estate 184 200 Short-term investments 54 65 Other current investments 153 118 Share in earnings of equity-accounted investees 41 100 Cash and cash equivalents 28 25 Net result from deposit-accounted contracts 118 127 Deposits with ceding companies 441 457
Dividends received from investments accounted for using the equity method were USD 176 million and USD 170 million for 2016 and 2017, respectively.
Share in earnings of equity-accounted investees included impairments of the carrying amount of equity-accounted investees of USD 66 million and USD 46 million for 2016 and 2017, respectively.
Equity securities available-for-sale: Gross realised gains 371 959 Gross realised losses –122 –28
Other-than-temporary impairments –88 –46 Net realised investment gains/losses on trading securities 110 27 Change in net unrealised investment gains/losses on trading securities –14 3 Net realised/unrealised gains/losses on other investments 118 –8 Net realised/unrealised gains/losses on insurance-related activities 344 99 Foreign exchange gains/losses 178 121
Investment income – fixed income securities 100 134 69 120 Investment income – equity securities 735 69 705 69 Investment income – other 28 13 20 11
Realised gains/losses – fixed income securities 135 174 –12 12 Realised gains/losses – equity securities 3 631 321 2 094 191 Realised gains/losses – other 53 –11 28 8
Fixed income securities available-for-sale 85 171 6 136 –721 –5 90 581
Debt securities issued by governments and government agencies: US Treasury and other US government corporations and agencies 14 397 273 –152 14 518 US Agency securitised products 5 884 18 –66 5 836 States of the United States and political subdivisions of the states 1 620 108 –7 1 721 United Kingdom 8 699 1 378 –31 10 046 Canada 3 969 543 –30 4 482 Germany 3 193 239 –22 3 410 France 2 015 252 –10 2 257 Australia 2 065 16 –4 2 077 Other 7 655 318 –76 7 897
Investments trading The carrying amounts of fixed income securities and equity securities classified as trading (excluding unit-linked and with-profit business) as of 31 December were as follows: Debt securities issued by governments and government agencies 2 538 2 414 Corporate debt securities 45 38 Mortgage- and asset-backed securities 112 86
Fixed income securities trading – non-participating business 2 695 2 538
Fixed income securities trading 2 379 2 774 2 105 3 104 Equity securities trading 23 859 1 948 26 582 2 201 Investment real estate 580 298 543 281 Other 265 75 286 64
Maturity of fixed income securities available-for-sale The amortised cost or cost and estimated fair values of investments in fixed income securities available-for-sale by remaining maturity are shown below. Fixed maturity investments are assumed not to be called for redemption prior to the stated maturity date. As of 31 December 2016 and 2017, USD 14 640 million and USD 17 742 million, respectively, of fixed income securities available-for-sale were callable.
Due in one year or less 6 607 6 650 7 399 7 410 Due after one year through five years 19 180 19 623 29 459 29 724 Due after five years through ten years 19 240 20 079 15 921 16 652 Due after ten years 35 564 39 562 36 550 41 370 Mortgage- and asset-backed securities with no fixed maturity 4 580 4 667 3 949 4 092
Total fixed income securities available-for-sale 85 171 90 581 93 278 99 248
As of 31 December 2016 and 2017, securities of USD 16 059 million and USD 15 740 million, respectively, were transferred to third parties under securities lending transactions and repurchase agreements on a fully collateralised basis. Corresponding liabilities of USD 1 010 million and USD 989 million, respectively, were recognised in accrued expenses and other liabilities for the obligation to return collateral that the Group has the right to sell or repledge.
As of 31 December 2017, a real estate portfolio with a carrying value of USD 192 million serves as collateral for a credit facility, allowing the Group to withdraw funds up to CHF 500 million.
Derivative financial instruments – assets 2 801 –1 580 1 221 1 221 Reverse repurchase agreements 7 040 –3 986 3 054 –3 054 0 Securities borrowing 483 –314 169 –169 0
Securities lending Debt securities issued by governments and government agencies 244 567 614 442 1 867 Corporate debt securities 6 6 Equity securities 5 5
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 2016 and 2017. As of 31 December 2016 and 2017, USD 62 million and USD 40 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 21 million and USD 7 million, respectively, to declines in value for more than 12 months.
Debt securities issued by governments and government agencies: US Treasury and other US government corporations and agencies 6 709 179 6 709 179 US Agency securitised products 2 594 53 14 0 2 608 53 States of the United States and political subdivisions of the states 494 18 8 2 502 20 United Kingdom 1 762 87 56 10 1 818 97 Canada 1 759 26 40 9 1 799 35 Germany 1 337 15 100 0 1 437 15 France 703 10 703 10 Australia 461 2 132 3 593 5 Other 2 554 78 247 18 2 801 96
Less than 12 months 12 months or more Total 2017 Unrealised Unrealised Unrealised USD millions Fair value losses Fair value losses Fair value losses
Total 21 613 285 4 127 113 25 740 398 Corporate debt securities 6 299 102 1 040 34 7 339 136 Mortgage- and asset-backed securities 1 617 14 421 7 2 038 21
Mortgages, loans and real estate As of 31 December, the carrying and respective fair values of investments in mortgages, policy and other loans and real estate (excluding unit-linked and with-profit business) were as follows: 2016 2017 USD millions Carrying value Fair value Carrying value Fair value
Certain financial instruments are classified within level 3 of the fair value hierarchy because they trade infrequently and therefore have little or no price transparency. Such instruments include private equity, less liquid corporate debt securities and certain assetbacked securities. Certain over-the-counter (OTC) derivatives trade in less liquid markets with limited pricing information, and the determination of fair value for these derivatives is inherently more difficult. Such instruments are classified within level 3 of the fair value hierarchy. Pursuant to the election of the fair value option, the Group classifies certain liabilities for life and health policy benefits in level 3 of the fair value hierarchy. When appropriate, valuations are adjusted for various factors such as liquidity, bid/offer spreads, and credit considerations. Such adjustments are generally based on available market evidence. In the absence of such evidence, management’s best estimate is used.
The Group holds both exchange-traded and OTC interest rate, foreign exchange, credit and equity derivative contracts for hedging and trading purposes. The fair values of exchange-traded derivatives measured using observable exchange prices are classified in level 1. Long-dated contracts may require adjustments to the exchange-traded prices which would trigger reclassification to level 2 in the fair value hierarchy. OTC derivatives are generally valued by the Group based on the internal models, which are consistent with industry standards and practices, and use both observable (dealer, broker or market consensus prices, spot and forward rates, interest rate and credit curves and volatility indices) and unobservable inputs (adjustments for liquidity, inputs derived from the observable data based on the Group’s judgements and assumptions).
The Group’s OTC credit derivatives can include index and single-name credit default swaps, as well as more complex structured credit derivatives. Plain vanilla credit derivatives, such as index and single-name credit default swaps, are valued by the Group based on the models consistent with the industry valuation standards for these credit contracts, and primarily utilise observable inputs published by market data sources, such as credit spreads and recovery rates. These valuation techniques warrant classification of plain vanilla OTC derivatives as level 2 financial instruments in the fair value hierarchy.
Assets Fixed income securities held for proprietary investment purposes 13 078 79 016 1 182 93 276
Investment real estate 209 209 Other invested assets 266 183 496 937 1 882 Other investments backing unit-linked and with-profit business 42 42 Funds held by ceding companies 225 225
Quoted prices in active markets for identical assets Significant other observable Significant unobservable Investments measured at net 2017 and liabilities inputs inputs Impact of asset value as USD millions (Level 1) (Level 2) (Level 3) netting1 practical expedient Total
Fixed income securities backing unit-linked and withprofit business 5 209 5 209 Equity securities held for proprietary investment purposes 3 856 5 4 3 865 Equity securities backing unit-linked and with-profit business 28 770 13 28 783 Short-term investments held for proprietary investment purposes 1 021 3 825 4 846 Short-term investments backing unit-linked and withprofit business 59 59 Derivative financial instruments 50 1 274 386 –1 176 534
Interest rate contracts 4 511 5 520 Foreign exchange contracts 307 307 Equity contracts 43 451 283 777 Credit contracts 1 1 Other contracts 98 98 Contracts backing unit-linked and with-profit business 3 4 7
Investment real estate 198 198 Other invested assets 765 12 509 828 2 114 Funds held by ceding companies 206 206
Total liabilities at fair value –961 –3 208 –605 1 342 –3 432 1 The netting of derivative receivables and derivative payables is permitted when a legally enforceable master netting agreement exists between two counterparties. A master netting agreement provides for the net settlement of all contracts, as well as cash collateral, through a single payment, in a single currency, in the event of default or on the termination of any one contract.
Liabilities for life Fixed Other and health 2017 income Equity Derivative Investment invested Total Derivative policy Total USD millions securities securities assets real estate assets assets liabilities benefits liabilities
Realised/unrealised gains/losses: Included in net income –8 –2 23 19 34 66 202 19 221 Included in other comprehensive income 13 4 16 33 0
Purchases 264 26 290 0 Issuances 0 –84 –84 Sales –59 –45 –49 –44 –197 83 83 Settlements –84 –79 –6 –169 –1 –1 Transfers into level 31 45 45 0 Transfers out of level 31 –89 –2 –91 0 Impact of foreign exchange movements 89 19 13 121 –15 –1 –16
Closing balance as of 31 December 1 353 4 386 198 509 2 450 –479 –126 –605 1 Transfers are recognised at the date of the event or change in circumstances that caused the transfer.
Gains and losses on assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (level 3) The gains and losses relating to the assets and liabilities measured at fair value using significant unobservable inputs (level 3) for the years ended 31 December were as follows: Gains/losses included in net income for the period 281 287 Whereof change in unrealised gains/losses relating to assets and liabilities still held at the reporting date 134 226
Private placement credit tenant leases 48 46 Discounted Cash Flow Model Illiquidity premium 75 bps–175 bps (133 bps)
Derivative equity contracts 341 283 OTC equity option referencing correlated equity indices 341 283 Proprietary Option Model Correlation –45%–100% (27.5%)1
Other invested assets measured at net asset value Other invested assets measured at net asset value as of 31 December were as follows: 2016 2017 Unfunded Redemption frequency Redemption USD millions Fair value Fair value commitments (if currently eligible) notice period
The hedge fund investments employ a variety of strategies, including global macro, relative value, event-driven and long/short equity across various asset classes.
Liabilities for life and health policy benefits The Group elected the fair value option for existing GMDB reserves related to certain variable annuity contracts which are classified as universal-life-type contracts. The Group has applied the fair value option, as the equity risk associated with those contracts is managed on a fair value basis and it is economically hedged with derivative options in the market.
Other derivative liabilities For operational efficiencies, the Group elected the fair value option on a hybrid financial instrument, where the host contract is a debt instrument and the embedded derivative is pegged to the performance of the fund’s real estate portfolio. The liability is carried at fair value and changes in fair value are reported as a component of earnings. In the balance sheet and the following fair value disclosures, this item is included under ”Accrued expenses and other liabilities”.
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: Other invested assets –19 36 Funds held by ceding companies 6 Investments for unit-linked and with-profit business 9 Liabilities for life and health policy benefits 20 19 Accrued expenses and other liabilities 17 20
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 investments for unit-linked and with-profit business are reported in “Net investment result – unit-linked and with-profit business“. Fair value changes from accrued expenses and other liabilities are reported in “Net realised investment gains/losses – non-participating business“. Fair value changes from the GMDB reserves are shown in “Life and health benefits”.
Assets and liabilities not measured at fair value but for which the fair value is disclosed Assets and liabilities not measured at fair value but for which the fair value is disclosed as of 31 December were as follows: Significant other Significant 2016 observable inputs unobservable USD millions (Level 2) inputs (Level 3) Total
Assets Policy loans 95 95 Mortgage loans 2 411 2 411 Other loans 1 202 1 202 Investment real estate 3 367 3 367
Significant other Significant 2017 observable inputs unobservable USD millions (Level 2) inputs (Level 3) Total
Investments in real estate are fair valued primarily by external appraisers based on proprietary discounted cash flow models that incorporate applicable risk premium adjustments to discount yields and projected market rental income streams based on market-specific data. These fair value measurements are classified in level 3 in the fair value hierarchy.
Derivatives designated as hedging instruments Foreign exchange contracts 9 303 418 –17 401
The notional amounts of derivative financial instruments give an indication of the Group’s volume of derivative activity. The fair value assets are included in “Other invested assets” and “Investments for unit-linked and with-profit business”, and the fair value liabilities are included in “Accrued expenses and other liabilities”. The fair value amounts that were not offset were nil as of 31 December 2016 and 2017.
Non-hedging activities The Group primarily uses derivative financial instruments for risk management and trading strategies. Gains and losses of derivative financial instruments not designated as hedging instruments are recorded in “Net realised investment gains/losses — non-participating business” and “Net investment result — unit-linked and with-profit business” in the income statement. For the years ended 31 December, the gains and losses of derivative financial instruments not designated as hedging instruments were as follows: Derivatives not designated as hedging instruments Interest rate contracts 391 43 Foreign exchange contracts –116 301 Equity contracts –217 –254 Credit contracts –1 –25 Other contracts 181 287
Hedging activities The Group designates certain derivative financial instruments as hedging instruments. The designation of derivative financial instruments is primarily used for overall portfolio and risk management strategies. As of 31 December 2016 and 2017, the following hedging relationships were outstanding: Fair value hedges The Group enters into foreign exchange swaps to reduce the exposure to foreign exchange volatility for certain fixed income securities. These derivative instruments are designated as hedging instruments in qualifying fair value hedges. Gains and losses on derivative financial instruments designated as fair value hedging instruments are recorded in “Net realised investment gains/losses — non-participating business” in the income statement. For the years ended 31 December, the gains and losses attributable to the hedged risks were as follows: USD millions
Cash flow hedges The Group entered into cross-currency swaps to reduce the exposure to foreign exchange volatility for a long-term debt instrument issued in the second quarter of 2016 and a portfolio of foreign currency denominated corporate bonds. These derivative instruments are designated as cash flow hedging instruments.
For the year ended 31 December 2017, the Group recorded a gain of USD 30 million on derivatives in accumulated other comprehensive income. For the year ended 31 December 2017, the Group reclassified a gain of USD 33 million from accumulated other comprehensive income into income.
Hedges of the net investment in foreign operations The Group designates derivative and non-derivative monetary financial instruments as hedging the foreign currency exposure of its net investment in certain foreign operations.
For the years ended 31 December 2016 and 2017, the Group recorded an accumulated net unrealised foreign currency remeasurement gain of USD 2 448 million and USD 1 552 million, respectively, in shareholders’ equity. These offset translation gains and losses on the hedged net investment.
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 2016 and 2017 was approximately USD 1 679 million and USD 909 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 107 million and USD 102 million as of 31 December 2016 and 2017, respectively. For derivative financial instruments containing credit risk-related contingent features, the Group posted collateral of nil as of 31 December 2016 and 2017, respectively. In the event of a reduction of the Group’s credit rating to below investment grade, a fair value of USD 102 million additional collateral would have had to be posted as of 31 December 2017. The total equals the amount needed to settle the instruments immediately as of 31 December 2017.
Guardian Holdings Europe Limited On 6 January 2016, the Group acquired 100% of the shares of Guardian Holdings Europe Limited, the holding company for operations trading under the name Guardian Financial Services (“Guardian”) from private equity company Cinven. Guardian provided insurance solutions to financial institutions and insurance companies, either through the acquisition of closed books of business or through entering reinsurance agreements with its customers. The total cost of acquisition as of 6 January 2016 was USD 2.3 billion in cash.
Please refer to Note 10 of the 2016 Annual Report for further details on the Guardian Holdings Europe Limited’s acquisition.
Senior financial debt 3 734 3 781 Senior operational debt 423 390 Subordinated financial debt 3 381 3 607 Subordinated operational debt 2 249 2 370
As of 31 December 2016 and 2017, operational debt, ie debt related to operational leverage, amounted to USD 3.1 billion (thereof USD 2.2 billion limited- or non-recourse) and USD 2.8 billion (thereof USD 2.4 billion limited- or non-recourse), respectively. Operational leverage is subject to asset/liability matching and is excluded from rating agency financial leverage calculations.
Total senior long-term debt as of 31 December 2017 4 171
Maturity Instrument Issued in Currency Nominal in millions Interest rate First call in Book value in USD millions 2024 Subordinated contingent write-off loan note 2013 USD 750 6.38% 2019 778 2042 Subordinated fixed-to-floating rate loan note 2012 EUR 500 6.63% 2022 596 2044 Subordinated fixed rate resettable callable loan note 2014 USD 500 4.50% 2024 497 2045 Subordinated contingent write-off securities 2013 CHF 175 7.50% 2020 197 2057 Subordinated private placement (amortising, limited recourse) 2007 GBP 1 751 5.06% 2 370 Subordinated perpetual loan note 2007 GBP 500 6.30% 2019 676 Perpetual subordinated fixed-to-floating rate callable loan note 2015 EUR 750 2.60% 2025 863
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: Senior financial debt 121 114 Senior operational debt 10 11 Subordinated financial debt 179 166 Subordinated operational debt 122 114
Long-term debt issued in 2017 No long-term debt was issued in the year ended 31 December 2017.
Perpetual subordinated debt facility established in 2017 In July 2017, Swiss Re Ltd established a subordinated debt facility with no fixed termination date. The facility allows Swiss Re Ltd to issue at any time subordinated fixed rate callable notes with a face value of up to USD 750 million, having a first optional redemption date of 15 August 2022 and additional optional redemption dates every five years thereafter. Swiss Re Ltd pays a fee of 2.77% per annum on the available commitment under the facility. Notes issued under the facility have a fixed coupon of 4.63% per annum until the first optional redemption date, which will be reset every five years to the prevailing five-year US Treasury rate plus the fixed-for-life spread of 2.76%.
In these financial statements, the facility fees are classified as interest expense. Notes, when issued under this facility, will be classified as subordinated debt. As of 31 December 2017, no notes have been issued under the facility.
In February 2012, Swiss Reinsurance Company Ltd issued a contingent capital instrument accounted for as equity with a face value of CHF 320 million and a fixed coupon at a rate of 7.25% per annum. This capital instrument was redeemed on 1 September 2017.
Dividends are declared in Swiss francs. During the years ended 31 December 2016 and 2017, the Group paid dividends per share of CHF 4.60 and CHF 4.85, respectively.
Earnings per share for the years ended 31 December were as follows: USD millions (except share data) 2016 2017
Basic earnings per share Net income 3 623 393 Non-controlling interests 3 5 Interest on contingent capital instruments1 –68 –67
Diluted earnings per share Net income assuming debt conversion and exercise of options 3 626 331 Weighted average common shares outstanding 369 281 060 321 326 041
Net of tax expense effects from contingent capital instruments, totalling USD 67 million in 2017, and the potential impact of these instruments on the weighted average number of shares, of 31 642 628 shares, have not been included in the diluted earnings per share calculation because the impact of such an inclusion was antidilutive.
Tax rate reconciliation The following table reconciles the expected tax expense at the Swiss statutory tax rate to the actual tax expense in the accompanying income statement: Income tax at the Swiss statutory tax rate of 21.0% 918 110 Increase (decrease) in the income tax charge resulting from: Foreign income taxed at different rates 191 11 Impact of foreign exchange movements –5 71 Tax exempt income/dividends received deduction –44 –51 Change in valuation allowance –256 –77 Non-deductible expenses 65 57 Change in statutory rate 6 –60 Change in liability for unrecognised tax benefits including interest and penalties –116 13 Other, net1 –10 58 1 Other, net includes tax return to tax provision adjustments from various jurisdictions.
For the year ended 31 December 2017, the tax rate was largely driven by profits earned in higher-tax jurisdictions, tax charges from foreign currency translation differences between statutory and US GAAP accounts and expenses not allowed for local tax purposes, partially offset by tax benefits from US tax law changes. The lower rate in the year ended 31 December 2016, was largely driven by benefits from the effective settlement of tax audits in certain jurisdictions and releases of valuation allowance on net operating losses partially offset by tax on profits earned in higher-tax jurisdictions.
Deferred and other non-current taxes The components of deferred and other non-current taxes were as follows: Deferred tax assets Income accrued/deferred 354 259 Technical provisions 640 488 Pension provisions 378 313 Benefit on loss carryforwards 2 914 2 296 Currency translation adjustments 339 490 Unrealised gains in income 424 487 Other 1 381 981
Liability for unrecognised tax benefits including interest and penalties –245 –238
As previously noted in the tax rate reconciliation, a tax benefit of USD 93 million arises from revaluing the US deferred tax assets and liabilities to the new US tax rate of 21% (from 35%). Accordingly, the revaluing reduced the US deferred tax assets by USD 1 220 million and the US deferred tax liabilities by USD 1 313 million (net USD 93 million).
As of 31 December 2017, the Group had capital loss carryforwards of USD 1 096 million, expiring as follows: USD 4 million in 2020, USD 4 million in 2021, USD 6 million in 2022, and USD 1 082 million never expire.
For the year ended 31 December 2017, net operating tax losses of USD 1 036 million and net capital tax losses of USD 27 million were utilised.
As of 31 December 2016 and 2017, the amount of gross unrecognised tax benefits within the tabular reconciliation that, if recognised, would affect the effective tax rate were approximately USD 216 million and USD 206 million, respectively.
Interest and penalties related to unrecognised tax benefits are recorded in income tax expense. For the years ended 31 December 2016 and 2017 such expenses were USD 21 million and USD 2 million, respectively. For the years ended 31 December 2016 and 2017, USD 52 million and USD 54 million, respectively, were accrued for the payment of interest (net of tax benefits) and penalties. The accrued interest balance as of 31 December 2017 is included within the deferred and other noncurrent taxes section reflected above and in the balance sheet.
During the year, certain tax positions and audits in France and Switzerland were effectively settled.
The following table summarises jurisdictions and tax years that remain subject to examination: Australia 2013–2017 Korea 2014–2017
Benefit obligation as of 1 January 3 877 2 206 363 6 446 Service cost 113 8 5 126 Interest cost 31 76 10 117 Actuarial gains/losses 71 349 9 429 Benefits paid –140 –72 –16 –228 Employee contribution 25 25 Effect of settlement, curtailment and termination 1 1 Effect of foreign currency translation –62 –209 –2 –273
Benefit obligation as of 31 December 3 916 2 358 369 6 643
Fair value of plan assets as of 1 January 3 479 2 235 0 5 714 Actual return on plan assets 128 256 384 Company contribution 95 62 16 173 Benefits paid –140 –72 –16 –228 Employee contribution 25 25 Effect of settlement, curtailment and termination 1 1 Effect of foreign currency translation –56 –224 –280
Fair value of plan assets as of 31 December 3 532 2 257 0 5 789
Benefit obligation as of 31 December 3 948 2 464 413 6 825
Fair value of plan assets as of 1 January 3 532 2 257 0 5 789 Actual return on plan assets 264 167 431 Company contribution 95 61 17 173 Benefits paid –185 –78 –17 –280 Employee contribution 26 26 Effect of settlement, curtailment and termination 2 –20 –18 Effect of foreign currency translation 153 178 331
Non-current assets 140 140 Current liabilities –2 –15 –17 Non-current liabilities –384 –239 –354 –977
Amounts recognised in accumulated other comprehensive income, gross of tax, as of 31 December were as follows: 2016 USD millions Swiss plan Foreign plans Other benefits Total
Net gain/loss 1 113 513 –30 1 596 Prior service cost/credit –69 2 –58 –125
Other changes in plan assets and benefit obligations recognised in other comprehensive income for the years ended 31 December were as follows: 2016 USD millions Swiss plan Foreign plans Other benefits Total
Pension plans with an accumulated benefit obligation in excess of plan assets as of 31 December were as follows: Projected benefit obligation 5 478 5 071 Accumulated benefit obligation 5 441 5 025 Fair value of plan assets 4 854 4 834
Assumed medical trend rates at year end Medical trend – initial rate 5.1% 5.6% Medical trend – ultimate rate 3.8% 3.8% Year that the rate reaches the ultimate trend rate 2021 2021
Plan asset allocation by asset category The actual asset allocation by major asset category for defined benefit pension plans as of the respective measurement dates in 2016 and 2017 was as follows: Swiss plan allocation Foreign plans allocation
Asset category Equity securities 27% 29% 25% 23% 21% 21% Debt securities 44% 41% 47% 51% 71% 73% Real estate 22% 23% 20% 0% 0% 0% Other 7% 7% 8% 26% 8% 6%
Other assets classified within level 3 mainly consist of private equity investments valued with the same methodology as mentioned in Note 8.
Assets Fixed-income securities: Debt securities issued by the US government and government agencies 28 145 173 Debt securities issued by non-US governments and government agencies 348 348 Corporate debt securities 2 069 9 2 078 Residential mortgage-backed securities 26 26 Commercial mortgage-backed securities 4 4 Other asset-backed securities 6 6
Equity securities: Equity securities held for proprietary investment purposes 1 004 451 97 1 552
Total assets at fair value 1 171 3 804 805 563 6 343
Purchases, issuances and settlements 8 21 29 Transfers in and/or out of Level 3 –53 –53 Impact of foreign exchange movements –9 –3 –12
As of 31 December 2017, the projected benefit payments, which reflect expected future service, not adjusted for transfers in and for employees’ voluntary contributions, are as follows: USD millions Swiss plan Foreign plans Other benefits Total
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 2016 and in 2017 was USD 69 million and USD 81 million, respectively.
The total compensation cost for share-based compensation plans recognised in net income was USD 66 million and USD 55 million in 2016 and 2017, respectively. The related tax benefit was USD 14 million and USD 12 million, respectively.
A summary of the movements in shares relating to outstanding awards granted under the restricted share plans for the year ended 31 December 2017 is as follows: Weighted average grant date fair value in CHF1 Number of shares
Non-vested at 1 January 86 528 672 Granted 90 306 397 Forfeited 90 –2 312 Vested 86 –348 913 1 Equal to the market price of the shares on the date of grant.
Non-vested at 1 January 353 670 353 785 489 519 Granted 720 025 Forfeited –1 670 –11 830 –16 891 –23 221 Vested –352 000
The number of shares authorised for the Group’s share-based payments to employees was 3 665 794 and 4 411 532 as of 31 December 2016 and 2017, respectively. The Group’s policy is to ensure that sufficient treasury shares are available at all times to settle future share-based compensation plans.
As part of the consolidation process, transactions between Swiss Re Ltd and subsidiaries are eliminated in consolidation and are not disclosed in the notes.
Share in earnings and dividends received from equity-accounted investees for the years ended 31 December, were as follows: Share in earnings of equity-accounted investees 41 100 Dividends received from equity-accounted investees 176 170
In 2016, the Group entered into a real estate construction contract. Total commitments under the contract amount to USD 52 million over the next three years.
The Group enters into a number of contracts in the ordinary course of reinsurance and financial services business which, if the Group’s credit rating and/or defined statutory measures decline to certain levels, would require the Group to post collateral or obtain guarantees. The contracts typically provide alternatives for recapture of the associated business.
United Kingdom IptiQ Holdings Limited, Shropshire GBP 0 100 f Pension Insurance Corporation Group Limited, London GBP 1 000 4 fv ReAssure FSH UK Limited, Shropshire GBP 710 100 f ReAssure Group Limited, Shropshire GBP 0 100 f ReAssure Limited, Shropshire GBP 289 100 f Swiss Re Capital Markets Limited, London USD 60 100 f Swiss Re Services Limited, London GBP 2 100 f Swiss Re Specialised Investments Holdings (UK) Limited, London GBP 1 100 f
Share capital (millions) Affiliation in % as of 31.12.2017 Method of consolidation
Vietnam Vietnam National Reinsurance Corporation, Hanoi VND 1 310 759 25 e 2 Between 2016 and 2017, share capital has been reclassified to share premiums
284 Swiss Re 2017 Financial Report 20 Variable interest entities 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 primarily as a result of the Group’s involvement in certain insurance-linked securitisations, life and health funding transactions, swaps in trusts, debt financing, investment, senior commercial mortgage and infrastructure loans as well as other entities, which meet the definition of a VIE.
The Group’s variable interests in investment partnerships arise through ownership of the limited partner interests. Many investment partnerships are VIEs because the limited partners as a group lack kick-out or participating rights. The Group does not hold the general partner interest in the limited partnerships and therefore does not direct investment activities of the entity. 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 investment vehicles decrease. The Group’s maximum exposure to loss equals the Group’s share of the investment.
Consolidated VIEs The following table shows the total assets and liabilities in the Group’s balance sheet related to VIEs of which the Group is the primary beneficiary as of 31 December: Fixed income securities available-for-sale 3 715 3 974 Investment real estate 209 198 Short-term investments 128 62 Cash and cash equivalents 42 14 Accrued investment income 33 34 Premiums and other receivables 33 29 Deferred acquisition costs 9 4 Deferred tax assets 94 41 Other assets 12 15
Unpaid claims and claim adjustment expenses 65 84 Liabilities for life and health policy benefits 1 Unearned premiums 25 12 Reinsurance balances payable 6 17 Deferred and other non-current tax liabilities 213 133 Accrued expenses and other liabilities 178 174 Long-term debt 2 270 2 369
Insurance-linked securitisations 336 331 311 314 Life and health funding vehicles 2 1 1 948 27 1 2 052 Swaps in trusts 164 77 –2 25 66 –2 Debt financing vehicles 302 22 Investment vehicles 2 423 2 424 2 493 2 494 Investment vehicles for unit-linked business 8 770 9 223 Senior commercial mortgage and infrastructure loans 1 053 1 053 1 297 1 297 Other 3 3 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.
Key audit matter Investment valuation continues to be an area with inherent risk for certain level 2 and 3 investments that have unobservable or interpolated inputs. The risk is not the same for all investment types and is greatest for those listed below. These investments are more difficult to value because quoted prices are not always available and valuation requires unobservable or interpolated inputs and complex valuation models: Fixed income securitised products Fixed income mortgage and asset-backed securities Private placements and infrastructure loans Private equities Derivatives Insurance-related financial products
Performing independent projections of selected product lines. For these product lines, we compared our calculations of projected reserves with those of the Company taking into account the available corroborating and contrary evidence and challenging management’s assumptions as appropriate.
In relation to the matters set out opposite, our substantive testing procedures included the following: Testing the completeness and accuracy of the underlying data by vouching against the source documentation.
Performing independent model validation procedures, including detailed testing of models, independent recalculations and back testing.
Involving our own life insurance actuarial specialists to test the methodology and assumptions used by management, with particular consideration of industry studies, the Company’s experience and management’s liability adequacy test procedures.
Examining tax audit documentation to validate the appropriateness of releases of uncertain tax provisions.
On the basis of the work performed, we consider management’s assessment relating to the valuation of the uncertain tax items to be appropriate.
Income/loss before income tax expense/benefit –1 074 920 2 675 Income tax expense/benefit 411 –221 –541
Net income/loss after attribution of non-controlling interests –663 699 1 980
Current assets increased by CHF 362 million to CHF 3 958 million as of 31 December 2017, mainly driven by an increase in loans to subsidiaries and affiliates companies and receivables from subsidiaries and affiliated companies, partially offset by a decrease in short-term investments due to funding of capital contributions to subsidiaries and share buy-back programmes.
Short-term liabilities increased by CHF 458 million to CHF 697 million as of 31 December 2017, mainly driven by an increase in loans from subsidiaries and affiliated companies of CHF 429 million.
Long-term liabilities decreased by CHF 84 million to CHF 29 million as of 31 December 2017, mainly due to a reduction in the provision for currency fluctuations of CHF 74 million and tax provision of CHF 10 million.
Own shares (directly held by the Company) increased by CHF 81 million to CHF 1 636 million as of 31 December 2017 due to net purchases of own shares of CHF 17 million and share buy-back programmes of CHF 1 064 million, partially offset by the cancellation of own shares of CHF 1 000 million.
Income before income tax expense 3 997 4 059 Income tax expense –25 –16
Non-current assets Loans to subsidiaries and affiliated companies 103 98 Investments in subsidiaries and affiliated companies 5 19 474 20 915 Total non-current assets 19 577 21 013 300 Swiss Re 2017 Financial Report
Cash and cash equivalents Cash and cash equivalents include cash at bank, short-term deposits and certain investments in money market funds with an original maturity of three months or less. Such current assets are held at nominal value.
Receivables from subsidiaries and affiliated companies/Other receivables These assets are carried at nominal value. Value adjustments are recorded where the expected recovery value is lower than the nominal value.
Other legal capital reserves Other legal capital reserves reflect gains and losses from sale of own shares (directly held by the Company).
Swiss Re Ltd Financial statements 2 Investment income and expenses 3 Administrative expenses and personnel information
As of 31 December 2017, securities of CHF 0.1 million were lent to Group companies under securities lending agreements, whereas in 2016 securities of CHF 1 034 million were lent to Group companies. As of 31 December 2017 and 2016, there were no securities lent to third parties.
Realised losses on sale of investments 0 1 Investment management expenses 1 1 Other interest expenses 0 0 Investment expenses 1 2 304 Swiss Re 2017 Financial Report
As of 31 December 2017 and 2016, Swiss Re Ltd held directly the following investments in subsidiaries and affiliated companies: Further disclosures in respect of investments in significant indirect subsidiaries and affiliated companies are detailed in note 19 “Significant subsidiaries and equity investees” on pages 281 to 283 in the notes to the Group financial statements, where the voting interests are equal to the affiliations disclosed, except of Sul América S.A. where the voting rights are equal to 10%.
The Company has established subordinated debt facilities which allow the Company to issue subordinated callable notes at any time. The Company pays a fee on the available commitment under the facility and an interest rate on issued notes. Notes, when issued, will be classified as subordinated debt. As of 31 December 2017, no notes have been issued under the facilities.
Perpetual subordinated fixed spread callable notes facility 2017 USD 750 2.77% 4.625%1 2022 Perpetual2 1 Until first optional redemption date. 2 First optional redemption date in 2022 and every five years thereafter.
The Company has entered into subordinated funding facilities 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 at any time. For its various rights, Swiss Reinsurance Company Ltd owes the Company an unconditional fixed commitment fee on the total facility amount, payable in annual instalments. Annually, Swiss Reinsurance Company Ltd receives a partial reimbursement of the commitment fee on the undrawn facility amount. As of 31 December 2017, the facilities were undrawn.
An overview of the subordinated funding facilities is provided in the following table: 7 Change in shareholders’ equity
Allocations relating to the dividend paid 3 972 –3 972 0 Dividend for the financial year 2016 –1 557 –1 557 Net income for the financial year 4 043 4 043 Share buy-back programme 20161 –479 –479
Share buy-back programme 20172 –585 –585 Other movements in own shares 19 1 –1 –17 2
CHF millions Share capital Legal capital reserves Legal profit reserves Reserves for own shares
2 At the 153rd Annual General Meeting held on 21 April 2017, 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 2018 Annual General Meeting through a public share buy-back programme for cancellation purposes.
Subordinated funding facility Swiss Reinsurance Company Ltd 306 Swiss Re 2017 Financial Report
Own shares held by subsidiaries 211 472 178 233 Own shares held by Swiss Re Ltd directly 32 755 754 33 915 601
4 Purchased at average price CHF 94.33 (2016: CHF 94.00). 5 Purchased at average price CHF 92.16.
Share ownership The number of shares held as of 31 December were: Members of the Group EC 2016 2017
Christian Mumenthaler, Group CEO 63 854 68 775 David Cole, Group Chief Financial Officer 68 061 82 982 John R. Dacey, Group Chief Strategy Officer 7 526 23 671 Guido Fürer, Group Chief Investment Officer 56 156 61 077 Agostino Galvagni, CEO Corporate Solutions 79 670 94 591 Jean-Jacques Henchoz, CEO Reinsurance EMEA 46 817 49 020 Thierry Léger, CEO Life Capital 57 610 49 841 Moses Ojeisekhoba, CEO Reinsurance 27 895 36 194 Jayne Plunkett, CEO Reinsurance Asia 29 095 34 288 Edouard Schmid, Group Chief Underwriting Officer n/a 29 161 J. Eric Smith, CEO Reinsurance Americas 13 984 21 400 Matthias Weber, former Group Chief Underwriting Officer1 25 750 n/a Thomas Wellauer, Group Chief Operating Officer 130 224 105 390 1 The number of shares held on 30 June 2017 when Matthias Weber stepped down from the Group EC was 24 913.
Rajna Gibson Brandon, Member 21 700 23 194 C. Robert Henrikson, Chairman of the Compensation Committee 11 065 13 248
Renato Fassbind, Vice Chairman, Chairman of the Audit Committee3 359 4 110 330 3 900 Mathis Cabiallavetta, former Member4 39 449 n/a n/a
Jay Ralph, Member6 n/a n/a 73 868 Joerg Reinhardt, Member6 n/a n/a 73 868
Jean-Pierre Roth, former Member4 33 380 n/a n/a Philip K. Ryan, Chairman of the Finance and Risk Committee7 239 2 740 233 2 758
6 Elected to Swiss Re’s Board of Directors at the AGM of 21 April 2017. 7 Includes fees received for duties on the board of US Group companies.
Restricted shares For the years ended 31 December 2016 and 2017, neither the members of the Board of Directors nor the members of the Group EC held any restricted shares.
Vested options For the years ended 31 December 2016 and 2017, neither the members of the Board of Directors nor the members of the Group EC held any vested options.
Voluntary profit reserves after allocation and dividend payment 14 305 16 775 1 Since the Board of Directors’ proposal for allocation of disposable profit, included in the Annual Report 2016, the number of registered shares eligible for dividend, at the dividend payment date of 27 April 2017, decreased due to the share buy-back programme of 5 077 780 shares and transfer of 44 378 shares for employee participation purposes from not eligible to eligible for dividend. This resulted in a lower dividend of CHF 24 million, compared to the Board of Directors’ proposal, and higher voluntary profit reserves by the same amount.
Share structure per 31 December 2017 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 299 to 309), for the year ended 31 December 2017.
Auditor’s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.
Opinion In our opinion, the financial statements for the year ended 31 December 2017 comply with Swiss law and the Company’s Articles of Association.
In accordance with Article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists which has been designed for the preparation of financial statements according to the instructions of the Board of Directors.
Type of insurance – mainly comprising accident and liability business – which is separate from property, engineering and life insurance.
Defined as the difference between the mark-to-market investment result and the benchmark investment result.
Gross underwriting result from new business is defined as present value of new business underwriting cash flows (eg premiums, claims, commissions, etc) before internal expenses, taxes and capital costs.
A feature of variable annuity business. The benefit is a predetermined minimum amount that the beneficiary will receive upon the death of the insured.
Financial transaction in which future cash flows from financial assets (or insurable risks) are pooled, converted into tradable securities and transferred to capital market investors. The financial assets are commonly sold to a special-purpose entity, which purchases them with cash raised through the issuance of beneficial interests (usually debt instruments) to third-party investors.
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.
Forward-looking statements typically are identified by words or phrases such as “anticipate”, “assume”, “believe”, “continue”, “estimate”, “expect”, “foresee”, “intend”, “may increase”, “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 the Group’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: ̤ the frequency, severity and development of insured claim events, particularly natural catastrophes, man-made disasters, pandemics, acts of terrorism and acts of war; ̤ mortality, morbidity and longevity experience; ̤ the cyclicality of the insurance and reinsurance sectors; ̤ instability affecting the global financial system; ̤ deterioration in global economic conditions; ̤ 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 the Group’s investment assets; ̤ changes in the Group’s investment result as a result of changes in the Group’s investment policy or the changed composition of the Group’s investment assets, and the impact of the timing of any such changes relative to changes in market conditions; ̤ the Group’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 the Group’s financial strength or otherwise; ̤ any inability to realise amounts on sales of securities on the Group’s balance sheet equivalent to their values recorded for accounting purposes; ̤ changes in legislation and regulation, and the interpretations thereof by regulators and courts, affecting us or the Group’s ceding companies, including as a result of shifts away from multilateral approaches to regulation of global operations; ̤ the outcome of tax audits, the ability to realise tax loss carryforwards, 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, and the overall impact of changes in tax regimes on business models; ̤ failure of the Group’s hedging arrangements to be effective; ̤ the lowering or loss of one of the financial strength or other ratings of one or more Group companies, and developments adversely affecting the Group’s ability to achieve improved ratings; ̤ uncertainties in estimating reserves; ̤ policy renewal and lapse rates; ̤ uncertainties in estimating future claims for purposes of financial reporting, particularly with respect to large natural catastrophes and certain large man-made losses, as significant uncertainties may be involved in estimating losses from such events and preliminary estimates may be subject to change as new information becomes available; ̤ extraordinary events affecting the Group’s clients and other counterparties, such as bankruptcies, liquidations and other credit-related events; ̤ legal actions or regulatory investigations or actions, including those in respect of industry requirements or business conduct rules of general applicability; ̤ changes in accounting standards; ̤ significant investments, acquisitions or dispositions, and any delays, unexpected costs, lower-than expected benefits, or other issues experienced in connection with any such transactions; ̤ changing levels of competition, including from new entrants into the market; and
̤ operational factors, including the efficacy of risk management and other internal procedures in managing the foregoing risks and the ability to manage cybersecurity risks.
These factors are not exhaustive. The Group operates in a continually changing environment and new risks emerge continually. Readers are cautioned not to place undue reliance on forward-looking statements. Swiss Re undertakes no obligation to publicly revise or update any forward-looking statements, whether as a result of new information, future events or otherwise.
subsidiaries are downgraded beyond a certain threshold. Moreover, a decline in ratings could impact the availability and terms of unsecured financing and obligate the Group to provide collateral or other guarantees in the course of its business or trigger early termination of funding arrangements, potentially resulting in a need for additional liquidity. As a ratings decline could also have a material adverse impact on the Group’s costs of borrowing or ability to access the capital markets, the adverse implications of a downgrade could be more severe. These same factors could also impact the Group’s insurance business.
The Group is also involved, from time to time, in investigations and regulatory proceedings, which could result in adverse judgments, 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. Tax authorities may also actively pursue additional taxes based on retroactive changes to tax laws. 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.
Insurance, operational and other risks As part of the Group’s ordinary course operations, the Group is subject to a variety of risks, including risks that reserves may not adequately cover future claims and benefits; risks that catastrophic events (including hurricanes, windstorms, floods, earthquakes, acts of terrorism, man-made disasters such as industrial accidents, explosions, and fires, and pandemics) may expose the Group to unexpected large losses (and related uncertainties in estimating future claims in respect of such events); changes in the insurance industry that affect ceding companies, particularly those that further increase their sensitivity to counterparty risk; competitive conditions (including as a result of consolidation and the availability of significant levels of alternative capacity); cyclicality of the industry; risks related to emerging claims and coverage issues; macro developments giving rise to emerging risks, such as climate change and technological developments (including greater exposure to cyber risks, which could have a range of consequences from operational disruption, to loss of proprietary or customer data, to
The Group includes in its annual report a section in respect of its results, including financial statements, prepared in accordance with the Group’s proprietary economic value management (“EVM”) principles (“EVM section”). Financial information included in the EVM section 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 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 lifetime 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.
São Paulo Avenida Paulista, 500 5th floor Bela Vista São Paulo, SP 01310-000 Telephone +55 11 3073 8000
Asia-Pacific Hong Kong 61/F Central Plaza 18 Harbour Road Wanchai Telephone +852 2827 4345
Beijing 23rd Floor, East Tower, Twin Towers, No. B12, Jian Guo Men Wai Avenue Chao Yang District Beijing 100022 Telephone +86 10 6563 8888
In this report We describe our commitment as a responsible company and the actions we have taken.
Climate change remains a top priority among our Corporate Responsibility Topics. This is why we have substantially expanded our Climate-related Financial Disclosures included in our 2017 Financial Report. We invite you to take a look at these in addition to the information presented in this report.
The Swiss Re Foundation in 2017 – Voices for Change Adopting a fresh approach, the 2017 edition of the Foundation’s Activity Report showcases fewer initiatives in greater depth and lets powerful photography tell more of the underlying story.
The report is organised into chapters focusing on the main activities we carry out to address our Corporate Responsibility Topics: from offering re/insurance solutions for sustainability risks to engaging our people. Below, we would like to briefly summarise what we achieved in these areas in 2017.
In parallel to offering re/insurance protection against a number of environmental and social issues, in our risk management we seek to identify and address risks that may undermine sustainable progress, raise ethical questions and/or increase loss potential. As part of our Sustainability Risk Framework, we have started to develop a carbon risk model to support the worldwide reduction of greenhouse gas emissions and contribute to limiting global warming to 1.5–2°C above preindustrial levels. The model’s initial part takes the form of a thermal coal policy applicable to all our lines of business. We also introduced clearer guidance on potentially sensitive dam projects in the Mekong River basin. Our public SONAR report again presented our insights on various emerging risks. On the following pages, we present a case study on antimicrobial resistance.
Asset Management is a core part of how we create value, by generating attractive returns when investing the premiums we receive from our underwriting business. While Swiss Re has been a responsible investor for over a decade, we took a key strategic step during 2017 to switch to investment benchmarks incorporating environmental, social and governance (ESG) aspects for our active listed equity and credit portfolios. To provide further insight on this as well as our approach to integrating ESG criteria across the investment portfolio, we launched the publication “Responsible investments – Shaping the future of investing”.
Our efforts to make the world more resilient are more effective when we engage in dialogue. “We’re smarter together” with you, dear stakeholders, as our clients, partners and other groups in wider society. In 2017, we continued to address several of our Corporate Responsibility Topics through this ongoing dialogue, holding many events and producing a number of new publications. A major initiative looked at the funding sources currently available for our ageing societies and how re/insurers could make a larger contribution. All our dialogue activities now benefit from the Swiss Re Institute, which combines Swiss Re’s own expertise with world-class research.
We would like to close by thanking our employees for the strong commitment they have again shown to our company, day in, day out. In this report, you can also read what we at Swiss Re do to create a flexible and inclusive work environment that inspires our people to unleash their full potential. To achieve our vision of “making the world more resilient”, we need people from many different backgrounds who feel passionate about the contribution they can make together.
The Swiss Re Group is a leading wholesale provider of reinsurance, insurance and other insurance-based forms of risk transfer. Dealing directly and working through brokers, our global client base consists of insurance companies, mid-to-large-sized corporations and public sector clients. From standard products to tailor-made coverage across all lines of business, we deploy our capital strength, expertise and innovation power to enable the risk-taking upon which enterprise and progress in society depend.
Headquartered in Zurich, Switzerland, Swiss Re has operations across the world. At the end of 2017, we had over 80 office locations in more than 30 countries. Based on “net premiums earned and fee income from policyholders ”, our ten biggest markets in 2017 were: the United States, the United Kingdom, Australia, China, Germany, Canada, Japan, Ireland, Switzerland and France. They accounted for 79% of the Group’s total business over the year.
Number of employees (regular staff) as of 31 December 2017 * Counting each location with offices once; not counting data centres
Income before tax and variable compensation 4 773 100% 814 100%
US GAAP net income attributable to shareholders 3 558 331 of which paid out as dividend2 1 559 33% 1 650 203% of which share buy-back 1 006 21% 1 0163 125% of which added to retained earnings within shareholders’ equity 993 20% –2 335 1 Aggregate compensation for all employees was CHF 2 165 million in 2017. See 2017 Financial Report, page 172.
Our approach to corporate responsibility We are committed to being a responsible company. Playing our part in enabling sustainable progress serves as a guiding principle for our actions.
Based on our commitment to corporate responsibility and enabling sustainable progress, we have signed up to a number of external charters and initiatives: ̤ EP100: see page 52
̤ Task Force on Climate-related Financial Disclosures (FSB-TCFD): see page 35 and 2017 Financial Report, pages 138–151
Treating everyone with respect – both inside and outside the company.
Our commitment to corporate responsibility: “Corporate responsibility” expresses Swiss Re’s commitment to being an open, honest and transparent organisation that treats all its stakeholders – employees, shareholders, clients, government agencies and the general public – with respect and integrity. In particular, we aim to take the long-term view and to play our part in enabling sustainable progress.
On an operational level, various divisions, departments and units are involved in implementing Swiss Re’s commitment to corporate responsibility in daily business. The Sustainability, Emerging and Political RM unit drives the development of Group risk policies and related strategic projects and coordinates communication, dialogue and engagement efforts across the Group. In addition, it is responsible for producing Swiss Re’s Corporate Responsibility Report, which is reviewed by senior management and approved by the Board of Directors.
ONLINE CONTENT You can learn more about the internal risk expertise, stakeholder dialogue and process we use to identify material Corporate Responsibility Topics in the online version of the report. reports.swissre.com/corporateresponsibility -report/2017/cr-report/ introduction/our-approach-tocorporate -responsibility/ourcorporate -responsibilitymap.html
Reflecting our two main insight sources and in line with current best practice, eg the recommendations of the Global Reporting Initiative (www.globalreporting.org), this map is structured along the two axes of ”Stakeholder expectations” and “Relevance for Swiss Re” – in terms of the risks as well as opportunities. The topics are positioned within three areas expressing different stages of relevance and maturity: OUR CORPORATE RESPONSIBILITY MAP
Based on our commitment made to the UN, advise 50 sovereigns and sub-sovereigns on climate risk resilience by 2020 and offer them USD 10 billion of re/insurance protection against this risk.
By the end of 2017, had advised 66 sovereigns and subsovereings on climate risk resilience, offering protection of USD 5.3 billion in total (page 23).
We were involved in further offshore wind projects, mainstream ones as well as an innovative site set up by the Danish Energy Agency to test more efficient technology (page 26).
Started to develop a thermal coal policy and sharpened our assessments of sustainability risks of dam projects in the Mekong River basin (page 32).
* Note: SDG 17 “Partnerships for the Goals” is important for most of our CR Topics.
OUR CORPORATE RESPONSIBILITY TOPICS LINKS TO THE UN SUSTAINABLE DEVELOPMENT GOALS*
1. Managing climate and natural disaster risk is at the core of what we do. Losses from floods, storms, earthquakes and other natural catastrophes impact the economies of entire countries and are therefore a key driver of the re/insurance business. Such losses are becoming more frequent and severe due to higher insurance penetration and the concentration of assets in exposed areas as well as climate change. By financing disaster risk mitigation and climate adaptation, we can strengthen the resilience of citizens, businesses, local and national economies and societies.
Use our capacity and technical expertise to provide effective risk covers for complex offshore wind farm projects.
Partnering for food security Meeting the demand for food for the growing world population – estimated to reach 9 billion by 2050 – will be challenging, as supply is constrained by such factors as climate change, depleted agricultural soils and the distribution of land, water and energy. Today, about 800 million people – one in 11 – are chronically hungry and malnourished. Swiss Re is a leader in agricultural insurance markets. We use our experience, expertise and financial strength to provide cutting-edge solutions to all stakeholders of the agricultural value chain. By insuring the agricultural sector, we play a vital role in combatting hunger and poverty.
Completed a pioneering transaction protecting Taiwanese aquaculture farms against extreme rainfall risk and made payouts to 14 000 Kenyan herders, saving approximately 70 000 livestock from drought (pages 22–24).
Funding longer lives People are living longer today than ever before, but the share of the working population is shrinking. The costs of funding retirement income, healthcare and long-term care in old age will increase dramatically. This could have significant financial consequences for individuals, insurers, employer pension funds and society in general. Swiss Re is the world’s largest reinsurer of mortality, and life and health reinsurance is part of our core business. We help clients create solutions that better support people across the different phases of ageing and retirement.
Engaging our people We want to be an organisation where diverse talents come together globally to apply fresh perspectives and knowledge to “make the world more resilient”. Once a year, we seek feedback from our employees through the Employee Engagement Survey (EES). The EES is an opportunity to hear from our employees what engages them and what ideas they have to improve their experience at Swiss Re.
According to EES scores, 84% of our employees feel Swiss Re lives a diverse and inclusive culture. Gender diversity in senior management positions has remained constant since 2016 (page 61).
Advancing access to insurance Access to insurance is an important contributor to economic development. However, 60% of the world’s population still remain excluded from appropriate insurance products. We work on advancing public awareness of the societal value of insurance and the role insurance plays in achieving sustainable economic development. We further evaluate our contribution on selected Sustainable Development Goals (SDGs).
Swiss Re Foundation: Empowering communities The Swiss Re Foundation reflects the social and humanitarian values of Swiss Re. It partners with social entrepreneurs, aid organisations, researchers, Swiss Re employees and clients to help communities increase their resilience. The Foundation’s initiatives address the causes and effects of risks in four areas – climate, natural hazards, water and society – both in emerging and developing countries and in regions where Swiss Re has offices.
Reducing our environmental footprint As a knowledge company in the financial services sector, our environmental impacts through our own operations are limited. Nonetheless, we firmly believe it is important for a responsible company to minimise its environmental footprint, thus leading by example. Tackling our CO2 emissions and reducing energy consumption are key targets across the Group. Our pioneering initiatives include the Greenhouse Neutral Programme and the COyou2 Programme.
Keep per-capita CO2 emissions from our own operations at 2013 levels, which we had reduced by 49.3% in the ten years since 2003.
Reduce our energy intensity by an average 2% per year. Since 2013, achieved a total reduction of 24.3% (page 52).
At the end of 2017, covered 84% of our total power consumption from renewable sources (page 52).
CLIMATE CHANGE Content organisation Beyond the specific goals we have defined for our Corporate Responsibility Topics, we are committed to addressing them across the different areas of our business where they are relevant. These implementation areas are listed below and provide the basic chapter structure for our Corporate Responsibility Report: Business solutions Within our core business of re/insurance and asset management, we strive to develop innovative solutions that help tackle key environmental and social challenges. To achieve this, we work with our clients and partners in both the private and public sectors.
Corporate governance and compliance By adhering to the highest standards of governance and compliance, we seek to maintain effective checks and balances between the top corporate bodies and to ensure the application of laws, rules and regulations, and ethical standards in our business. Swiss Re’s commitment to sustainability is fully integrated into the Code of Conduct.
Within these core chapters, the content primarily reflects our current Corporate Responsibility Topics, displayed and described on pages 11–15. (Please note that our activities as an active citizen in society are described in detail in the separate Activity Report published by the Swiss Re Foundation.)
ONLINE CONTENT A full, interactive overview showing where and how we have addressed our Corporate Responsibility Topics in 2017 is available in the online version of the report: reports.swissre.com/ corporate-responsibilityreport /2017/cr-report/ introduction/our-approach-tocorporate -responsibility/overviewwhere -and-how-we-haveaddressed -our-cr-topics.html
Furthermore, we continue to report against the Principles for Sustainable Insurance, PSI (www.unepfi.org/psi). Our Public Disclosure of Progress is also available in the online version of the report.
ONLINE CONTENT Global Reporting Initiative (GRI) Content Index with UN Global Compact COP references, and our PSI Public Disclosure of Progress. reports.swissre.com/corporateresponsibility -report/2017/ cr-report/introduction/ourapproach -to-corporateresponsibility /reportingframeworks.
Swiss Re is a member of various sustainability indices, including the Dow Jones Sustainability World and Europe, FTSE4Good, Euronext Vigeo Europe 120, the MSCI ESG Leaders and MSCI Global Socially Responsible (2017) families. In May 2017, Swiss Re received the AAA rating on the MSCI ESG assessment.
Our most important index listings and ratings are displayed on page 79.
Creating solutions for sustainability Our re/insurance solutions help address key environmental and social challenges. We focus on natural catastrophes and climate change, food security, renewable energy, funding longer lives and advancing access to insurance.
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 tackle such risks is a key part of our commitment as a responsible company and of our vision to make the world more resilient.
Across our efforts, we seek to develop solutions that improve access to insurance protection, especially in emerging and developing countries. If governments and communities are financially protected against such risks as windstorms, earthquakes, drought and flooding, they can better cope with the immediate consequences of a disaster.
Natural catastrophes are a key risk in our Property & Casualty (P&C) business. The damage caused by floods, storms, earthquakes and other natural catastrophes can affect millions of lives and the economies of entire countries. With hurricanes Harvey, Irma and Maria as well as other major catastrophes, the year of 2017 was the costliest ever. Total worldwide economic losses from natural and man-made catastrophes were over USD 337 billion – of these, approximately USD 144 billion were insured.
These figures underline the significant benefits that access to effective re/insurance protection against natural catastrophes creates for our clients and for society at large. In 2017, our clients in P&C Reinsurance paid us USD 2.3 billion of natural catastrophe premiums (for losses larger than USD 20 million), equivalent to approximately 14% of total premiums in this business segment.
Even before 2017, both economic and insured losses caused by natural catastrophes had steadily increased on average over the past 20 years. The key reasons are economic development, population growth, urbanisation and a higher concentration of assets in exposed areas.
This general trend will continue. But crucially, economic 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, www.ipcc.ch), a changing climate gradually leads to shifts in the frequency, intensity, spatial extent, duration and timing of extreme weather events.
In our 2017 Financial Report, we provide detailed quantitative information on natural catastrophe perils: the four perils with the highest expected annual losses (page 148) and the liquidity requirements stemming from four extreme loss scenarios (“insurance risk stress tests”, page 85).
While the impact of climate change will increase gradually over the coming decades, most of our business is renewed and repriced annually, and our risk models are refined every few years. Risks are normally covered for 12 months (up to five years for cat bonds). Thus, re/insurance premiums do not reflect expected loss trends over the coming decades. Rather, for underwriting and risk management purposes, our models provide an estimate of the current risk. But as natural catastrophe losses continue to rise as a result of the different factors described above, our models will gradually factor in this trend.
CONTENT IN THE 2017 FINANCIAL REPORT In our Climate-related Financial Disclosures, we describe in detail how we identify the risks and opportunities created by climate change and how we manage them (see pages 138–151).
In this section, we describe a selection of the innovative transactions and initiatives we were involved in during 2017 to strengthen risk resilience. These transactions help address the following of our Corporate Responsibility Topics, often more than one at the same time: ̤ Managing climate and natural disaster risk ̤ Partnering for food security ̤ Advancing access to insurance
They help our clients and their communities become more resilient to the risks they face by ensuring that adequate funding is in place when it is needed.
Reinsuring flood insurance in the US In the US, the annual uninsured economic impact from flooding is roughly USD 10 billion, making it one of the most common and costly natural disasters. While the private flood insurance market is developing, the US Government has been offering residential flood coverage since 1968. Today, the National Flood Insurance Program (NFIP), which is managed by the Federal Emergency Management Agency (www.fema.gov), insures five million households. As the power and frequency of floods have been increasing over the last decade, insurance claims have risen beyond the amount that policyholders pay into the programme.
The three tiers refer to the national, subnational and household level. At the national level, the government negotiated a contingent credit line with the World Bank to provide immediate liquidity in the aftermath of a natural disaster. In 2017, protection was added at the subnational level for the most exposed provinces. Supported by the World Bank, Swiss Re and other partners, the government bought a parametric earthquake and typhoon cover offering up to USD 200 million of protection to 25 provinces along the eastern edge of the Philippine archipelago. The risk has been fully ceded to local and national re/insurers, including Swiss Re, who will quickly provide provincial governments with liquidity in the event of a disaster.
Protecting aquaculture in Taiwan against extreme rainfall In Taiwan, we helped develop the first parametric insurance solution for aquaculture, jointly with Taiwan Fire & Marine Insurance. The programme will offer protection against extreme rainfall risk to 120 000 hectares of onshore fisheries in Ping Tung County, which together produce 25 million kilogrammes of grouper annually.
Using meteorological data, this innovative aquaculture insurance solution pays out automatically when there is rainfall of more than 480 mm for two consecutive days. It is the second programme we have helped develop for the Taiwanese agricultural sector, in response to the government’s initiative to transfer agricultural risks to re/insurers. Allowing for quick payouts through its index-based trigger, the scheme helps to improve the sector’s resilience. It has attracted strong interest and demand from the fish farming community in Taiwan, and it is hoped that it will benefit further Asian countries in the future.
Launching the cat bond arm of the Pandemic Emergency Financing Facility When the Ebola disease broke out in West Africa in 2014, it took the international community several months to mobilise the resources required to provide effective support to the affected communities. To address this problem, the World Bank (www.worldbank.org) decided to set up a rapid response mechanism called the Pandemic Emergency Financing Facility (PEF) and mandated Swiss Re to help support its development.
The central goal of the PEF is to release emergency funds quickly enough to prevent a disease outbreak from turning into a fully-fledged pandemic, thus potentially saving many lives. Its innovative design combines funding from the re/insurance market (using index-based products) with the proceeds from catastrophe bonds issued by the World Bank. Swiss Re Capital Markets acted as joint structurer and sole book runner for the PEF transaction, which was completed in 2017. It is the first time ever that pandemic risk is being transferred to the capital markets to protect lowincome countries.
Herding provides many people in the Greater Horn of Africa region with their livelihoods, but faces serious drought risks. In 2017, the KLIP programme, which we support, made payouts to 14 000 Kenyan herders, thus saving an estimated 70 000 livestock sustaining 100 000 people.
of an event. Swiss Re has been acting as the facility’s lead reinsurer right from the start.
Building on these experiences, we made a significant commitment to the United Nations at its Climate Summit in September 2014. Personally addressing the government leaders present at the summit, our then Group CEO Michel M. Liès made the following pledge: “By the year 2020, Swiss Re commits to having advised 50 sovereigns and sub-sovereigns on climate risk resilience and to have offered them USD 10 billion against this risk.”
Our commitment to to the Grow Africa Partnership has centred 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.
Working together with different partners, we helped to bring weather insurance to 1.5 million smallholder farmers in 12 Sub-Saharan countries by the end of our commitment in 2017. While developing commercially viable schemes continues to face significant challenges, in particular regarding the creation of effective distribution networks and overcoming market fragmentation, we entered into some promising new programmes in 2017.
USD 5.3 billion Total amount of climate protection offered to sovereigns and sub-sovereigns since 2014
1.5 million Smallholder farmers benefiting from the Grow Africa Partnership by 2017
protect pastoralists against this persistent threat, we helped to launch the Kenya Livestock Insurance Program (KLIP) in 2016, the first-ever government livestock insurance scheme in Africa.
It is an index-based scheme that uses satellite imagery to assess the state of grazing conditions by measuring deviations in the colour of ground vegetation. When a certain threshold is reached, the insured herders automatically receive a lump sum payment, allowing them to provide their livestock with feed and water.
To offer governments at the national, regional and local level easier access to protection against these risks, we recently developed and launched Swiss Re rainX, an index insurance tool. In contrast to classical indemnity insurance, which requires policyholders to prove the extent of any losses incurred, index insurance relies on external, verifiable and quantifiable data or parameters.
The rainX tool enables us to offer our clients such solutions quickly and effectively, and allows for scalability of coverage and payout patterns.
CONTENT IN THE 2017 BUSINESS REPORT Learn more about a partnership we entered in the UK to help recovering cancer patients, pages 34–37.
A key innovation tested by the project is a new “gravity jacket foundation” concept developed by Siemens. Foundations generally account for 20–30% of an offshore wind project’s construction costs, and this new technology allows to reduce these. The project also features a new cable and turbine concept with a higher voltage of 66kV, which will result in lower costs for cabling and reduced transmission losses. The DEA expects that, together, the innovations to be tested at Nissum Bredning will bring significant savings regarding both construction and operating costs, and have a positive impact on the levelised cost of electricity (LCoE).
Increasingly, stakeholders are asking companies to provide information on their social output, impact and social value. In response to this development, we launched a pilot project to assess the “social output” of our Life Capital Business Unit, which is responsible for developing Swiss Re’s primary life and health business. Looking at the results of particular activities such as policies sold and number of people reached, social output analysis sets the preliminary stage for measuring “social outcome” (which is defined by the changes achieved in the target population’s lives) and, ultimately, “social impact”, or the progress made towards pre-defined goals.
The analysis showed that Life Capital scores well on several output indicators as it is growing, eg in terms of employment and partnership opportunities created, number of policyholders and claims paid. Research conducted by third parties also showed that Life Capital protects a certain number of customers that belong either to a “financially stretched“ or “urban adversity“ socio-demographic group. In the two books assessed, these groups represented approximately 30% of the total. Providing insurance to them is likely to help reduce the risk of falling into the poverty trap.
We define sustainability risks as ethical concerns related to potential environmental and socio-economic impacts of our business transactions, and the reputational risks they may entail.
The Sustainability Risk Framework consists of: ̤ Two umbrella policies on human rights and environmental protection plus seven specific guidelines on sensitive sectors or issues; ̤ The Sensitive Business Risk (SBR) process comprising an online assessment tool and a referral tool – due diligence mechanisms to assess our business transactions; ̤ Company exclusions; and ̤ Country exclusions beyond mere compliance with international trade controls.
Mines can potentially have serious consequences on the environment and local communities. A dedicated policy of our Sustainability Risk Framework clearly states when our underwriters need to carry out due-diligence checks on such risks.
The online tool stores the relevant sustainability risk information for these sectors and is regularly updated to reflect new risk developments. It thus provides our underwriters with an efficient means to check the potential impact of their transactions on human rights, labour rights and the environment. For transactions that reveal low to medium risks, they need to carry out additional due diligence based on industry and country advice provided by the tool.
We first introduced the online SBR assessment tool midway through 2015 and have continuously fine-tuned it since, gradually strengthening our underwriters’ ability to integrate sustainability risk assessment into their decision-making. This has resulted in a steady decrease of SBR referrals to our in-house sustainability experts, from 454 in 2014 to 178 in 2017. Of those
Respecting human rights and protecting the environment ̤ 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.
Defence industry ̤ Particularly cruel weapons that inflict indiscriminate harm to humans and the environment, often after a conflict has ended; ̤ The provision of certain services by private security companies.
SENSITIVE BUSINESS RISKS REFERRED TO OUR EXPERT TEAM IN 2017, BY SECTOR/ISSUE
Sensitive Business Risk referrals 2013 36% Oil and gas 23% Mining 23% Dams 11% Other: human rights 2% Other: environmental protection 2% Defence 2% Forestry, pulp & paper and oil palm 1% Animal testing
 Not materialised * Starting in mid-2015, we have refined our SBR process, which has led to a steady decrease in the number of referrals transactions, we issued negative recommendations in 29 cases and positive recommendations with conditions attached in 12 cases.
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. We review the list of excluded countries annually based on independent human rights assessments and update it if warranted.
As the Sustainability Risk Framework is based on the principles of respecting human rights and protecting the environment, the SBR process with its two due diligence tools, company exclusions and country exclusions are our principal means to ensure compliance with the UN Global Compact in our core business.
WEBSITE You can read more about the international declarations and principles underpinning our Sustainability Risk Framework at www.swissre.com/library/archive/ sustainability_risk_framework_ sustainable_business_is_good_ business.html 178 Sensitive business transactions referred to our team of sustainability experts
The first part of this carbon steering mechanism will take the form of a thermal coal policy, to be integrated in the Sustainability Risk Framework by mid-2018. It will apply across all lines of business on the direct, facultative and treaty sides. This transition will take some time and constructive dialogue with our clients.
At the same time, the whole Mekong basin is estimated to have hydropower potential of up to 30 000 megawatts. Extensive dam construction in such an important ecosystem harbours significant sustainability risks, though, eg resettlement, affected hydrology and fishery regimes, and falling agricultural productivity in downstream areas.
We analysed these and other risks for both existing and planned dams in the Mekong basin. The results have enabled us to determine which of the projects are compliant with the policies of our Sustainability Risk Framework and to update our SBR assessment tool accordingly.
Training Ever since we introduced our Sustainability Risk Framework, 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.
Detecting and investigating such risks early on forms an important part of our comprehensive approach to risk management. In analysing how risks are evolving and related to each other, we seek to assess their potential impact on Swiss Re. This is vital to reduce uncertainty and prevent unforeseen losses, raising awareness within the Group and across the industry.
The SONAR process involves several steps. The first is an interactive intranet platform which enables our employees to share and discuss risk notions based on developments in the re/insurance landscape, allowing for bottom-up identification and peer reviews. While many of the risk notions – or “early signals” – flagged on the SONAR will never turn into emerging risks, others may well do so. However, as we cannot anticipate which signals will become emerging risks, we scan the horizon quite broadly before concentrating on those with the highest impact potential on the re/insurance business.
Our emerging risk specialists periodically cluster and further assess these risk notions for their potential impact on our business. Finally, in-depth investigations are carried out on selected topics.
You can learn more about one of these topics – antimicrobial resistance – in the case study on page 34.
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.
Since we first identified these emerging risks, we have followed up on several of them together with our stakeholders. Recent examples include the following: Extending our risk intelligence
Inappropriate, ie excessive and/or wrong use of antibiotics is prevalent in human medicine and features prominently in animal farming, too. In fact, the proliferation of antimicrobials in the production of livestock and in aquaculture is a key factor in the spread of global AMR. Overuse of antimicrobial drugs favours the selection of resistant strains, thus accelerating the emergence and spread of AMR.
As a result, a comprehensive and coordinated response to this emerging risk is currently lacking. This is needed, though, as antimicrobial resistance represents a typical “commons” or “public good” problem: a resource open to all risks to be overused by particular parties, with detrimental effects for everyone. Seen from a re/insurance perspective, it could, for example, exacerbate the impacts of a pandemic by further increasing mortality rates.
Expert Forum on Cyber Risk: Reducing vulnerability to attack institute.swissre.com/events/ Expert_Forum_Cyber_Risk_2016. html
umbrella guidelines and policies of our Sustainability Risk Framework (see pages 28–32) 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 in conflict areas and the identification of areas prone to civil unrest.
Regulatory risks Swiss Re is strongly engaged in the regulatory debate, striving to mitigate potentially negative impacts while supporting reforms that could enhance the overall health of the sector, facilitate convergence of regulatory standards or generate business opportunities.
Climate risk and sustainability Reflecting our commitment to enabling sustainable progress, we closely monitor regulatory developments in connection with climate change and sustainability and contribute to selected initiatives. These issues are gaining traction among policy makers, regulators and standardsetters.
At present, two main areas of activity can be identified. The first concerns a shift from voluntary to mandatory disclosure of environmental, social and governance (ESG) information, eg carbon and climate, diversity and human rights. These efforts seek to create more transparency about how ESG issues affect organisations’ businesses, strategy and financial planning.
Strategic risk initiatives Identifying and addressing emerging risks can be challenging. Their novelty and interconnectedness makes it difficult to determine when a particular risk notion must be considered an emerging risk. Timing is of crucial importance. If measures to exclude a particular risk are taken too early, we may not be able to offer our clients insurance protection; if measures are taken too late, we may end up with increased loss potential.
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
The second area of activity revolves around efforts to reduce capital requirements for ESG and long-term investments. This is mainly promoted by the re/insurance industry as a way to facilitate its role as a long-term investor. Especially in the EU, regulators are sympathetic to these arguments as they see them as a way to meet the commitments made as part of the Paris Agreement on climate change.
The FSB-TCFD’s final recommendations report was published in December 2016 and has received broad public support, with more than 100 business leaders and their companies committing to support the recommendations. Swiss Re supports the work of the task force and has been one of its members since its launch. We started to integrate the recommended disclosures in the 2016 Financial Report and have significantly expanded our disclosures in the 2017 edition.
We also provided input to the European Commission’s High Level Panel on Decarbonisation Pathways, a group of nine renowned climate experts established in late 2016. The task of this panel is to support cost-effective climate action towards a low-carbon future by delivering science-based, policy-relevant advice, thus helping to implement the Paris Agreement in the European Union. Our input focused on such aspects as data sharing on weather extremes and variability, research on the economics of climate adaptation, transparency on contingent liabilities and facilitating viable infrastructure investments.
CONTENT IN THE 2017 FINANCIAL REPORT You can view our Climate-related Financial Disclosures in the “Corporate responsibility” chapter, pages, 138–151.
We consistently integrate ESG considerations along the three pillars Enhancement, Inclusion and Exclusion, of which Enhancement is strategically the most meaningful pillar for Swiss Re.
“Inclusion” is one of the three pillars of our responsible investment approach: by making thematic investments in renewable infrastructure and green bonds, we seek to support the transition to a low-carbon economy.
Enhancement This pillar refers to the systematic integration of ESG criteria along the investment process, from portfolio definition to monitoring and reporting. As part of our active risk management, we announced in 2017 that we had switched to ESG benchmarks.
These have been adopted in our investment mandates and consist of better-rated companies from an ESG perspective. This allows us to have both the right measurement and appropriate incentives for our portfolio managers in place. If benchmarks are not applicable, a minimum ESG rating rule is applied to our mandates. For actively managed mandates, external managers have limited leeway to invest into securities they deem to have a positive ESG trend but are not included in the benchmark yet.
An effective way to do this is by investing in infrastructure renewables and green bonds. As the latter is more of a concept than a specific investment class, we use the Green Bond Principles (GBP) from ICMA as guiding principles for our investments. We are well advanced in meeting our publicly committed investment target for green bonds of at least USD 1.5bn.
In our 2017 Financial Report, we further disclose information on our climate change-related investment risk exposure (pages 138–151).
Swiss Re’s Group Sustainability Risk team develops and updates the Groupwide exclusion lists of countries and companies based on the Sustainability Risk Framework. Further information is available at: media.swissre.com/documents/ Sustainability_Risk_Framework_ Brochure_en.pdf
Our Asset Management runs under a well-defined framework. Strong governance is key to bringing ESG considerations into the investment process in a structured and controlled way. Our approach to responsible investment is based on clear principles, procedures and responsibilities.
The policy is reviewed periodically and updated if required. It is complemented by the Swiss Re Asset Management Voting Policy, which provides guiding principles that apply to all our voting activities.
Swiss Re’s Head Responsible Investing (Head RI) develops and coordinates the implementation of the ESG strategy within the unit. As part of this role, the Head RI steers the ESG Advisory Board, a committee formed by representatives of all investment units, as well as Legal, Compliance and Group Risk Management. The ESG Advisory Board reports on responsible investment activities in the various investment units, develops and reviews improvement ideas, shares knowledge and monitors implementation progress.
The Asset Management Investment Committee reviews and discusses Swiss Re’s responsible investment approach and advises the Group Chief Investment Officer on related decisions and improvements.
As an active member of the OECD’s long-term investor network, we also engage in the development of policy proposals with regard to sustainable infrastructure and ESG.
To provide further insights on our switch to ESG benchmarks, we launched the publication “Responsible investments – Shaping the future of investing” in 2017. It shares our experience and methodologies relating to further promoting the development of best practice frameworks (see box on the left).
Swiss Re first formalised its commitment to responsible investing in 2007 by signing the UN Principles for Responsible Investment (PRI). In 2012, we signed the Principles for Sustainable Insurance (PSI), a further step to formally endorse our commitment to corporate responsibility. Both the PRI and PSI are taken into account within our comprehensive responsible investment framework. All PRI signatories are required to provide in-depth reporting on their responsible investment activities. For the second time in a row, we received the highest score for our overarching (“Strategy and Governance”) approach to responsible investing in 2017. The reports are available on the PRI website at www.unpri.org/signatory-directory/
Our consistent integration of ESG criteria resulted in an award in the category “Best ESG Programme” at the 2017 Institutional Investor Swiss, German & Austrian Peer-to-Peer Awards.
2 We vote in all countries, with the exception of a few where voting process and regulatory obligations require a high level of administrative coordination.
Our Top Topics Combining insights from our internal risk expertise and from our stakeholders, we 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 form an important focus for our global stakeholder dialogue.
Swiss Re’s Reputation Management Committee coordinates the content of this stakeholder dialogue across all our Business Units, functions and regions in order to optimise its effectiveness. The Committee comprises representatives from across the Group, ie our three Business Units, Investor Relations, Group Risk Management, Group Communications and – since 1 March 2017 – the Swiss Re Institute.
Exploring and shaping the risk landscape We engage in regular dialogue with our stakeholders. By sharing expertise and know-how, we help society develop effective responses to key risks.
Our re/insurance solutions help our clients and partners to cope with the risks they face. This in turn helps create stability and enables economic growth. But many of today’s risks are complex and may threaten sustainable progress. To find effective, long-term responses to such risks, partners from the public and the private sector need to work together.
This is why we attach great importance to ongoing dialogue with our stakeholders. Drawing on the expertise from our core business, we identify key risk topics and take an active role in discussions about them. We share and exchange knowledge through many channels, eg our renowned publications including the sigma series, international dialogue platforms, events hosted at the Centre for Global Dialogue and cooperation with governments and academic institutions. This exchange gives us valuable feedback and new insights for risk management and product development. Since its establishment on 1 March 2017, the Swiss Re Institute plays a key role in our stakeholder dialogue (see page 47).
Advancing sustainable energy solutions Cutting back greenhouse gas emissions while meeting the energy needs of a growing population remains one of the biggest challenges of our times. In recent years, there have been signs that the transition towards a low-carbon future is gathering pace.
“Partnering for food security” has been one of our Top Topics for many years. As part of our recent dialogue activities, we devoted an issue of our agro insurance hotspot series to Bolivia, where one in three of the working population is employed in agriculture.
Our notable achievements in 2017: ̤ We initiated a new phase in our successful partnership with the World Energy Council (www.worldenergy.org) and Marsh & McLennan Companies (www.mmc.com) on the topic of “financing resilient energy infrastructure”. Building on the three reports published in 2016, we started to develop a series of real-life case studies shedding light on the risks faced by the energy industry from extreme weather and cyber threats; ̤ Following completion of our new two-megawatt solar power plant at Swiss Re Americas’ headquarters in Armonk, New York, former US President Bill Clinton and Eric Smith, President and CEO of Swiss Re Americas, inaugurated the facility, one of the region’s largest, in a high-profile public ceremony addressing a range of stakeholders; ̤ Under the title “The value of hedging: New approaches to managing wind energy resource risk”, we launched a seminal new study with partners from the European wind industry that looks into the potential impact on energy companies of hedging the cash flow volatility associated with wind production.
Funding the needs of ageing consumers: what re/insurers can do to help
As part of our Top Topic of “funding longer lives”, we recently launched a major strategic initiative focusing on how re/insurers can help ensure our ageing populations are financially protected. Our “ageing wallet” analysis looks at the different funding sources for income, health, care and inheritance of people aged over 65 in six major markets (Australia, China, Germany, Japan, UK and US).
Following up on our research, we have tested a number of prototype solutions with consumers and are now looking for opportunities to develop marketable solutions together with our clients, leveraging our in-depth understanding of ageing consumers.
Our campaign on funding the needs of ageing consumers included the two reports “Who pays for ageing” and “Who are the ageing” …
Swiss Re conducted new consumer research and discovered insights that offer a fresh perspective on the traditional products focus and approach to segmentation. To get started on developing propositions that are more relevant for today‘s ageing consumers, turn the page.
Winning solutions can combine financial and nonfinancial benefits with high levels of trust and simplicity
SAVINGS Employee savings plans are growing Largest dependence on society at
THE ANNUAL AMOUNT SPENT TO FUND THE LIVES OF PEOPLE OVER AGE 65, ACROSS 3 MAJOR SOURCES
AVERAGE ANNUAL SPEND PER PERSON OVER AGE 65 BY COUNTRY IN USD
Today society bears the largest share, but that is in decline
Money to fund income, health care, social care and inheritance for people over age 65
… as well as fact sheets analysing the current funding situation in six major markets.
Small-scale subsistence farmers who feed their families and sell a small surplus at local markets still provide food to the majority of people on the globe. Recently, the urban population exceeded the rural one for the first time ever. This means that cities are becoming increasingly dependent on the remaining farmers for their food.
The surplus that subsistence farmers currently produce will not be enough to feed growing urban populations. Smallholder farmers need to make the transition to commercial agriculture to feed the world. For this, they need access to credit so they can buy tools, seeds and fertilizer. Lending will remain restricted, however, if banks fear that farmers are unable to pay back their loans in the event of a lost harvest due to flood, drought or other disasters. Here, insurance can play the same role in the developing world as it already does in developed countries: protecting farmers against the perils of nature to keep them in business, even if disaster strikes.
Swiss Re is striving to influence these developments by actively participating in and contributing to the global and local financial reform dialogue. Ultimately, we want to ensure that long-term investors can act – not only think – on a long-term horizon to achieve greater financial resilience.
In 2017, we also engaged with our stakeholders on further Corporate Responsibility Topics: Managing sustainability risks As part of our efforts to manage sustainability risks, we regularly engage with clients and industry partners to help promote best practices within the re/insurance industry.
Insurance (PSI) introduced in 2012 by the UN Environment Programme Finance Initiative, UN EPFI (www.unepfi.org/psi). We were one of the initiative’s original signatories and currently act as one of its board members. (Our Public Disclosure of Progress for 2017 is included online.)
We also continued our involvement in the Swiss Sustainable Finance (SSF) association (www.sustainablefinance.ch), as one of its board members. With over 90 members from the private and public sector, SSF aims to strengthen Switzerland’s position in the global marketplace for sustainable finance.
Advancing access to insurance “Advancing access to insurance” is a Corporate Responsibility Topic we newly established in 2016. While many of our innovative solutions target underinsured communities and risks (see examples on pages 20–24), it is a fact that 60% of the world’s population remain excluded from appropriate insurance products. This is why we seek to advance public awareness of the societal value of insurance and the role insurance plays in achieving sustainable economic development.
The publication argues that a better understanding of these barriers is key to developing effective new approaches. In particular, greater availability of data about insureds makes it easier to recognise their actual behaviour and needs. In combination with innovation, technological progress and new approaches, such as microinsurance schemes and public-private partnerships, this enables the creation of products suitable to local conditions. Selected case studies from around the world illustrate how insurers, policy-makers etc. can work together to achieve this.
Navigating the digital transformation The digital transformation has the potential to radically transform the re/insurance sector. The huge growth in the range and volume of electronic data from various devices makes it possible to personalise insurance policies to a greater extent and to cover previously excluded risks. At the same time, Big Data raises questions concerning data protection and solidarity. The digital transformation is a research focus of the Swiss Re Institute (institute.swissre.com/campaigns/ digital_transformation_campaign.html) and one of Swiss Re’s Corporate Responsibility Topics.
Among our activities to navigate the potential and the risks of the digital transformation, we contributed to a research project on “dealing with ethical and legal big data challenges in the insurance industry”, conducted by researchers at the University of Zurich and the University of Applied Sciences HTW Chur. The project receives funding from Switzerland’s National Research Programme 75 on “Big Data” (www.nfp75.ch/en/projects/module-2societal -and-regulatory-challenges).
For Swiss Re’s in-house data protection policies and standards, please refer to the “Code of Conduct” section on page 73.
No 4 /2017 01 Executive summary 02 Introduction 05 How insurance contributes to development 15 Barriers to insurance: an evidence-based approach 20 Insurance through new and alternative means 26 Developments in select markets and regions 35 Conclusion performance. This open dialogue allowed us to explain our own positions on human rights and environmental protection, and draw attention to specific practices we consider problematic.
CONTENT IN THE 2017 FINANCIAL REPORT You can view our Climate-related Financial Disclosures in the “Corporate responsibility” chapter, pages 138–151.
The Swiss Re Institute Swiss Re has long been recognised as a knowledge leader within the re/insurance industry. We are convinced that a better understanding of the risks we all face supports the Group’s vision of making the world more resilient.
The Swiss Re Institute incorporates successful Swiss Re brands, such as the sigma publication series and the Centre for Global Dialogue. The Institute further acts as a coordination point for research output from research-focused business lines within Swiss Re and from external partners. Lastly, the Institute seeks opportunities to collect and curate novel data, as well as cultivate new data-analytic and machine-intelligence solutions.
Based on these activities, the Swiss Re Institute also supports Swiss Re’s commitment to corporate responsibility. We help highlight emerging risk trends, engage in dialogue with clients and stakeholders, provide capacity building sessions and seminars to governments and subnational governments in different parts of the world and seek to identify sustainable risk solutions. Highlights among our many conferences and publications of 2017 include: 13th CRO Assembly: Our Changing Risk Landscape institute.swissre.com/ events/13th_CRO_Assembly_ changing_risk_landscape.html sigma event 2017: Catastrophes – Protecting the uninsured. Solutions for a resilient world institute.swissre.com/events/ Sigma_Event_2017.html
Moving on dangerous grounds – wind power and earthquake exposures in China swissre.com/library/expertisepublication /moving_on_ dangerous_grounds.html sigma 2/2017: Natural catastrophes and man-made disasters in 2016: a year of widespread damage institute.swissre.com/research/ overview/sigma/2_2017.html
Moving on dangerous grounds – wind power and earthquake exposures in China
In recent years, we have collaborated with various (inter-)governmental and academic institutions both to promote effective approaches to sustainability challenges and to share our expertise on managing specific risks.
Our work with (inter-)governmental agencies to promote effective sustainability responses ̤ In Europe, we increased our engagement activities on the important role insurers play in mitigating climate risk, engaging closely with the European Commission’s work on climate adaptation and risk prevention and participating in several focus groups. To coincide with the European Commission’s work on the role of insurance in climate adaptation, we hosted a high-level conference in Brussels (see below). We also continued to use our trade association memberships (eg in the Reinsurance Advisory Board and Pan European Insurance Forum) to promote our key messages on this topic.
̤ In the US, we have maintained regular dialogue with the National Association of Insurance Commissioners (NAIC), principally on climate change and natural catastrophes.
̤ For our participation in the Financial Stability Board’s Task Force on Climate-related Financial Disclosures, see page 35.
Our work with (inter-)governmental agencies to share risk management expertise ̤ With Global Partnerships, we have a team that works strategically with public-sector bodies to improve risk resilience: – directly with sovereigns or subsovereigns and their agencies, recently with the Federal Emergency Management Agency (FEMA) to create reinsurance cover program for its National Flood Insurance Program, as partner of the World Bank with the Philippine government to develop an earthquake and typhoon cover for exposed provinces, with the government and prefectures of two Chinese provinces to establish major natural catastrophe insurance schemes, and with the UK government as part of a programme set up to make flood insurance more afordable for homeowners; – with the United Nation’s International Strategy for Disaster Reduction (UNISDR) in a consulting role; – with development agencies such as the United States Agency for International Development (USAID), the UK’s Department for International Development (DFID), the Swiss Agency for Development and Cooperation (SDC), the World Bank, the Asian Development Bank (ADB), the Inter-American Development Bank (IADB) and the German Development Bank (KfW).
This conference hosted by Swiss Re in Brussels brought together representatives from the insurance industry and the public sector to debate what action is needed to improve how EU citizens are protected from natural disasters. The discussion focused on what kind of natural catastrophe schemes are already successfully in place and what learnings from other regions in the world could be transferred to Europe. As a follow-up to the event, Swiss Re published a conference report to reiterate the event’s key messages and highlight examples of where preemptive action to tackle the exposure to natural disasters has helped to reduce the protection gap.
CONFERENCE “INSURING NATURAL CATASTROPHE RISK: HOW PUBLIC-PRIVATE PARTNERSHIPS COULD MAKE EUROPE MORE RESILIENT”
Insuring natural catastrophe risk: How public-private partnerships could make Europe more resilient Brussels, 29 June 2017
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 and videos mentioned in this chapter.
The value of hedging: New approaches to managing wind energy resource risk
Building resilience in the eye of the storm – Agriculture in the Caribbean and Central America
Swiss Re rainX – straightforward protection in case of heavy or lack of rain
Agro insurance hotspot: Pakistan With two out of every five people dependent on the sector, agriculture is vital to Pakistan’s economy. That’s why it’s important to further strengthen irrigation networks, upgrade the country’s flood resistance and increase the availability of crop and livestock insurance. Such measures can make the agriculture sector more resilient to the impact of floods, earthquakes, droughts and cyclones.
Building resilience in the eye of the storm – Agriculture in the Caribbean and Central America w
Agro insurance hotspot: Bolivia Agriculture accounts for 13.2% of Bolivia’s GDP and employs one in three of the working population. Small-scale family farmers in the highlands make a substantial contribution to agricultural production. To protect these and other farmers against natural disasters, the Bolivian government has established an agriculture insurance programme. Such is the importance of the industry, demand for insurance continues to be high.
We operate an integrated global management system (GMS) at our Corporate Real Estate & Services (CRES) 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.
Goals and scope Seamlessly continuing from the programme’s first phase, we launched a second commitment cycle running from 2013 until 2020. However, after almost halving our CO2 emissions per employee in the previous ten years, the potential for further reductions is now significantly smaller. Thus, our target until 2020 is to keep our CO2 emissions per employee stable at the 2013 level. In view of our expansive business strategy, especially in high growth markets, we regard this as an ambitious goal.
In line with the new Scope 2 Guidance of the Greenhouse Gas (GHG) Protocol, we report the emissions associated with our electricity consumption according to both a locationbased approach representing the CO2 intensity of the grids where we operate and a market-based method taking into account emission reductions from instruments such as Renewable Energy Certificates (RECs) and Guarantees of Origin (GOs).
Even though over 80% 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.
Goals of our Greenhouse Neutral Programme until 2020: ̤ 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.
In the current cycle, the programme covers the following emission sources: ̤ Heating (Scope 1) ̤ Power consumption (Scope 2) ̤ Business travel, copy paper use, waste generation, water use, technical gases and employee commuting (Scope 3)
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 (FTE) or, in other words, to reduce our energy intensity. Through many small measures to improve energy efficiency and by concentrating backoffice tasks in fewer and more energyefficient buildings, we managed to cut our energy intensity by a total of 46.5% between 2003 and 2013.
A solar power plant is being constructed on the roof of our new Bangalore office. We have recently stepped up such internal efforts as part of our Group-wide commitment to cover 100% of our power consumption from renewable sources by 2020.
The solar plant will also help save around 8 000 litres of diesel every year because the office will no longer need to use back-up generators when there are power cuts, which happens quite frequently in Bangalore.
84% Share of total power consumption from renewable sources in 2017
Paper, water and waste We also calculate and compensate the CO2 emissions from further sources along our supply chain (Scope 3), ie copy paper, waste generation and water use. The overview of all our emissions sources on page 51 shows, however, that these are less relevant in our business than other environmental impacts, which is why we have not set quantitative reduction goals for them.
Offsetting our remaining CO2 emissions The second commitment of our Greenhouse Neutral Programme is to compensate all CO2 emissions we cannot avoid. For the seven emissions sources covered by it, we bought and retired VERs for a total of 80 780 tonnes of CO2e in 2017.
We are keen to ensure that the VERs we buy are of a high environmental standard and have developed a set of criteria to select the projects generating certificates. In particular, we give priority to those which create strong social side effects and benefit the poorest regions. You can read more about the compensation projects we selected in 2017 on page 55.
External verification of our CO₂ reporting Ever since we first launched our Greenhouse Neutral Programme in 2003, we have disclosed our CO2 emissions, their principal sources and relative performance over time. The method we use to calculate our emissions is based on the guidelines of the Greenhouse Gas Protocol, the most widely-used emissions accounting standard (www.ghgprotocol.org/).
Reducing our environmental footprint 80 780 Tonnes of CO2e compensated in 2017
When selecting compensation projects for our CO2 emissions, we require them to be of the highest quality and to have tangible social benefits. In 2017, we chose “Gold Standard” projects that support small ceramics factories in Brazil to switch to fuel from renewable biomass.
The Ceará and Balsas Renewable Energy Projects combat both climate change and deforestation by replacing the ceramic factories’ primary source of fuel – deforested wood – with renewable energy won from agricultural and industrial residues.
This biomass would have been discarded as waste otherwise, so the fuel switch transforms residues into something useful. In addition, it enables many local residents to earn an income by supplying biomass waste directly to the factories.
Together, the two projects have managed to avoid approximately 41 860 tonnes of CO2e emissions annually. Over the course of the last ten years, they have helped to save about 2 730 hectares of forest from being logged, the equivalent of more than 2 180 football pitches.
We consider environmental criteria relating to materials and ingredients, production methods, recycling and waste. For some sourcing categories, we have developed “minimum standards” that further specify our requirements. Besides power (see page 52) and paper (see page 54), these cover cleaning services and agents, refrigerant agents and building materials. Each standard lists objectives, ecological aspects, ecological minimum standards, exceptions, controlling and labels.
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 periodic contract reviews, and we visit individual suppliers to inspect them onsite. Internally, we hold regular awareness trainings with all our sourcing staff.
In 2016, we signed up for EcoVadis, 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. This will allow us to assess the sustainability performance of our suppliers more systematically with the help of key performance indicators and to engage them in improvements, thus also reducing potential sustainability risks in our supply chain.
Reducing our environmental footprint 13% Share of our tier 1 and 2 vendors included in the EcoVadis platform by end of 2017
The lakeside facade of Swiss Re Next, our newly completed headquarter building in Zurich. Right from the project’s start in 2009, sustainability has been embedded in its planning, design and performance.
Our company has over 80 office locations in more than 30 countries. For new buildings or renovation work, we apply a number of principles, one of which is sustainability.
In 2017, we completed Swiss Re Next, our new office building at the Group’s headquarters in Zurich. Right from the start of the project in 2009, sustainability was defined as a key topic and subsequently integrated into its planning, construction and operation, as well as the demolition of the former Neubau building.
̤ Heat pumps using water from nearby Lake Zurich heat and cool the building.
̤ Wherever possible, we have used recyclable materials, including more than 50% of the concrete.
̤ Peripheral steel columns at maximum distance allow for open internal spaces, providing optimal flexibility for our interactive workplace concept.
WEBSITE You can find more information on sustainability at Swiss Re Next, including a graphic overview, at next. swissre.com/en/#sustainability
The COyou2 Programme Tackling our carbon footprint is one of four pillars of our climate change strategy (see page 16). In 2007, we launched the COyou2 Programme because we wanted to make our commitment more tangible for our employees and help them to become more aware of climate change. The programme offers subsidies for a range of investments through which our employees can reduce their private carbon footprints. To our knowledge, it was the first global corporate initiative of its kind at the time.
In 2017, our successful COyou2 Programme had its ten-year anniversary. Between its launch in 2007 and the end of 2017, it chalked up the following impressive statistics: ̤ Over 15 000 Swiss Re employees and their families took part in the programme, investing in advanced green technology and renewable energy products; ̤ In this way, they helped avoid roughly 70 000 metric tonnes of CO2 emissions; ̤ This amount is equivalent to an average passenger car driving over 265 000 000 kilometres, enough to circle the Earth 6 620 times; ̤ It is also equivalent to the carbon sequestration effect of growing 1 800 000 trees for ten years.
Celebrating the programme’s ten-year anniversary, we held a competition for our employees. We asked them to create a personal message on how they have made use of the programme and to provide a photograph, video or other illustration.
Below you can read two of the winning entries: Alvaro Leiva Rincon, Bratislava
In April, I injured my knee playing football for the Swiss Re team. 1st diagnostic: surgery. 2nd option: get the leg very strong and avoid surgery. Thanks to the COyou2 Programme I bought a new bike … The result: I avoided the surgery. On average, I do three weekend trips per month, covering more than 200 km on each. Of course, I also go to the office by bike. COyou2 Programme = Bikes > cars
Since yesterday, we have been proud producers of clean energy. COyou2 has supported me and (indirectly) my small family in our aspiration to live without a car. Besides being more environmentally friendly, we were also able to save up some of our own money, which we have now invested in harvesting the power of the sun. A big THANK YOU from myself, my wife and my little daughter who will hopefully grow up in a more sustainable future.
Our vision is to offer our employees meaningful work with a clear purpose in an attractive and inclusive work environment. We aim to collaborate in the spirit of “Let’s be smarter together”, because we can maximise our full potential only if we work together. Our organisation is constantly looking for new ways to improve the wellbeing of society and prepare for the changing needs of the future, drawing on the know-how and experience of a diverse, multigenerational group of employees. We aspire to be a place where a flexible and inclusive culture is the norm and where everyone can contribute. We are passionate about building an environment of trust, respect, collaboration and responsibility in which how we achieve results is every bit as important as what we achieve.
** In 2017, we changed our reporting method for average tenure. The numbers for 2015 and 2016 have been restated accordingly.
̤ Drive the business: We envision that our employees operate with a truly commercial mind-set and accountability. They should all take accountability proactively and hold each other responsible for performance in terms of both results and behaviour. We ensure reward is fair and competitive, although this should not be the main reason why people want to work for our company.
We are proud to see that various areas improved in 2017. Diversity & Inclusion continues to advance, as 84% of surveyed employees feel that Swiss Re values diversity and has an open, inclusive culture that exceeds the Global Financial/Insurance Average Benchmark of 77%. Customer Focus also emerged as a new area of strength, with 75% of employees who feel encouraged to suggest improvements that will better serve customers. Overall scores show that in terms of Work Fulfilment, 75% agree that their job is a good fit, and 73% feel a strong sense of accomplishment in their work. Finally, the area that has improved the most since 2015 is Empowerment/ Autonomy, driven by 70% of employees who feel they are able to influence decisions affecting their work, which directly supports our People Strategy.
̤ Build for the future: At Swiss Re, we embrace and build a diverse workforce that brings together the best of multiple generations, cultures, skill sets and thinking. Our aim is for our employees to live a flexible, inclusive and open culture where all perspectives are valued. We create meaning for our employees by connecting our work to the core purpose of our company.
Developing our employees In a world where the ability to learn and adapt quickly is increasingly crucial, the effective development of our people and leaders is key for our enduring success. For this reason, we have continued to significantly invest in this area during 2017 by reinforcing our 70/20/10 approach to developing and upgrading our leadership development architecture. The 70/20/10 approach advocates a shift from formal training or self-study (10% of development time) to actions that reflect “on-the-job experiences” (eg rotations and stretch assignments; 70%) and “learning from others” (eg mentoring, coaching; 20%).
Investing in employee development and growth We firmly believe in creating a culture of personal growth which empowers our employees to fulfil their aspirations and encourages them to develop their capabilities through a variety of learning experiences with active support from their managers. Our initiative PersonalGrowth@SwissRe sets out the shared role line managers and employees play and focuses on our investments in employee development. In this context, we offer various rotation opportunities that give our employees a great chance to gain insight into business areas outside their own and that support managers who have a short-term need for additional (project) resources in their team.
Currently, we offer more than 1 000 different training courses. Our employees attend training in areas as diverse as underwriting, finance, sales and negotiation, leadership, diversity and inclusion, interpersonal skills, project management, office tools and language skills. In 2017, our employees completed 234 609 hours of training overall, averaging 15 hours and USD 784 per employee. We recommend that client-facing employees invest at least two days per year in formal sales training. A total of 581 employees participated in sales training during 2017, with the average feedback score of 4.48 (out of 5), which is in line with the financial services benchmark of 4.4. Reflecting our efforts in the area of employee development, we outperformed in all HR categories within the prestigious Dow Jones Sustainability Indices, with Swiss Re top on the social dimension and above the world average in every human capital dimension (Human Capital Development scored 100% versus the industry average of 38 and world average of 77).
Swiss Re won the STEVIE Silver Award in the area “Achievement in Workforce Development and Learning” with the new Finance Week Development Programme – a new approach to learning. The newly introduced programme provides an interactive and innovative learning experience that expands our finance expertise and differentiates us from competitors. The objective of the event was to improve the finance acumen of the Reinsurance organisation. A total of 530 employees participated in 40 events and trainings as part of the Finance Week in Zurich, Switzerland in 2017, and 260 participants attended in Armonk, US with 25 events and trainings. Over 50 internal and external experts shared their expertise and we embedded the 70/20/10 approach to modern training.
Managing performance We want our employees to reach their potential and be fully supported in their work. We therefore lay great emphasis on performance. The past three years have seen our behavioural framework, the Personal and Leadership Imperatives, become fully embedded in our performance management approach, focusing on both what people achieve and how they achieve their goals. Including these behaviours in performance and feedback discussions allows for robust, future-focused
In 2017, Swiss Re won first place for “Top 100 Company For Graduates To Work For” in the “Banking & Finance” sector. Previously, we had already won the JobCrowd Award in the “Accounting & Insurance” category in 2015 and 2016. Overall, we ranked 11th out of 100 companies in 2017.
This award was presented to us by TheJobCrowd (www.thejobcrowd. com), a popular graduate job review website in the UK.
To determine this ranking, our graduates were asked to complete a survey about working at Swiss Re. They were asked 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, ethical/ environmental balance? The results from our graduates were overwhelmingly positive.
Engaging the next generation We support employees at all levels to maximise their potential and we are proud to offer various programmes to young adults moving into the workforce.
Graduates@SwissRe Each year, our award-winning graduates@swissre programme provides entry positions for a number of university graduates. It offers an excellent opportunity for young talents to discover the exciting world of a leading global re/insurer.
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. The programme was first launched in 2007 and we still have 409 graduates working for Swiss Re from this 10-year period.
Interns@SwissRe In 2017, we employed 79 interns through our interns@swissre programme. This includes nine internship positions for students from the African Leadership Academy (ALA) and the Swiss Re Start-up Academy in Kenya in support of our high growth market talent strategy. The interns programme is mainly aimed at university students who are pursuing a Bachelor’s or Master’s degree, and at graduates with less than one year of full-time work experience. Interns join teams in core business areas, where they take on specific tasks and various projects. In India, South Africa, the US and the UK, we offer traditional summer internships that typically last between eight and 12 weeks, while in Germany and Switzerland the internships usually span three to six months.
differences and where they can all bring their authentic selves to the workplace – an environment in which our inclusive culture enables us to truly live our “smarter together” brand promise.
Uniqueness in leadership, in thought, in fact in every way we work together and live our values. A key aspect of our People Strategy is to prevent stereotyping of individuals based on any dimension of diversity. We are committed to helping our employees recognise and understand “unconscious biases” that every one of us has, and which can unintentionally influence our decisionmaking and our behaviour towards others.
Executive/senior management positions* 22.1 22.9 23.3 All management positions* 32.2 32.9 33.3 * “Executive/senior management positions” comprises the management levels of Director/Senior Vice President upwards. “All management positions” refers to Vice President and above.
In 2017, we took several important steps toward building and fostering a gender-balanced talent pipeline. We are committed to closely monitoring the talent flows in the business and locations, ensuring we make steady progress toward our aspirations. We also launched a global sponsorship initiative designed to enable highpotential female talent to reach their career aspirations. Close to 50 executive members are actively engaged in one or more sponsor/sponsoree relationships.
“If we are to make the world more resilient, we need everybody to be able to bring their true selves to work and to be fully engaged. I am an ally to our LGBTI+ community and am committed to ensuring that they do not feel marginalised or underrepresented alongside all other communities at Swiss Re.”
We acknowledge that one size does not fit all and we support non-traditional work models and embrace flexibility. Our trademarked programme, Own the Way You Work, is a cultural change initiative which gives managers and employees autonomy to decide how, when and where work is carried out in compliance with the applicable laws, rules and regulations of their particular region. Own the Way You Work is about creating a team environment where trust, responsibility, empowerment and autonomy are valued and where business results count more than “face time” in the office. This has become a differentiating part of Swiss Re’s employee value proposition and was internationally recognised by Glassdoor when we ranked in their 2017 Top 20 Global Companies for Employee Benefits & Perks.
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, and disciplinary actions and conflict cases.
Number of employees who have recorded absence due to illness 1 979 1 809 1 683 Average number of sick days 7.2 7.9 8.7
In the UK, these activities are covered by the Employee Liaison Group (ELG) and at our Munich office we have a works council with clearly defined codetermination rights in several areas. Our smaller branches in Europe (eg in France, Italy, Luxembourg and Denmark) also have works councils or staff delegates, depending on the size of the branch and local regulations.
Through the Swiss Re Alumni Network, we offer our former employees the opportunity to continue sharing their knowledge and experience, and to keep in contact with colleagues. Currently, we have more than 3 800 active members. The network also includes our retirees. This important group of stakeholders continues to take great interest in the company. Through extended access rights, we enable them to utilise resources that are normally available to employees only.
The balanced compensation package is generally complemented by competitive pension plans and other employee benefits. Such benefits include, for example, the Continuous Contribution Award, which recognises the loyalty, commitment and continuous contribution of our employees by offering them opportunities at defined milestones to enjoy additional paid time off. Health benefits and financial protection in case of ill-health are also an important part of many of our packages. We provide medical, life and disability insurance in excess of state provisions in several locations. Furthermore, we support employees in accumulating retirement benefits to supplement any state provisions.
In addition, the COyou2 Programme continues to offer our employees the opportunity to claim subsidies from the company for a range of emissionscutting investments they want to make in their private lives (see page 58).
In early 2017, Swiss Re participated in a study on compensation practices and policies of the Board of Directors, the Executive Board and senior management of listed and large, unlisted companies in Switzerland and was awarded the Silver Medal (2nd place).
Further information on Swiss Re’s approach to compensation and benefits can be found in our 2017 Financial Report (pages 152–178).
Key focus areas in 2017 included the revision of the Corporate Bylaws to anticipate developments and trends, the enhancement of the conflicts of interest framework as well as Board of Directors educational sessions and trainings.
̤ the Swiss Financial Market Supervisory Authority (FINMA) provisions on corporate governance, risk management and internal control systems.
The Board of Directors regularly assesses Swiss Re’s corporate governance against regulatory developments, relevant best practice standards and new stakeholder demands. The Board of Directors closely monitors Swiss and global corporate governance developments and considers relevant studies and surveys.
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 SRL or the Swiss Re Group or gives the appearance of a conflict. Each member must disclose any conflict of interest relating to a matter to be discussed at a meeting, as soon as the member becomes aware of the conflict, to the Chairman. The respective member must not participate in the discussion and decision-making involving the interest at stake. The Chairman informs the Board of Directors of the existence of the conflict and it is reflected in the meeting minutes. Each member must disclose any conflict of interest generally arising to the Group Chief Legal Officer or in his absence to the Group Chief Compliance Officer in line with the standards and procedures set forth by the personal Conflicts of Interest Instructions.
Swiss Re’s corporate governance framework Swiss Re Ltd’s Board of Directors is responsible for the overall direction, supervision and control of Swiss Re Ltd (SRL) and the Group. It has delegated the management of SRL and the Group to the Group Executive Committee (Group EC). This structure maintains effective mutual checks and balances between these top corporate bodies.
As determined by applicable law and the Articles of Association, the Board of Directors has inalienable and nontransferable responsibilities and authorities. The Board of Directors has established Board committees, which support the Board in fulfilling its duties. The Board of Directors has delegated certain responsibilities, including the preparation and execution of its resolutions, to the Chairman’s and Governance Committee, the Audit Committee, the Compensation Committee, the Finance and Risk Committee and the Investment Committee.
Voting right restrictions, statutory group clauses and exception rules There are no voting right restrictions and no statutory group clauses (other than the limitations on nominee registrations). Therefore, there are no procedures or conditions for cancelling restrictions and no rules on making exceptions to them. Accordingly, no such exceptions were made in 2017.
Changes of control and defence measures SRL has not put in place any specific measures to defend against potential unfriendly takeover attempts. SRL’s Articles of Association neither contain an “opting up” nor an “opting out” provision. 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.
We regularly review and update the Code to reflect changes in regulations and principles. An overhauled version that includes a new layout and real-life examples to provide clearer guidance for day-to-day business situations was published in the second half of 2016.
Policies Our Code addresses the following key compliance topics under two headings, “Our responsibility towards one another and Swiss Re” and “Our responsibility towards our business partners and society”: Our responsibility towards one another and Swiss Re ̤ Business information and information technology ̤ Communication ̤ Conflicts of interest ̤ Diversity & inclusion and fair and equal treatment ̤ Fraud ̤ Health, safety and security ̤ Intellectual property
Our responsibility towards our business partners and society ̤ Bribery and corruption ̤ Data protection ̤ Inside information ̤ Fair competition ̤ International trade controls and economic sanctions ̤ Licensing and permanent establishment ̤ Money laundering ̤ Sustainability and human rights
We also contribute thought leadership on data protection by conducting expert sessions during insurance industry events and by hosting events through the Swiss Re Institute that look at the future of regulations, new technologies, digitalisation, cross-border data processing, big data and innovation in life and health insurance
Our Anti-money Laundering Standards set out in detail key principles and guidance in relation to our anti-money laundering and counter terrorism financing efforts, including due diligence obligations concerning “know your counterparty”, counterparty and politically exposed persons (PEP) screening and the reporting of any suspicious activities.
Training All new permanent and temporary employees joining Swiss Re must undergo mandatory eLearning training on the Code, focusing on ethical behaviour in accordance with the principles of the Code and its relationship to Swiss Re’s values. Completion of the training is tracked and instances of non-completion are escalated until resolution.
All permanent and temporary employees complete a periodic Code of Conduct Acknowledgement.
We also conducted trainings for all our employees on the following compliance topics in the four years from 2014 to 2017: ̤ Anti-bribery and corruption ̤ Anti-money laundering and terrorist financing ̤ Conflicts of interest ̤ Data protection ̤ Inside information and insider training ̤ Fraud awareness
In addition, we have offered tailored trainings to employees that are particularly exposed to certain compliance risks, eg on antitrust and fair competition, insider trading, licensing & permanent establishment.
Policy governance In the second half of 2017 we launched a Policy Management Tool as a central place for finding all Swiss Re policies and standards. In addition, we simplified the architecture of our Global Policies so that they are short and use simplified language and a consistent structure to make them easy to read and understand. There are a reduced number of Global Policies (eight in total) that contain highlevel principles all employees have to be aware of, beyond the principles set out in the Code of Conduct. Where necessary, underlying Standards are in place to provide additional detail on the Code of Conduct and the Global Policies.
Contribute to promoting social welfare, protecting the environment and enhancing quality of life near Swiss Re locations
Boost impact by teaming up with private and public partners that share our goals and complement our expertise
Earn the respect of our stakeholders, creating measurable value for society and for Swiss Re
WEBSITE You can find detailed information about the Swiss Re Foundation at www.swissrefoundation.org
Archana Sinha of Ashoka India on how kids can help fi ght malnutrition page 4
Swiss Re Foundation has worked with Ashoka India and its partners to tackle endemic malnutrition by developing and implementing a programme called Nourishing Schools. This initiative teaches children the importance of healthy food and empowers them as changemakers in their communities.
Scope and subject matter Scope and subject matter Our limited assurance engagement focused on the following data and information disclosed in the CR Report 2017 of Swiss Re and its consolidated subsidiaries, for the financial year ended 31 December 2017: ̤ 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; ̤ The organizational measures and internal key controls in place at the corporate level regarding aggregation of information obtained from the subsidiaries and reporting functions; ̤ The consolidated data and information disclosed in the sections “Creating sustainability solutions” on pages 18–27, “Extending our risk intelligence” on pages 28–35, “Being a responsible investor” on pages 36–39, “Exploring and shaping the risk landscape” on pages 40–49, “Reducing our environmental footprint” on pages 50–59, “Engaging our people” on pages 60–69 and “Compliance: Code of Conduct” on pages 72–73; ̤ The consolidated CO2 emissions 2017 (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 51, “Underlying environmental data, Swiss Re Group” on page 51 and “Indirect emissions from purchased electricity, Swiss Re Group” on page 51 in the CR Report 2017 covering the reporting period from 1 October 2016 to 30 September 2017; ̤ The retirement of 80 780 tonnes of CO2e (CO2 equivalents) described on page 54 of the CR Report 2017.
̤ The defined internal guidelines, by which CR data and information are internally gathered, collated and aggregated.
Our responsibility Our responsibility is to express a limited assurance conclusion on whether anything has come to our attention to indicate that the corporate responsibility information reporting is not stated, in all material respects, in accordance with the reporting criteria.
Standard on Assurance Engagements 3410, Assurance Engagements on Greenhouse Gas Statements, issued by the International Auditing and Assurance Standards Board. These standards require that we plan and perform this engagement to obtain limited assurance about whether the identified CR indicators are free from material misstatement. A limited assurance engagement under ISAE 3000 (revised) and ISAE 3410 is substantially less in scope than a reasonable assurance engagement in relation to both the risk assessment procedures, including an understanding of internal control, and the procedures performed in response to the assessed risks. Consequently, the nature, timing and extent of procedures for gathering sufficient appropriate evidence are deliberately limited relative to a reasonable assurance engagement and therefore less assurance is obtained with a limited assurance engagement than for a reasonable assurance engagement.
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 Performing tests on a sample basis of evidence supporting selected CR data and information (Natural catastrophes and climate change, strengthening risk resilience: 2017 highlights, the commitment to the UN and the Grow Africa Partnership, the Sustainability Risk Framework, responsible investments, HR data and information, diversity and inclusion, development & training) to assess their completeness, accuracy, adequacy and consistency; ̤ Review of the documentation 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 80 780 tonnes CO2e verified emission reductions (VER) according to the Gold Standard.
Memberships and commitments CDP CDP is an international, not-for-profit organisation providing the only global system for companies and cities to measure, disclose, manage and share vital environmental information. CDP works with market forces to motivate companies to disclose their impacts on the environment and natural resources and take action to reduce them. www.cdp.net
Chief Risk Officer Forum The CRO Forum is a group of professional risk managers from the insurance industry that focuses on developing and promoting industry best practices in risk management. The Forum consists of Chief Risk Officers from large multinational insurance companies. www.thecroforum.org
Memberships, commitments, awards and index listings Listed here is a selection of Swiss Re’s most important memberships, commitments, recent awards and index listings with regard to corporate responsibility.
STEVIE Silver Award, 2017 We won this award in the “Achievement in Workplace Development and Learning” area for our innovative Finance Week Development Programme (see page 63).
Aon Hewitt Best Employer, 2016 We were recognised by our engagement survey providers Aon Hewitt as a Best Employer in several countries and the Europe region.
Photographs: Istockphoto (Cover & back cover) Geri Krischker (page 2) Marc Wetli (page 2)
Saravanakumar Thangavelu/Swiss Re (page 53) South Pole (page 55) © 2017 Leonardo Finotti (page 57) Alvaro Leiva Rincon/Swiss Re (page 59) Thomas Artho/Swiss Re (page 59) Stevie Awards Inc. (page 63) Michael Strub (page 64) Deniz Kenber/Swiss Re (page 66) Christian Bobst Photography (page 75)