reinsurance Reinsurance is Swiss Re’s largest business in terms of income and the foundation of our strength, providing about 85% of gross premiums and fee income through two segments — Property & Casualty and Life & Health. The unit aims to extend Swiss Re’s industry-leading position with disciplined underwriting, prudent portfolio management and diligent client service.
Our strategy is designed to help us meet our financial targets for 2016 and beyond — ambitious goals that are aimed at profitability and economic growth.
Our Reinsurance Business Unit uses key trends and metrics to contribute to the Group’s overall optimal capital allocation through both its Property & Casualty and Life & Health segments.
More than three hundred highly-educated employees work in basic research of insurance. Fifty are at work modelling natural catastrophes and thirty work in the unit that produces sigma, the industry-leading publication. At our Centre for Global Dialogue we host more than one-hundred events per year with clients and other experts on topics such as 3-D printing and cyber risk.
Forward-looking statements typically are identified by words or phrases such as “anticipate”, “assume”, “believe”, “continue”, “estimate”, “expect”, “foresee”, “intend”, “may increase” and “may fluctuate” and similar expressions or by future or conditional verbs such as “will”, “should”, “would” and “could”. These forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause Swiss Re’s actual results of operations, financial condition, solvency ratios, capital or liquidity positions or prospects to be materially different from any future results of operations, financial condition, solvency ratios, capital or liquidity positions or prospects expressed or implied by such statements or cause Swiss Re to not achieve its published targets.
̤ possible inability to realise amounts on sales of securities on Swiss Re’s balance sheet equivalent to their mark-to-market values recorded for accounting purposes; ̤ the outcome of tax audits, the ability to realise tax loss carryforwards and the ability to realise deferred tax assets (including by reason of the mix of earnings in a jurisdiction or deemed change of control), which could negatively impact future earnings; ̤ the possibility that Swiss Re’s hedging arrangements may not be effective; ̤ the lowering or loss of one of the financial strength or other ratings of one or more Swiss Re companies, and developments adversely affecting Swiss Re’s ability to achieve improved ratings; ̤ the cyclicality of the reinsurance industry; ̤ uncertainties in estimating reserves; ̤ uncertainties in estimating future claims for purposes of financial reporting, particularly with respect to large natural catastrophes, 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; ̤ the frequency, severity and development of insured claim events; ̤ acts of terrorism and acts of war; ̤ mortality, morbidity and longevity experience; ̤ policy renewal and lapse rates; ̤ extraordinary events affecting Swiss Re’s clients and other counter parties, such as bankruptcies, liquidations and other credit-related events; ̤ current, pending and future legislation and regulation affecting Swiss Re or its ceding companies and the interpretation of legislation or regulations by regulators; ̤ 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 or other issues experienced in connection with any such transactions; ̤ changing levels of competition; and
As you can see I am passionate about Swiss Re’s future. I am convinced that Christian Mumenthaler and his team will further strengthen the role of Swiss Re in our industry and our society more generally. It is an honour and a privilege to work for this great company. I will always be proud to have been part of Swiss Re.
Market overview The global non-life industry generated around USD 2 000 billion of premium income in 2015, of which 19% came from emerging markets. non-life insurance ranges from standardised motor and household insurance to sophisticated tailor-made liability and property covers, including specialty commercial and industrial risk insurance.
Market performance Global life insurance premium income declined by 5% in US dollar terms in 2015 due to adverse currency developments. in inflation- and currencyadjusted terms, premium income was up 3%.
in emerging markets, premium income rose by an estimated 11% in 2015 after a 7.4% gain in 2014. Growth was strongest in the emerging asian countries (up 13%). in china, premiums were up 12% and in india 8%, the latter after five years of contraction and stagnation due primarily to regulatory changes. Premium growth strengthened to 8% in latin america while in central and eastern europe, premiums were down 2% in real terms, led by a decline in russia because of the economic recession, high inflation, unfavourable currency moves and weakening credit which had fuelled growth before.
Market performance The life reinsurance industry registered a currency-driven decline of 3%. currency- and inflation-adjusted premium income rose by 3% in 2015. The accident & Health business supported some premium growth, as did large annuity and longevity contracts. Meanwhile, other business lines had weak organic growth and some treaties were cancelled. Health and annuity transactions are expected to continue to drive growth in the coming years and also help reinsurers in the UK and north america diversify away from traditional mortality business.
The third area is the optimisation of resources and platforms. We have more than doubled our workforce in high growth markets since 2011 and invested in strengthening our iT architecture, adding smart analytics and cognitive computing to our toolset.
Flexible capital allocation among these portfolios — and taking advantage of the diversification benefits — is what drives value creation at Swiss re. We aim to make our decisions based on capital usage and returns from each portfolio, balancing cash flow, economic Value Management (eVM) and US GaaP metrics.
Steering risk globally across all Business Units and product types is key to optimising capital allocation. Specifically, our underwriting teams analyse and predict loss, exposure and premium trends by portfolio segment. a central unit then determines the optimal portfolio mix by taking into account future expected cash flow, eVM and US GaaP profiles by portfolio segment, leveraging the advantages of our multi-line book to deliver more than just the capital-related diversification benefits. Knowing these cash flow, eVM and US GaaP profiles allows us then to formulate an ambition for a future desired book of business and create a plan to achieve it.
The total life and health benefits decreased from USD 10.6 billion in 2014 to USD 9.1 billion in 2015. That result was strongly influenced by the successful completion of management actions in reinsurance in 2014 in relation to the US pre-2004 individual life business. in 2015, mortality experience was favourable compared to expectations mainly from good experience in the US post-2004 business. Morbidity was unfavourable by about the same amount, driven by adverse experience in the critical illness business in the UK and asia. Model and assumption changes were favourable, driven by interest rate updates of the valuation of disabled life reserves.
Our 2015 performance was driven by solid underwriting and progress on strategic goals.
The composition of gross premiums earned by region changed year on year, with the americas having a higher share of premiums in 2015 compared to 2014. The balance between proportional and non-proportional reinsurance business moved towards proportional business in 2015. Based on gross premiums written before intra-Group retrocession, the share of proportional business was 69% in 2015, compared to 64% in 2014.
Expenses claims and claim adjustment expenses –8 493 –7 892 –7
Premiums Operating income1 1 Operating income is income before interest for financial debt, excludes realised capital gains/losses. 2 Data for Munich re and Hannover re extrapolated from 9 months results.
Expenses life and health benefits –9 194 –8 290 –10 return credited to policyholders –99 –60 –39 acquisition costs –2 489 –1 986 –20 Other expenses –885 –903 2 interest expenses –438 –278 –37 Total expenses –13 105 –11 517 –12
2 Operating income is income before tax and before interest for financial debt; excludes realised capital gains/losses. 3 Data for Munich re and Hannover re extrapolated from 9 months results.
in addition, corporate Solutions started operations in Johannesburg, Madrid, Melbourne, and Osaka, expanding the distribution network to 52 offices in 20 countries.
Dividends are typically paid out of current earnings and Swiss re pays its dividend annually. Shares are ex-dividend two working days after the annual General Meeting (aGM). Dividend payment is typically two working days after the ex-dividend date. The corresponding dates in 2016 are 26 and 28 april.
Swiss Security number (Valorennummer) 12688156 – iSin (international Securities identification number) cH0126881561 US8708861088
Te vim justo iudico. Ei iudicabit consequat cum, mollis pericula constituto pri ex, graeco eruditi detracto ea sit.
patrick Raaflaub group Chief Risk Officer 50 Swiss Re 2015 Financial Report
These capital measures are expected to bring the total amount of capital returned to shareholders to Usd 12.1 billion since the implementation of the new group structure in 2012, even excluding the upcoming proposed share buy-back.
swiss Re’s capital management aims to ensure our ability to continue operations following an extremely adverse year of losses from insurance and/or financial market events.
The agencies evaluate swiss Re based on a set of criteria that include an assessment of our capital adequacy.
To manage these risks, we have a range of liquidity policies and measures in place. in particular, we aim to ensure that: ̤ sufficient liquidity is held to meet funding requirements under current conditions as well as adverse circumstances; ̤ funding is charged and credited at an appropriate market rate through our internal transfer pricing; ̤ diversified sources are used to meet our residual funding needs; and
The primary liquidity stress test is based on a one-year time horizon, a loss event corresponding to 99% Tail Value at Risk (see pages 64–65), and a three-notch ratings downgrade.
in addition, Risk management proposes risk capacity limits that ensure compliance with the overall risk appetite and tolerance. The risk capacity limits represent an aggregated constraint to risk-taking and seek to ensure that group-wide accumulation risks remain within acceptable levels. They allow for risk monitoring and hence also for risk controlling during the subsequent execution of the plan. in addition to the risk capacity limits proposed by Risk management, the group EC also sets operational limits, which the business monitors and controls in day-to-day management.
The detailed aspects of the group’s risk governance are defined in the group Risk policy (level 1), swiss Re’s core Risk management document. it outlines how the group organises and applies its risk management practices. The policy is owned by the group Board of directors and is binding for all swiss Re employees.
Risk-taking activities are typically subject to three lines of control. The first comprises the day-to-day risk management activities by front-line employees (risk takers) in the Business Units as well as in corporate and enabling functions. The second line of control is formed by independent oversight functions, such as Risk management and Compliance. The third consists of independent audits of processes and procedures carried out by our group internal Audit.
̤ life and health risk decreased by 10% to Usd 7.2 billion. This drop was mainly driven by the depreciation of several currencies against the Us dollar.
swiss Re’s Risk management function monitors reserving levels; it provides information to the risk-taking functions on trends to ensure appropriate pricing. Underwriting systems across the group provide timely information on risks assumed and capacity committed. Regular internal risk and issue reporting ensures transparency at all stages.
Credit risk is the risk of incurring a financial loss due to diminished creditworthiness or default of swiss Re’s counterparties or of third parties (credit spread risk falls under financial market risk). Credit risk arises primarily from our investment activities as well as from liabilities underwritten by our Business Units, such as credit, surety and from retrocession. We distinguish between three types of credit exposure: the risk of issuer default from instruments in which swiss Re invests or trades; counterparty exposure in a direct contractual relationship; and risk assumed by swiss Re through reinsurance contracts.
The model generates a probability distribution for the group’s economic profit and loss over a one-year time horizon, specifying the likelihood that the outcome will fall within a given range. The risk measures derived from the model are expressed as economic loss severities taken from the total economic profit and loss distribution.
the Board of Directors assesses Swiss re’s corporate governance on a regular basis to ensure its alignment with best practice.
̤ In line with the ordinance’s requirements and the amended articles of association, the shareholders were asked at the annual General Meeting 2015 to approve the compensation of both the Board of Directors and the Group eC.
Changes in capital Changes in 2015 the annual General Meeting 2015 approved that the authority to issue registered shares from authorised capital as set forth in the articles of association be extended to 21 april 2017 and that the limitation included in the articles of association to issue registered shares from authorised capital where the existing shareholders’ subscription rights are excluded, be extended to 21 april 2017.
Limitations on transferability and nominee registrations Free transferability the company maintains a share register for the registered shares, in which owners and usufructuaries are entered.
Term of office effective since the annual General Meeting 2014, the members of the Board of Directors are elected for a term of office until completion of the next General Meeting of shareholders. Members whose term has expired are immediately eligible for re-election.
Members ̤ Walter B. Kielholz, Chair ̤ renato Fassbind ̤ C. robert Henrikson ̤ philip K. ryan (since 21 april 2015) ̤ Susan L. Wagner (since 21 april 2015) ̤ Mathis Cabiallavetta
Resolutions and quorum With regard to Board meetings, a quorum is constituted if at least either the Chairman or the vice Chairman or the Lead Independent Director are present in person or participate by telephone or video conference, as well as the majority of the members of the Board of Directors. as regards Board committee meetings, a quorum shall be constituted if the majority of the Board committee members are present or participate by telephone or video conference. resolutions are adopted by majority vote. at Board meetings, in the event of a tie, the Chairman’s vote is decisive. In the event of a tie at Board committee meetings, the item shall be submitted to a vote by the full Board. Board and committee meetings consider and discuss the items on the agenda incorporating presentations by members of the Group eC and, where needed, by other specialist employees or outside advisers. It is contemplated for every meeting that an executive session is held for discussions between the Board of Directors and the Group Ceo. Furthermore, private sessions are held for discussions involving all members of the Board of Directors only.
Number of meetings Average duration Average attendance Invitees in advisory capacity, in addition to members
Delegation of management the Board of Directors has delegated the management of Swiss re Ltd and the Swiss re Group to the Group eC (see section executive Management, starting on page 102). Such delegated tasks are within the responsibility of the entire Group eC.
Appointment and removal of Group EC members and further key executives, Human Capital ̤ appoints and removes Group eC
Group Chief Strategy Officer the Group CSo is responsible for the Group strategic process and initiates the respective discussions in the Group eC as preparation for submission of strategic content to the Group Board for approval. the Group CSo supports and advises the Group Board and the Group eC by developing and articulating a Group strategy in close cooperation with the Business Units and Group Functions.
̤ Member of the global executive Board of the International Chamber of Commerce (ICC) since 2014
thierry Léger was appointed Ceo Life Capital and a member of the Group eC as of 1 January 2016.
Qualifications at least once a year, the external auditor submits a report to the audit Committee describing the external auditor’s own quality control procedures, including any material issues raised by its most recent internal reviews or inquiries or investigations by governmental or professional authorities within the preceding five years, as well as any steps taken to deal with any such issues.
Understanding the risk To assess our property & Casualty business accurately and to structure sound risk transfer solutions, we need to clearly understand the economic impact of natural catastrophes and the effect of climate change. This is why we invest in proprietary, state-of-the-art natural catastrophe models and regularly collaborate with universities and scientific institutions.
Protecting Vietnamese farmers against livestock loss We also helped to relaunch an important agricultural insurance pilot in Vietnam. it will protect the livelihoods of poor smallholder farmers in the two provinces of Vinh phuc and Ha Giang by insuring them against the effects a major natural catastrophe or disease may have on their livestock. in total, the scheme covers more than 150 000 head of cattle and buffalo.
C. Robert Henrikson Chairman of the Compensation Committee 130 Swiss Re 2015 Financial Report
Plan duration 3 years 5 years for Group eC members and GmDs* and 3 years for the majority of participants 3 years 1 year
Funding of the Annual Performance Incentive and Leadership Performance Plan pools the Compensation Committee focuses on both financial results and qualitative criteria in determining global variable compensation pools.
Incentive Share Plan the incentive share plan (isp) provides employees with an opportunity to receive some or all of their immediate cash api in the form of swiss Re Ltd shares. shares are offered with a 10% discount on the Fair market Value (FmV) and are subject to a one-year blocking period. Full shareholder rights apply during this blocking period. the isp encourages alignment with shareholder interests. at the end of the one-year period, the employee assumes full ownership of the shares.
Compensation framework for Group EC members the Group eC including the Group Ceo are remunerated under the same compensation framework as all other swiss Re employees, except for the following: ̤ Compensation approval: the
̤ Caps on api: two caps apply to actual api awards which are 2x tapi and 3x annual base salary.
Benchmarking the external compensation advisor to the Compensation Committee conducts an annual review of the compensation for the Group eC relative to a group of reference companies in the financial services industry to ensure that market competitiveness is maintained. the reference companies are regularly reviewed by the Compensation Committee to ensure their continued relevance. the core peer group consists of the following globally active primary insurance and reinsurance firms: aCe Ltd, allianz se, american international Group inc, aviva pLC, aXa sa, Generali, Hannover Rueck se, metlife inc, muenchener RueckversicherungsGesellschaft aG, partnerRe Ltd, QBe insurance Group Ltd, Reinsurance Group of america inc, sCoR se, XL Group pLC* and Zurich insurance Group Ltd.
Compensation Committee activities the Compensation Committee has an annual agenda to ensure that important reviews take place at the appropriate times throughout the year. the Compensation Committee also commits time to executive sessions and conducts periodic self-assessments to ensure its continued high level of effectiveness. it held six meetings during 2015 and provided an update to the Board of
Board of Directors4 individual compensation of Group eC members (excl. Group Ceo)
each member of the Group eC including the Group Ceo participates in a definedcontribution pension scheme. the funding of pension benefits shown in the two tables on page 147 reflects the actual employer contributions.
in general, credit is secured against real estate or pledged shares. the terms and conditions of loans and mortgages are typically the same as those available to all employees of swiss Re Group in their particular locations to the extent possible. For example, in switzerland fixed-rate mortgages have a maturity of five years and interest rates that correspond to the five-year swiss franc swap rate plus a margin of 10 basis points.
Total net cash provided/used –235 1 098 effect of foreign currency translation –366 –365 Change in cash and cash equivalents –601 733 cash and cash equivalents as of 1 January 8 072 7 471 Cash and cash equivalents as of 31 December 7 471 8 204 1 the Group reviewed the nature of certain items within the statement of cash flow. “securities purchased/sold under agreement to resell/repurchase, net” were reclassified from the operating cash flow to the investing cash flow, and certain investment related cash flows were reclassified from “trading positions, net” in the operating cash flow to “net purchases/sales/maturities of other investments” in the investing cash flow. comparatives are adjusted accordingly.
Experience features which are directly linked to a reinsurance asset or liability are classified in a manner that is consistent with the presentation of that asset or liability.
Share-based payment transactions As of 31 December 2015, the Group has a Leadership Performance Plan, stock option plans, restricted shares, an Employee Participation Plan, and a Global Share Participation Plan. These plans are described in more detail in Note 15. The Group accounts for share-based payment transactions with employees using the fair value method. Under the fair value method, the fair value of the awards is recognised in earnings over the vesting period.
Subsequent events Subsequent events for the current reporting period have been evaluated up to 15 March 2016. This is the date on which the financial statements are available to be issued.
In January 2016, the FASB issued ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities“, an update to subtopic 825-10, “Financial Instruments – Overall“. The ASU requires an entity to carry investments in equity securities, including other ownership interests and limited liability companies at fair value through net income, with the exception of equity method investments, investments that result in consolidation or investments for which the entity has elected the practicability exception to fair value measurement. The practicability exception can only be applied by certain entities and only to equity investments without a readily determinable fair value. Investments under the practicability exception will be subject to an indicator-based impairment test. For financial liabilities to which the fair value option has been applied, the ASU also requires an entity to separately present the change in fair value attributable to instrument-specific credit risk in other comprehensive income rather than in net income. Specific exceptions apply to this requirement. In addition, the ASU requires an entity to assess whether a valuation allowance is needed on a deferred tax asset (DTA) related to fixed income securities AFS in combination with the entity‘s other DTA‘s rather than separately from other DTAs. The ASU also introduces changes to disclosure requirements for financial instruments not measured at fair value and introduces new requirements for equity instruments where the practicability exception to fair value measurement is applied. The new requirements are effective for annual and interim periods beginning after 15 December 2017 with early adoption permitted for requirements relating to the presentation of the impact of instrument-specific credit risk on qualifying financial liabilities in other comprehensive income. The Group is currently assessing the impact of the new requirements.
Corporate Solutions Corporate Solutions offers innovative insurance capacity to mid-sized and large multinational corporations across the globe. Offerings range from standard risk transfer covers and multi-line programmes, to customised solutions tailored to the needs of clients. Corporate Solutions serves customers from over 52 offices worldwide.
a) Business segments – income statement For the year ended 31 December 2014 USD millions
Liabilities for life and health policy benefits –187 –187 accrued expenses and other liabilities –1 035 –864 –1 899 Total liabilities at fair value –1 048 –3 971 –944 2 969 –2 994 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.
Other invested assets measured at net asset value Other invested assets measured at net asset value as of 31 December, respectively, were as follows: The hedge fund investments employ a variety of strategies, including global macro, relative value, event-driven and long/short equity across various asset classes.
Private equity direct 109 121 non-redeemable n.a. Real estate funds 203 203 57 non-redeemable n.a.
FInanCIaL STaTEMEnTS notes to the Group financial statements 210 Swiss Re 2015 Financial Report
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” 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: 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 2014 and 2015, 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 of its issued debt positions and 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: 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.
Assets Fixed income securities available-for-sale 3 456 3 496 Policy loans, mortgages and other loans 157 154 Short-term investments 6 1 Cash and cash equivalents 23 19 accrued investment income 37 33 Premiums and other receivables 6 9 Reinsurance recoverable on unpaid claims and policy benefits 7 8 Other assets 1 1
Maturity Instrument Issued in Currency nominal in millions Interest rate Book value
in USD millions 2024 Subordinated contingent write-off loan note 2013 USD 750 6.38% 2019 813 2042 Subordinated fixed-to-floating rate loan note 2012 EUR 500 6.63% 2022 537
Benefits paid –129 –76 –17 –222 Employee contribution 27 27 Acquisitions/disposals/additions 0 Effect of settlement, curtailment and termination 1 –23 –22 Effect of foreign currency translation –407 –149 –556 Fair value of plan assets as of 31 December 3 535 2 354 0 5 889 Funded status –150 –35 –371 –556
Residential mortgage-backed securities 22 22 Commercial mortgage-backed securities 2 2 Other asset-backed securities 1 1
Outstanding as of 1 January 84 100 000 Outstanding as of 31 December 82 100 000 Exercisable as of 31 December 82 100 000
If the employee is still employed by Swiss Re at the end of a plan cycle, the employee will receive an additional number of shares equal to 30% of the total number of purchased and dividend shares held at that time. In 2014 and 2015, Swiss Re contributed USD 7 million and USD 10 million to the plans and authorised 109 461 and 211 472 shares as of 31 December 2014 and 2015, respectively.
FINANCIAl STATEmENTS Notes to the Group financial statements 234 Swiss Re 2015 Financial Report
The Group did not provide financial or other support to any VIEs during 2015 that it was not previously contractually required to provide.
The increase of the provision in the Property & Casualty Reinsurance business segment of USD 11 million is mostly related to leaving benefits.
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.
̤ uncertainties in estimating future claims for purposes of financial reporting, particularly with respect to large natural catastrophes, 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; ̤ the frequency, severity and development of insured claim events; ̤ acts of terrorism and acts of war; ̤ mortality, morbidity and longevity experience; ̤ policy renewal and lapse rates; ̤ extraordinary events affecting Swiss Re’s clients and other counter parties, such as bankruptcies, liquidations and other credit-related events; ̤ current, pending and future legislation and regulation affecting Swiss Re or its ceding companies and the interpretation of legislation or regulations by regulators; ̤ 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 or other issues experienced in connection with any such transactions; ̤ changing levels of competition; and
the Group could also be adversely affected by the insolvency of, or other credit constraints affecting, counterparties in its reinsurance operations. moreover, the Group could be adversely affected by liquidity issues at ceding companies or at third parties to whom the Group has retroceded risk, and such risk could be exacerbated to the extent any such exposures are concentrated.
risks arising from the Group’s dependence on policies, procedures and expertise of ceding companies; risks related to investments in emerging markets; and risks related to the failure of, or attacks directed at, the Group’s operational systems and infrastructure. any of the foregoing, as well the occurrence of future risks that the Group’s risk management procedures fail to identify or anticipate, could have a material adverse effect on the Group, and could also give rise to reputational risk.
Swiss Re has about 70 office locations in more than 30 countries. for a full list of our office locations and service offerings, please visit swissre.com.
Our strategy for 2016 and beyond Late in 2015, we presented an updated strategic framework. Building from our current strategy, this will drive our 2016 priorities and create long-term value for our shareholders.
In the following years, we broadened our commitment to “corporate responsibility”: still based on the key notions of long-term value creation and sustainable progress, this began to place more emphasis on social and governance aspects. Our current, overarching commitment is shown on page 9.
A key question for any company that seeks to take a long-term view and enable sustainable progress is what this means in the context of its own business and industry: which topics are “material” to achieving this goal?
The present report follows the 2014 edition and covers the calendar year of 2015. We plan to maintain our annual publishing cycle and to present our next Corporate Responsibility Report by the second quarter of 2017, covering the year of 2016.
The goal of the PEF is to set up a response system mechanism to ensure that sufficient resources will be available early enough to prevent an epidemic developing into a fully-fledged pandemic. The facility will use pre-determined and transparent criteria to indicate an outbreak. When these triggers are met, funds will be made available within days, either through capital markets or re/insurance. This will allow emergency workers, equipment and medicines to be rapidly deployed to an affected area, to prevent further spread of the disease.
Climate change adaptation Our solutions offering re/insurance protection against extreme weather events and weather volatility help communities to adapt to climate change, by making them more resilient against such risks.
Previous longevity deals in the UK The longevity solution we have developed for the Scottish & Newcastle Pension Plan is the latest in a host of such transactions in the UK. Other clients in recent years include the Aviva Staff Pension Scheme (19 000 members plus partners), one of AkzoNobel’s pension funds (17 000 members), the LV= pension fund (more than 5 000 members) and the Royal County of Berkshire Pension Fund (11 000 members). We have outlined these transactions in more detail in earlier Corporate Responsibility Reports.
At the core of our approach to tackling ESG-related risks in investments is the Sustainability Risk Framework (see pages 26–30). This framework enables us to identify and analyse potential ESG risks within an investment, and to ensure we are aligned with our governance structure.
2 Rates products consist of cash, short-term investments and government bonds (including agency).
Credit products, equities and hedge funds At the end of 2015, more than 40% of our investment portfolio was managed externally. This portfolio comprises mainly credit products, equities and hedge funds. PRI signatories manage approximately 95% of these assets. Additionally, all of Swiss Re’s external asset managers have contractual provisions with Swiss Re that are specifically related to responsible investing.
Advancing sustainable energy solutions The 2015 Paris agreement on climate change (see page 41) underscored that sustainable energy sources are essential to combat global warming. Reducing greenhouse gas emissions while, at the same time, satisfying the energy needs of a growing population will be one of the great challenges we face in the coming decades. Sustainable energy projects continue to increase in scale and complexity, as do the risks associated with them.
Although insured losses from natural catastrophes were lower in 2015 than in recent years, the number of events was among the highest ever recorded. The expectation is that, as a result of climate change, extreme weather events like hurricanes and floods will increase. Moreover, the economic losses from such events are also expected to rise given a higher concentration of assets in exposed areas. If no action is taken, climate change could cost the world economy an estimated 20% of global GDP by the end of this century.
Understanding natural catastrophe risks and the impact of climate change is critical to cost our business accurately and to structure sound risk transfer solutions. By sharing this knowledge, we help our partners to identify costeffective measures to protect themselves. In addition, we provide solutions to cover the residual risk that cannot be avoided.
2012 Corporate Responsibility Report. The Expert Forum held at the Centre for Global Dialogue in 2015 brought together participants from re/insurance, industry, academia, regulatory bodies and the general public to discuss the risks and opportunities posed by this new technology.
For the programme’s second cycle, we also extended the scope of our emissions reporting and of our offsetting commitment. In addition to our Scope 1 and Scope 2 emissions (heating and power consumption) and a major source of Scope 3 emissions (business travel), our reporting now covers further activities along our supply chain (Scope 3): employee commuting, copy paper use, waste generation, water use and technical gases.
Swiss Re has over 70 offices in more than 30 countries. For new building or renovation work, we apply a number of principles. One of them is sustainability, which translates into criteria such as stringent construction standards, highquality fittings and finishes, a comfortable ambient climate, environmentally sound, durable materials, low energy consumption and low maintenance and running costs. Constructing or renovating an office building in line with such sustainability criteria is the most effective way to minimise its environmental footprint.
New and old: Our Swiss Re Next project in Zurich is taking shape, watched over by our original headquarter building from 1913.
Good progress was made since we last ran our former survey in 2013, with positive trends on most questions, including reduced bureaucracy, ability to openly debate issues and employees feeling that their job has an impact on business outcomes.
Employee development and growth In line with our 70/20/10 approach, we revamped and improved our Talent Broker platform to provide employees with more visibility and simpler access to job rotation opportunities. On average around 750 employees per month use the platform and the number of job rotations greatly increased in 2015 (+300% over the previous year).
In addition, we have integrated the Leadership and Personal Imperatives into both our performance management process and leadership development programmes.
What our priorities are ̤ Climate ̤ Natural hazards ̤ Water ̤ Society
Mind the risk: A global ranking of cities under threat from natural disasters
Stakeholder engagement G4-24 List of stakeholders 10 G4-25 Basis for stakeholder identification 10 G4-26 Approaches to stakeholder engagement 10 G4-27 Key topics raised by stakeholders 10, 38–46, 59–60
G4-EC7 Infrastructure investments 35–36, 42–43 G4-EC8 Significant indirect impacts 4–7, 16–22