Annual Report 2020
Annual Report 2020
Financial Report
Financial Report
Transforming
Tomorrow
Together
TransformingTomorrowTogether Financial highlights
Financial highlights
For the years ended 31 December
USD millions, unless otherwise stated
Group
Net income/loss attributable to common shareholders
Gross premiums written
Premiums earned and fee income
Earnings per share in CHF
Shareholders’ equity
Return on equity in %1
Return on investments in %
Net operating margin in %2
Number of employees3
Property & Casualty Reinsurance
Net income/loss attributable to common shareholders
Gross premiums written
Premiums earned
Combined ratio in %
Net operating margin in %2
Return on equity in %1
Life & Health Reinsurance
Net income attributable to common shareholders
Gross premiums written
Premiums earned and fee income
Net operating margin in %2
Return on equity in %1
Corporate Solutions
Net loss attributable to common shareholders
Gross premiums written
Premiums earned
Combined ratio in %
Net operating margin in %2
Return on equity in %1
Life Capital
Net loss attributable to common shareholders
Gross premiums written
Premiums earned and fee income
Gross premiums written – open books
Net operating margin in %2
Return on equity in %1
2019
727
42 228
38 594
2.46
29 251
2.5
4.7
3.4
15 401
396
21 562
19 275
107.8
3.8
4.4
899
14 452
13 004
10.0
12.4
–647
4 974
4 166
127.9
–16.7
–34.1
–177
2 831
2 149
1 790
2.4
–3.4
2020
Change in %
–878
42 951
40 770
–2.97
27 135
–3.1
3.5
–1.1
13 189
–247
21 512
20 832
109.0
0.1
–2.8
71
15 067
13 883
2.9
0.9
–350
4 839
4 047
116.5
–10.5
–17.4
–265
2 533
1 984
2 171
–6.6
–7.5
–
2
6
–
–7
–14
–
–
8
–92
4
7
46
–3
–3
–50
–11
–8
21
1 Return on equity is calculated by dividing net income/loss attributable to common shareholders by average common shareholders’ equity.
2 Net operating margin is calculated as ”Income before interest and income tax expense” divided by ”Total revenues” excluding ”Net investment result – unit-linked and with-profit business”.
3 Regular staff.
Our Annual Report
Contents
Our Annual Report consists of
the Business Report and the
Financial Report:
Annual Report 2020
Business Report
Annual Report 2020
Annual Report 2020
Financial Report
Financial Report
Transforming
Tomorrow
Together
Transforming
Tomorrow
Together
Financial Report
This publication provides a more
detailed account of our financial
performance during the year and the
market trends we observe. It also
provides details on risk and capital
management, as well as information
on our governance and compensation.
Financial year
The global economy and
financial markets
Summary of financial statements
Group results
Reinsurance
Property & Casualty Reinsurance
Life & Health Reinsurance
Corporate Solutions
Life Capital
Swiss Re Institute
Group Investments
Share performance
Economic Value Management
EVM performance
EVM financial information
Independent Assurance Report
For more information
Risk and capital management
See our online Annual Report at
https://reports.swissre.com
Overview
Financial strength and
capital management
Liquidity management
Risk management
Risk assessment
Corporate governance
Overview
Group structure and shareholders
Capital structure
Board of Directors
Executive Management
Shareholders’ participation rights
Changes of control
and defence measures
Auditors
Information policy
Compensation
Report from the
Compensation Committee
Compensation highlights in 2020
Compensation framework
Compensation governance
Performance outcomes 2020
Compensation disclosure
and shareholdings 2020
Report of the statutory auditor
Climate-related financial disclosures
(TCFD)
Overview
Climate governance
Climate strategy
Climate risk management
Climate metrics and targets
Financial statements
Group financial statements
Notes to the Group
financial statements
Report of the statutory auditor
Group financial years 2011–2020
Swiss Re Ltd
General information
Glossary
Cautionary note on
forward-looking statements
Note on risk factors
Contacts
Corporate calendar
116
118
119
128
132
138
147
150
151
152
168
172
182
193
286
292
294
312
318
320
328
329
4
12
14
18
20
22
24
26
28
30
32
36
40
48
52
54
60
61
67
80
84
86
88
102
108
109
110
112
Swiss Re | Financial Report 2020
1
TransformingTomorrowTogetherTransformingTomorrowTogether
Financial year
Swiss Re reported strong
underlying performance in
2020, despite large losses
related to COVID-19, and
reaffirmed its positive outlook.
2
Swiss Re | Financial Report 2020
Contents
The global economy and
financial markets
Summary of financial statements
Group results
Reinsurance
Property & Casualty Reinsurance
Life & Health Reinsurance
Corporate Solutions
Life Capital
Swiss Re Institute
Group investments
Share performance
4
12
14
18
20
22
24
26
28
30
32
Swiss Re | Financial Report 2020
3
Financial year
The global economy
and financial markets
A year of three Rs: Recession,
Recovery and Resilience
COVID-19 has triggered the deepest global
recession since World War II and dealt
a blow to economic resilience. Despite a
fragile economic recovery, global equity
markets have bounced back, supported
by massive fiscal and monetary responses.
Recession: first-half lockdown
The world economy contracted by almost
4% in 2020, more than twice the decline
during the global financial crisis of 2008–
2009 (–1.8%). The outbreak of COVID-19
led to government-mandated lockdowns
that drastically reduced economic activity.
The US economy (–3.5%) proved more
resilient than the Euro area (–6.8%) and
Japan (–4.7%) in 2020. China was the only
major economy to grow in 2020 (+2.3%)
after recovering quickly from the crisis and
returning to growth in the second quarter.
Other emerging markets were affected
more severely; India contracted by 8.2%,
Brazil by 5.0% and Russia by 3.1%.
Inflation declined across major markets
due to the crisis-driven blow to demand
and oil prices (see the economic indicators
table). This more than offset higher prices
in segments that experienced scarcity or
were affected by pandemic-related
disruptions to supply chains.
A huge monetary response to the global
downturn put new pressure on already low
interest rates. Major central banks quickly
restarted extraordinary monetary policies in
the first half of 2020, including extending or
reintroducing asset purchase programmes.
In addition, the US Federal Reserve (Fed)
and the Bank of England cut interest rates
to historic lows, while the European Central
Bank expanded its quantitative easing
programme and purchased assets totalling
more than 11% of Euro area GDP. Central
banks in major emerging markets including
China, Brazil, India and Russia also reduced
interest rates.
GDP shortfall indices
In addition, central banks took steps to
directly support the real economy. This
included measures to encourage banks to
lend to households and businesses, as well
as purchases of private sector assets. For
example, the Fed bought corporate bonds
for the first time. Fiscal and monetary
authorities also increased their coordination.
Many governments offered fiscal support
for the new central bank monetary
measures, while central bank sovereign
bond purchases helped keep government
funding costs low.
Note: SRI GDP shortfall index, 7-day moving average, is calculated by multiplying the estimated GDP sensitivity to
mobility by the Google Mobility Index, which represents the average change in frequency of visits to workplaces,
public transportation, and retail centers.
4
Swiss Re | Financial Report 2020
05United StatesLatin AmericaJapanEuro areaChinaJanDezNovOctSeptAugJulyJuneMayAprilMarchFebJan05United StatesLatin AmericaJapanEuro areaChinaJanDezNovOktSeptAugJuliJuniMaiAprilMärzFebJan China Euro area Japan Latin America United Statesin %Source: Google, Apple, Wind, Swiss Re Institute50–5–10–15–20–25 China Eurozone Japan Lateinamerika USAin %Quelle: Google, Apple, Wind, Swiss Re Institute50–5–10–15–20–25 0.9%
US 10-year Treasury
bond yield
Year-end 2020
–0.6%
German 10-year
Bund yield
Year-end 2020
Long-term government bond yields trended
lower in response to the stimulus (see the
interest rate chart). The US 10-year yield
closed the year at 0.9%, down by one
percentage point compared with the
previous year, while the UK 10-year yield
dropped from 0.8% to 0.2% during the year.
German and Swiss yields were already
negative at the onset of the crisis. The
German 10-year yield declined further
to end the year at –0.6%, while Swiss and
Japanese yields were broadly unchanged
at –0.5% and 0% respectively.
Interest rates for 10-year government bonds 2016–2020
Interest rates for 10-year government bonds 2016 – 2020
in %
4
3
2
1
0
–1
–2
2016
2017
2018
2019
2020
– United States – United Kingdom – Germany – Japan – Switzerland
United States United Kingdom Germany Japan Switzerland
Source: Refinitiv, Swiss Re Institute
Source: Refinitiv, Swiss Re Institute
Stock markets 2016–2020
Stock markets 2016 – 2020
31 December 2011 = 100
200
180
160
140
120
100
80
60
2016
2017
2018
2019
2020
– United States (S&P 500) – United Kingdom (MSCI UK) – Europe (Euro Stoxx 50)
– Japan (TOPIX)
United States (S & P 500) United Kingdom (MSCI UK) DJ Euro STOXX 50
Japan (TOPIX)
– Switzerland (SMI)
Switzerland (SMI)
Source: Refinitiv, Swiss Re Institute
Source: Datastream
Swiss Re | Financial Report 2020
5
Financial year
The global economy and financial markets
Recovery: fragile and uneven
The economic rebound from the sharp
contraction in the first half of 2020 began
swiftly during the northern hemisphere
summer as governments eased mobility
restrictions and fiscal and monetary
measures took effect. Economies did not
return to full capacity, however (see the
GDP shortfall indices chart). Momentum
weakened at year-end as COVID-19
infection rates increased again, a sign of
the fragility of the recovery. In the Euro area,
lockdowns of the hospitality, leisure and
entertainment sectors led to a double-dip
contraction in the fourth quarter. Growth
in China remained more robust than
elsewhere, though the weak global
backdrop weighed on external demand.
After falling into bear markets as the
pandemic took hold, global stock markets
rallied for the rest of 2020 to recover most
or all of their losses. The fiscal and monetary
stimulus unleashed worldwide prompted
major stock indices to rebound from falls
of between 28% (Swiss Market Index (SMI))
and 38% (Eurostoxx 50). US stocks ended
the year 16% above prior-year levels (see
the stock markets chart), supported by
a weaker US dollar exchange rate.
Japanese stocks also gained 8%. The
Eurostoxx 50 did not fully recover its lost
value, closing 5% lower than the previous
year, while the MSCI UK index ended 2020
down 16% due to uncertainty around
Brexit negotiations. The SMI ended the year
roughly unchanged (+1%).
The US dollar depreciated against other
major currencies in 2020 and ended the
year 8% lower vs the euro, 9% lower vs the
Swiss franc, 5% lower vs the Japanese yen
and 3% lower vs the British pound. The
key driver behind US dollar weakness was
growing investor risk appetite after equity
markets had troughed in March and the
economic rebound in the summer turned
out to be stronger than expected. This
positive environment weighed on the US
dollar, which is typically seen as a safe
haven currency, strengthening in times of
crisis and weakening in times of economic
and financial market upswings. The
sustained downward trend that started in
late March more than offset the temporary
strengthening of the US dollar exchange
rate during the equity market sell-off.
A more pronounced decline in US interest
rates relative to other currencies added
to US dollar weakness.
USA
Eurozone
UK
Japan
China
2019
2.2
1.8
1.9
–
2020
–3.5
1.2
0.9
–
2019
1.3
1.2
–0.2
112
2020
–6.6
0.3
–0.6
122
2019
1.3
1.8
0.8
132
2020
–9.9
0.9
0.2
137
2019
0.7
0.5
0.0
0.92
2020
–4.7
–0.1
0.0
0.97
2019
2020
6.0
2.9
3.2
2.3
2.5
3.2
14.4
15.3
Economic indicators 2019–2020
Real GDP growth1
Inflation1
Long-term interest rate 2
USD exchange rate2,3
1 Yearly average
2 Year-end
3 USD per 100 units of foreign currency
Source: Refinitiv, Swiss Re Institute
6
Swiss Re | Financial Report 2020
Resilience: the need to replenish
The COVID-19 crisis has depleted global
economic resilience further from an
already weak level. The Swiss Re Institute
Macroeconomic Resilience Index indicates
that the world economy was less resilient
at the onset of the pandemic than before
the global financial crisis of 2008–2009
(see the economic resilience indices chart).
We estimate global economic resilience
decreased by another 20% during 2020
as stimulus packages reduced fiscal
headroom. Diminished monetary policy
buffers also contributed, although these
were already largely exhausted ahead
of the pandemic.1
The increase in public and private sector
debt and deficits in 2020 is the largest and
fastest since World War II. It accelerates the
trend of rising corporate debt and declining
credit quality seen since 2008. This could
lead to higher corporate bankruptcies and,
potentially, a credit crisis. Meanwhile, the
number of “zombie companies” is likely to
increase as access to cheap credit enables
indebted and unprofitable companies to
survive. While generous monetary and
fiscal support helps to avoid a credit crisis
in the short term, increasing “zombification”
may weigh on growth in the long run.
Economies and financial markets are also
exposed to increased long-term inflation
risks. While the immediate impact of the
COVID-19 crisis has been disinflationary, a
longer-term trend towards de-globalisation,
including companies’ desire to diversify
supply chains to become more resilient,
could fuel inflationary pressure. There are
also indications that central banks will
tolerate higher inflation as they seek to keep
interest rates low to facilitate the servicing
of high public and private debt burdens.
A scenario of high inflation coupled with
such “financial repression” would be
challenging for re/insurers.
Replenishing economic resilience needs
to be a top policy priority for societies.
The global economy no longer has the
luxury of relying on monetary and fiscal
levers alone. Alternatives should include
structural reforms that strengthen
resilience, such as targeted investments
into sustainable infrastructure, the digital
economy and the transition towards a
low-carbon economy. Governments
should also work to limit inequality, foster
human capital, deepen the liquidity and
dynamism of financial markets and improve
the efficiency of labour markets.
Economic resilience indices and decomposition over time
0.80
0.60
0.40
0.20
0.00
2007
2018
2019
2020
2007
2018
2019
2020
Advanced economies
Emerging economies
Fiscal space
Financial market development
Banking industry backdrop
Monetary policy space
Low carbon economy
Insurance penetration
Human capital
Economic complexity index
Labour market efficiency
World
Source: Swiss Re Institute Macroeconomic Resilience Index, 2020
0,80
1 sigma Resilience Index 2020: global resilience put to the pandemic test, Swiss Re, September 2020; Emerging markets macro resilience: beware fading global tailwinds,
Swiss Re, September 2020.
0,60
0,40
0,20
0,00
7
2007
2018
2019
2020
2007
2018
2019
2020
World
Banking industry backdrop
Labour market efficiency
Economic complexity
Human capital
Financial market development
Insurance penetration
Low-carbond economy
Fiscal space
Monetary policy space
World
Banking industry backdrop
Labour market efficiency
Economic complexity
Human capital
Financial market development
Insurance penetration
Low-carbond economy
Fiscal space
Monetary policy space
Swiss Re | Financial Report 2020 Financial year
The global economy and financial markets
Primary non-life
2 500
Market size in USD billions
Estimated global premium
income in 2020
2%
Market performance
Estimated global premium
growth in 2020
We estimate that overall profitability of
the non-life insurance sector, measured by
return on equity (ROE) was at 5% in 2020,
down from an already low 7% in 2019,
mostly driven by lower investment returns.
Overall, underwriting results remained
stable or even improved. On the one hand,
the unprecedented pandemic containment
measures caused estimated industry losses
in the range of USD 50–80 billion1.
These losse were almost entirely related to
commercial lines of business and were
largely attributed to business interruption
covers triggered under communicable
diseases clauses and to event cancellations.
Trade credit insurance also experienced
significant losses, as did liability lines (E&O,
D&O, medical malpractice) and workers’
compensation for healthcare workers.
Personal insurance lines experienced
better underwriting results, mainly in motor
insurance due to significantly reduced
claims frequencies as a result of the
lockdown measures.
Outlook
We see a recovery to 3.6% growth in 2021
and 2022, supported by rising economic
strength (although output will not return
to pre-pandemic levels), a hard market in
commercial lines to a degree not seen
since 2002–2003, and a rebound in most
emerging regions.
The profitability outlook remains
challenging. We believe low interest rates
are here to stay with 10-year US Treasury
yields expected to remain below 2%
over the next two years. As such, any
improvement in sector profitability will
depend on underwriting performance,
suggesting a need for more rate increases
and improved underwriting discipline.
Market overview
The global non-life industry generated
around USD 2 500 billion of premium
income in 2020, of which 22% came
from emerging markets. Non-life insurance
ranges from standardised motor and
household covers to sophisticated tailor-
made liability and property covers,
including specialty, commercial and
industrial risk insurance.
Market performance
On the back of the COVID-19 crisis, the
global non-life insurance market proved
much more resilient than previously
expected. Amid the strongest economic
decline since the Great Depression, global
non-life premiums were up an estimated 2%
in real terms, after a 3% gain in 2019. The
main reason was stronger-than-expected
rate hardening in commercial lines.
At 2%, non-life premium growth in
the advanced regions was unexpectedly
resilient in 2020, again due to rate
hardening in commercial lines. China
remains the world’s fastest growing non-life
insurance market: we estimate a 7%
expansion in non-life premiums in 2020,
coming from double-digit growth in the
health business. Growth in the other
emerging markets was negative, with
the exception of Emerging Asia.
Pricing in non-life commercial insurance
lines strengthened again in 2020. This
marked the sharpest rate increase since
2001/2002 after the 9/11 terror attack,
with prices up 19% throughout the year.
The upswing broadened across lines of
business and across regions. There were
strong price increases in Property (19%)
and in Financial and Professional liability
(FinPro) (+38% ) lines in almost all regions.
For Property, rates were mainly driven by
natural-catastrophe-related covers, and in
FinPro by rising Directors and Officers
liability (D&O) claims. Casualty business,
which had remained soft until 2018, started
to exhibit stronger, but still single-digit,
price improvements. This was driven by
improvements in the US and Europe, while
Asia and Latin America remained sluggish.
1 Bottom-up reporting of companies is net of reinsurance, and often net of tax. Also, the list of companies is not comprehensive. The bottom-up reporting is therefore already
closer to the top-down estimate than the figures suggest. This range includes estimates from four different sources.
8
Swiss Re | Financial Report 2020
Reinsurance non-life
210
Market size in USD billions
Estimated global premium
income in 2020
4%
Market performance
Estimated global premium
growth in 2020
Market overview
Global non-life reinsurance premiums
totalled about USD 210 billion in 2020,
with 28% coming from ceding companies
in emerging markets. In general, reinsurance
demand is a function of the size and capital
resources of primary insurance companies,
as well as of the risk profile of the insurance
products provided.
Market performance
We estimate that global premiums in
non-life reinsurance grew by around 4%
in real terms in 2020, with moderate
expansion and stable reinsurance demand
in advanced markets and China. Other
emerging markets suffered from lower
exposure growth in the primary market.
In terms of profitability, the reinsurance
industry provided a subpar performance
for the fourth year in a row, with return
on equity of around 4% in 2020. This was
a result of negative industry underwriting
results and low investment returns.
Preliminary data indicated a combined ratio
of around 105% for 2020, deteriorating
from 101% in 2018 and 2019, which was
driven by elevated natural catastrophe
losses and COVID-19 claims.
The record North Atlantic hurricane season,
which included 30 named storms, as well
as upward revisions to loss estimates,
pushed overall natural catastophe losses
higher. We estimate that insured claims
rose to roughly USD 89 billion for the year,
well above the USD 63 billion loss total for
the full year 2019. While COVID-19 claims
are still unfolding, the reinsurance industry
will take a significant share of the estimated
industry loss of USD 50–80 billion1.
The underlying, catastrophe-adjusted
underwriting result improved. This was
partly due to better reinsurance prices,
which gained momentum through 2020,
after a more moderate January 2020
renewal season. There were rate increases
in loss-affected lines and regions, but little
spillover into unaffected lines. Significant
pricing improvements of 10–20%, however,
were registered in the retrocession market,
which was adversely affected by high
losses between 2017 and 2019 and a
significant capacity crunch due to the
withdrawal of capital suppliers.
The sector’s capital base remained very
strong despite the capital markets turmoil in
the first half of the year, allowing reinsurers
to fulfill their role as the backbone of the
insurance industry and to support societal
resilience. The capital position of global
reinsurance, including both the traditional
source of reinsurance capacity as well as
alternative capital, showed a slight decline
of 2% during 2020. For the alternative
capital sector, it was the second year of
decline after 2019, which showed a decline
in capacity of 7% after several years of
soaring capital inflows.2
Market outlook
For the renewal rounds in 2021, we expect
a further increase of reinsurance price as
a reflection of elevated losses from natural
catastrophes since 2017 and from
COVID-19 claims.
Premium income of the reinsurance
industry is expected to grow by 7% in
2021 and by 5% in 2022, mainly driven
by higher prices.
1 See footnote on previous page
2 Source: Aon, Reinsurance Market Outlook, September 2019
Swiss Re | Financial Report 2020
9
Overall profitability of the global life
insurance sector – as measured by GAAP
return on equity (ROE) of listed life
insurance companies – decreased
significantly to 7%, compared with 10% in
2019. The impact of COVID-19 on mortality
books was limited and the main driver of
the decrease was life insurers’ investment
results. These were impacted by the
continued low interest rates, particularly
in the US, and realised investment losses
due to corporate bond and stock market
volatility in the first half of the year. In North
America, the weighted average ROE almost
halved to 5.1% in the first half of 2020.
Profitability in Europe and Asia also fell as
the weighted average ROE of life insurers
dropped to 6.3% in Europe and 9.4% in
Asia Pacific.
Market outlook
We expect a rebound in 2021 as the
economy recovers and risk awareness
increases. For 2021 and 2022, global life
premiums are expected to grow by around
6% per year, mainly driven by continued
strong growth in the emerging markets
(7%) and an improved situation in the
advanced markets (5%).
Market overview
The global life insurance industry generated
about USD 2 800 billion in premium
income in 2020, of which 25% came from
emerging markets. Around 80% of premium
income in life insurance is derived from
savings and retirement products. The
protection business covers a broad
spectrum of mortality and morbidity risks.
Market performance
We estimate that global life insurance
premiums contracted by 4% in real terms
in 2020. This was the result of rising
unemployment in the COVID-19-induced
recession, dwindling incomes leading to
weaker demand, a slowdown in distribution
activities due to lockdowns and even lower
interest rates that made life insurance less
attractive as a savings vehicle.
Premium decline in the advanced markets
was 5%. This was, however, unevenly
distributed. The US and Canada were less
affected, while Japan contracted by 8%.
In light of the steep recession and because
the savings business is by far the largest
source of premium income for the sector,
we estimate that life premiums in advanced
EMEA declined by nearly 10% in 2020.
In the emerging market segment, only
China – which became the second largest
life insurance market globally – succeeded
in maintaining the positive momentum.
It showed a 2% expansion due to increased
risk awareness and the rapid adoption
of digital distribution channels. Other
emerging market regions experienced
declines of between 4% for Emerging Asia
and 8% for Latin America.
Financial year
The global economy and financial markets
Primary life
2 800
Market size in USD billions
Estimated global premium
income in 2020
–4%
Market performance
Estimated global premium
growth in 2020
10
Swiss Re | Financial Report 2020
Reinsurance life
105
Market size in USD billions
Estimated global premium
income in 2020
4%
Market performance
Estimated global premium
growth in 2020
The operating margin of the life reinsurance
industry fell to around 4% of revenues
in 2020, down from 7–8% between 2015
and 2019. The contribution from
investments declined further, due to the
ongoing low interest rate environment,
which was accentuated by the further
expansionary monetary policy. The
underwriting performance was in turn
negatively impacted by elevated mortality
claims due to COVID-19.
Market outlook
The continued recovery in primary
insurance should support growth in life
reinsurance revenues, including a recovery
in traditional business. Premium growth
will nonetheless likely remain moderate,
especially in the large advanced markets.
In real terms, we forecast global life
reinsurance premiums will increase by
around 2.5% in 2021 and 2022, while
health reinsurance is expected to develop
by around 6% annually. This will be
mainly driven by the highly populated and
growing economies in China and India.
Market overview
The size of the global life reinsurance
business was about USD 105 billion in
2020. Around 75% of this is attributable
to the US, Canada, the UK and China.
Ceding companies from emerging
markets accounted for 24% of global
demand. Life reinsurers are increasingly
diversifying away from the traditional
mortality business.
Market performance
We estimate that global life and health
reinsurance premiums grew by 4% in 2020.
Expansion was unevenly distributed
between segments and regions. Medical
expense reinsurance from emerging
markets was up more than 32%, mainly
driven by China and India. Globally, this
sector was up 17%, contrasting strongly
with a more sluggish 1% increase in
mortality and health-related reinsurance
demand from life insurers.
Against this background, life reinsurers
have sought to increase revenues through
large, individual risk transfer transactions
that help primary insurers stabilise income
and/or bolster their balance sheets. The
introduction of risk-based capital regimes
has prompted much of this activity.
Another area of growth has been longevity
risk transfer. The availability of longevity
reinsurance has become key to pricing
annuity transactions as insurers offering
those transactions to pension funds require
reinsurance to hedge the longevity risk.
Swiss Re | Financial Report 2020
11
Financial year
Summary of financial
statements
Income statement
USD millions
Revenues
Gross premiums written
Net premiums written
Change in unearned premiums
Premiums earned
Fee income from policyholders
Net investment income – non-participating business
Net realised investment gains/losses – non-participating business
Net investment result – unit-linked and with-profit business
Other revenues
Total revenues
Expenses
Claims and claim adjustment expenses
Life and health benefits
Return credited to policyholders
Acquisition costs
Operating expenses
Total expenses before interest expenses
Income/loss before interest and income tax expense
Interest expenses
Income/loss before income tax expense
Income tax expense/benefit
Net income/loss before attribution of non-controlling interests
Income/loss attributable to non-controlling interests
Net income/loss attributable to common shareholders
Changes in equity
USD millions
Total shareholders’ equity as of 1 January
Net income/loss attributable to common shareholders
Dividends
Change in unrealised gains/losses on securities, net of tax
Change in foreign currency translation, net of tax
Purchase/sale of treasury shares and share based payments
Adjustment for pension and other post-retirement benefits, net
Other changes in equity
Total shareholders’ equity as of 31 December
Non-controlling interests
Total equity as of 31 December
12
Swiss Re | Financial Report 2020
2019
42 228
39 649
–1 675
37 974
620
4 171
1 580
4 939
30
49 314
–18 683
–13 087
–4 633
–7 834
–3 579
–47 816
1 498
–589
909
–140
769
–42
727
2019
27 930
727
–1 659
3 249
110
–925
–22
–159
29 251
1 786
31 037
2020
Change in %
42 951
39 827
494
40 321
449
2 988
1 730
–2 187
37
43 338
–19 838
–13 929
1 760
–8 236
–3 597
–43 840
–502
–588
–1 090
266
–824
–54
–878
2020
29 251
–878
–1 765
608
39
–174
42
12
27 135
123
27 258
2
–
–
6
–28
–28
9
–
23
–12
6
6
–
5
1
–8
–
–
–
–
–
29
–
Change in %
5
–
6
–81
–65
–81
–
–
–7
–93
–12
Summary balance sheet
USD millions
Assets
Fixed income securities
Equity securities
Other investments
Short-term investments
Investments for unit-linked and with-profit business
Cash and cash equivalents
Deferred acquisition costs
Acquired present value of future profits
Reinsurance recoverable
Other reinsurance assets
Goodwill
Other
Assets held for sale1
Total assets
Liabilities and equity
Unpaid claims and claim adjustment expenses
Liabilities for life and health policy benefits
Policyholder account balances
Other reinsurance liabilities
Short-term debt
Long-term debt
Other
Liabilities held for sale1
Total liabilities
Shareholders’ equity
Non-controlling interests
Total equity
Total liabilities and equity
1 Please refer to Note 10 “Acquisitions and disposals” for more details.
2019
2020
Change in %
81 573
2 993
12 892
5 768
520
7 562
7 838
1 042
5 898
24 743
3 945
9 354
74 439
238 567
72 373
19 836
5 405
17 775
185
10 138
13 232
68 586
207 530
29 251
1 786
31 037
83 018
4 899
16 231
16 082
463
5 470
8 230
928
5 892
26 660
4 021
10 728
182 622
81 258
22 456
5 192
19 552
153
11 584
15 169
155 364
27 135
123
27 258
238 567
182 622
2
64
26
179
–11
–28
5
–11
–
8
2
15
–
–23
12
13
–4
10
–17
14
15
–
–25
–7
–93
–12
–23
Swiss Re | Financial Report 2020
13
Financial year
Group results
Swiss Re reported a strong underlying performance
for 2020, despite the large losses related to the
COVID-19 pandemic.
Christian Mumenthaler
Group Chief Executive Officer
Our Group has gone through this crisis
with confidence and strength, and in our
role as a shock absorber we are doing
our part to help mitigate the challenges of
the pandemic and improve resilience
to future systemic risks.
14
Swiss Re | Financial Report 2020
Strategy and priorities
Swiss Re took early steps to navigate
the COVID-19 pandemic in 2020. Even
in 2019, before COVID-19 became a
pandemic, our experts were monitoring
the situation and collecting data. As the
situation unfolded, Swiss Re’s crisis
management and robust IT infrastructure
allowed business operations to continue
uninterrupted. Swiss Re employees
continued to conduct renewals, process
claims, steer the asset portfolio, share
knowledge and build long-term partnerships.
Throughout 2020, Swiss Re showed a
strong underlying performance across the
Group. Excluding COVID-19 losses, Group
net income increased to USD 2.2 billion for
the year, up from USD 727 million in 2019.
All Business Units executed on key
strategic initiatives in 2020. Reinsurance
achieved growth in its targeted areas.
Corporate Solutions finished 2020 well
ahead on its turnaround plan, while
Life Capital successfully closed the sale
of ReAssure and paid a USD 1.5 billion
dividend to the Group.
Against a backdrop of hardening prices in
key lines of business, Property and Casualty
Reinsurance (P&C Re) was able to grow
its core business. It increased natural
catastrophe exposure by 7% over the year,
maintaining its market-leading position
in North America. For Life and Health
Reinsurance (L&H Re), there was growth
in areas such as critical illness business
in China and in the longevity portfolio
in EMEA.
Reinsurance saw demand for large
transactions and tailored solutions,
closing over 200 tailored reinsurance
deals and increasing the number of
new insurance propositions delivered
to clients in 2020.
Net premiums and fees earned
Net premiums and fees earned by
by business segment, 2020
business segment, 2020
Total: USD 40.8 billion
51% P&C
51% P&C Reinsurance
Reinsurance
34% L&H Reinsurance
34% L&H
10% Corporate Solutions
Reinsurance
5% Life Capital
10% Corporate
Solutions
5% Life Capital
P&C Re’s focus on underwriting quality and
improved terms and conditions in recent
renewals allow for an improved normalised1
combined ratio estimate of less than 95%
in 2021.
Corporate Solutions’ turnaround has been
achieved through disciplined execution
on the decisive management actions
announced in 2019. At the end of 2020,
portfolio pruning and gross cost reductions
were largely completed and the unit
delivered a normalised1 combined ratio of
96.8%, well ahead of the expected 105%.
Corporate Solutions will target a normalised
combined ratio of less than 97% in 2021,
compared with the original 98% goal.
Corporate Solutions is repositioning its
product offering by focusing on segments
with a clear competitive advantage.
Other important strategic objectives include
deploying proven technology to drive
expansion, leveraging direct access to
corporates for the Swiss Re Group and
fostering a more disciplined and data-driven
underwriting culture.
iptiQ, Swiss Re’s global B2B2C digital
insurance platform, achieved 76%
premium growth in its core business in
2020, writing gross premiums in excess
of USD 370 million for the year. iptiQ
increased the number of distribution
partners by 11 in 2020 to a total of 40.
Following the successful sale of
ReAssure, the Life Capital Business Unit
was disbanded at the end of 2020.
Corporate Solutions has assumed
responsibility for elipsLife, while iptiQ is
now operating as a standalone division.
iptiQ’s growth is an example of the success
of the Group-wide strategy to create
new partnerships and develop Swiss Re’s
position as a technology-driven risk
knowledge company.
Performance
Swiss Re reported a net loss of
USD 878 million for the year after booking
claims and reserves related to COVID-19
of USD 3.9 billion. The vast majority of
the Group’s COVID-19 losses was driven
by affirmative non-damage business
interruption, higher mortality claims as
well as cancelled or postponed events.
Excluding the after-tax impact of COVID-19-
related losses, the Group’s net income
would have been USD 2.2 billion, compared
with USD 727 million for 2019. The
Group’s net operating margin2 was –1.1%,
compared with 3.4% in the prior year.
Reinsurance reported a net loss of
USD 176 million for the year, including
COVID-19 claims impacts. Excluding the
after-tax impact of COVID-19-related claims
and reserves, the Business Unit’s net
income would have been USD 2.1 billion
compared with USD 1.3 billion in 2019.
P&C Re reported a net loss of
USD 247 million in 2020, including claims
and reserves of USD 1.9 billion related to
the COVID-19 crisis. Excluding the after-tax
impacts of COVID-19-related claims and
reserves, the Business Unit would have
contributed USD 1.3 billion, up from
USD 396 million in 2019. The result was
supported by strong new business
generation with higher premiums earned
and price increases. This was adversely
impacted by significant claims from
large catastrophe losses of USD 1.7 billion,
primarily caused by a record-breaking
Atlantic hurricane season, Australian
hailstorm and flooding events, as well
as wildfires on the US West Coast.
Large man-made losses were dominated
by the Beirut port explosion. The net
operating margin was 0.1%, compared
with 3.8% in 2019.
1 Assumes an average large natural catastrophe loss burden and excludes prior-year reserve developments as well as the COVID-19 impact.
2 Net operating margin is calculated as ”Income before interest and income tax expense” divided by ”Total revenues” excluding ”Net investment result – unit-linked and
with-profit business”.
Swiss Re | Financial Report 2020
15
Financial year
Group results
3.0
Net investment
income in USD
billions, 2020
(2019: USD 4.2 billion)
3.5%
Group return on
investments, 2020
(2019: 4.7%)
16
Swiss Re | Financial Report 2020
Shareholders’ equity, excluding
non-controlling interests, decreased to
USD 27.1 billion at the end of 2020, down
from USD 29.3 billion at the end of 2019,
mainly reflecting payments to shareholders
of USD 2.0 billion for the 2019 regular
dividend and the share buyback programme,
as well as the current-year net loss, partly
offset by unrealised gains on fixed income
securities of USD 0.6 billion.The return on
equity was –3.1% in 2020, compared with
2.5% in 2019.
Earnings per share for 2020 were
USD –3.04 or CHF –2.97, down from
USD 2.46 or CHF 2.46 for 2019.
Book value per share stood at USD 93.90
or CHF 83.00 at the end of 2020, compared
with USD 100.64 or CHF 97.46 at the
end of 2019. Book value per share is based
on shareholders’ equity and excludes
non-controlling interests.
Business performance
Net premiums earned and fee income for
the Group amounted to USD 40.8 billion for
2020, an increase of 5.6% year-on-year.
At constant exchange rates, net premiums
earned and fee income increased by 5.5%.
Gross premiums written increased by 1.7%
to USD 43 billion in 2020, mainly reflecting
large longevity deals and higher volumes in
the open book businesses.
L&H Re reported a net income of
USD 71 million in 2020, including COVID-19 -
related claims of USD 999 million,
largely caused by higher mortality claims.
Excluding the after-tax impact of COVID-19-
related losses, L&H Re’s net income would
have been USD 855 million in 2020,
compared with USD 899 million in 2019.
The result was supported by a strong
investment result with a return on
investments (ROI) of 3.7%. The net
operating margin was 2.9% in 2020
and 10.0% in 2019.
Corporate Solutions incurred a net loss of
USD 350 million in 2020, with claims
and reserves related to COVID-19 totalling
USD 943 million in 2020. Excluding the
after-tax impact of COVID-19-related losses,
the Business Unit swung to a net income
of USD 393 million, compared with a net
loss of USD 647 million in 2019, benefitting
from rate increases, lower large man-made
losses, favourable prior accident years
development and strict expense
management.
Life Capital reported a net loss of
USD 265 million in 2020, compared with
a net loss of USD 177 million in 2019,
driven by ongoing investment into the open
book businesses’ growth and elipsLife’s
underperformance due to reserve
strengthening and COVID-19 impacts.
COVID-19-related losses for Life Capital
were minimal at USD 27 million. The net
operating margin declined to ‒6.6% in
2020 from 2.4% in the same period of the
previous year. Following the successful
deconsolidation of ReAssure, Life Capital
paid a dividend of USD 1.5 billion to
Swiss Re Group.
Acquisition costs for the Group amounted
to USD 8.2 billion in 2020, up from
USD 7.8 billion in 2019.
Operating expenses remained stable at
USD 3.6 billion in both years. Interest
expenses were USD 588 million in 2020,
slightly down from USD 589 million
in 2019.
The Group reported a tax benefit of
USD 266 million on a pre-tax loss of
USD 1.1 billion for 2020, compared to a
tax charge of USD 140 million on a pre-tax
income of USD 909 million for 2019. This
translated into an effective tax rate in the
current and prior-year reporting periods
of 24.4% and 15.4%, respectively. The tax
rate in 2020 was largely driven by tax
benefits from tax-exempt income and the
release of valuation allowance on deferred
tax assets, partially offset by tax charges
from intra-entity transfers and foreign
currency translation differences between
statutory and US GAAP accounts.
Net premiums earned by P&C Re were
USD 20.8 billion, an increase from
USD 19.3 billion in 2019, benefitting from
large transactions and growth in the
natural catastrophe business. At constant
exchange rates, premiums earned
increased by 8.0%. The P&C Re combined
ratio increased to 109.0% in 2020 from
107.8% in the prior year, mainly driven by
COVID-19 losses. Excluding the pre-tax
impact of COVID-19-related losses, the
combined ratio would have been 99.8%.
L&H Re’s net premiums earned and fee
income amounted to USD 13.9 billion, an
increase from USD 13.0 billion in the
prior- year period, supported by individual
large transactions including longevity deals.
At constant exchange rates, premiums
earned and fee income increased by 6.7%.
Corporate Solutions’ net premiums earned
decreased slightly to USD 4.0 billion
from USD 4.2 billion in the prior year, driven
by the active portfolio pruning and less
business activity due to COVID-19, partially
offset by rate increases. At constant
exchange rates, net premiums earned
decreased by 2.5% year-on-year. The
Corporate Solutions combined ratio
decreased to 116.5% in 2020 from 127.9%
in 2019. Excluding the pre-tax impact of
COVID-19-related losses, the combined
ratio would have been 93.2% for the year.
The normalised combined ratio remains
well ahead of the 105% estimate for 2020.
Investment result and expenses
Fundamentally, the portfolio performed
well with insignificant impairments
alongside gains generated from the fixed
income portfolio, as well as market value
gains on equity positions.
The Group’s non-participating investment
portfolio decreased from USD 134.5 billion
at the end of 2019 to USD 125.7 billion
in 2020, in part due to the sale of the
ReAssure portfolio in July 2020. The ROI
was 3.5% for 2020, compared with 4.7%
for 2019. The strong investment result,
although lower than in the prior year, was
driven by timely and effective portfolio
management actions throughout the global
financial market turbulence.
The Group’s non-participating net
investment income was USD 3.0 billion
in 2020, compared with USD 4.2 billion
in 2019. The decrease was mainly driven
by the impact of reinvestment into lower
yields and reduced contribution from
equity-accounted investments, as well as
the absence of the ReAssure portfolio in
the second half of the year. The Group’s
running yield was 2.4% in 2020, compared
with 2.8% in 2019, reflecting the impact
of historically low reinvestment yields
alongside de-risking actions. A high
concentration of unrealised gains on
long-maturity fixed income securities
supports our running yield’s persistency
looking forward.
Life Capital’s net premiums earned
and fee income were USD 2.0 billion,
slightly below the prior-year period of
USD 2.1 billion, as the growth in the open
book business was offset by the impact
from the deconsolidation of the ReAssure
business. At constant exchange rates,
premiums earned and fee income
decreased by 9.2%.
The Group reported non-participating net
realised gains of USD 1.7 billion in 2020,
compared with USD 1.6 billion in 2019.
The increase reflects the fact that the prior
year was impacted by the loss from the
agreed sale of ReAssure and additional
foreign exchange losses, while the current
year reflects reduced gains from sales of
fixed income securities.
Swiss Re | Financial Report 2020
17
Financial year
Reinsurance
As windstorms, floods, earthquakes and wildfires continued
to hit communities around the world, reinsurance again served
as a key resilience tool.
Moses Ojeisekhoba
CEO Reinsurance
Together with our clients, Reinsurance has
navigated one of the most challenging years in
our industry’s history. In 2020, we deployed
our data and technological capabilities,
transactional expertise and finanical strength
to make sure our clients had the right solutions
for their needs.
1 By NMG Consulting
18
Swiss Re | Financial Report 2020
Making the world more resilient
2020 was a year in which our clients and
partners needed us more than ever to help
mitigate the impact of COVID-19 – whether
from the pure financial impact, support
in their operations, underwriting, product
development or claims assessment
and payments.
Our Reinsurance business responded by
increasing our commitment to our clients.
For example, we offered insurance
companies across the world free access
to Life Guide – the industry’s top-rated1
digital underwriting manual for individual
health risks. This enabled clients to provide
important life insurance coverage to
individuals, based on improved criteria for
current and past infections and guidelines
for possible exposures.
Across P&C Re, our strong product support
helped European insurers to structure a
workable affirmative disease product for
business closures that excludes systemic
accumulation such as pandemics. We also
found ways to support clients who faced
premium challenges linked to COVID-19.
Through Swiss Re’s Insurance Response
Centre, our free collaborative platform
designed to accelerate the industry’s
ability to tackle the challenges caused
by COVID-19, our clients were able to
upload portfolio data and layer on further
information sources, such as hospital and
ICU bed occupancy. By running statistical
analyses and reports using the platform’s
coding environments, clients could create
new and more accurate models. This
allows them to understand and forecast
topics such as business interruption
patterns and small business resilience.
Summary
Successful execution of our strategy has
once again delivered value for our clients,
partners and stakeholders. It has also
allowed us to adapt quickly to rapidly
changing environments. Looking ahead,
we will continue to strengthen our
partnerships across insurance and the
wider ecosystem, remain relentless in
our knowledge development and sharing,
and draw on our global scale and capital
strength to live up to our vision – to make
the world more resilient.
The right strategy
In 2020, we confirmed our ambition
to build on the three strategic pillars of
Reinsurance: Core, Transactions and
Solutions. We will continue to focus on
strengthening our key assets: global scale
and presence, risk diversification, deep
risk knowledge, and client collaboration
and access. By continuing to invest in
these assets, we ensure that we provide
the right support to our clients when
it is most needed.
Over the last year we saw progress in all
areas of our strategy. In our core business,
we grew our natural catastrophe exposure
by 7% and maintained our market-leading
position in North America. Reinsurance
grew its critical illness book in China and
longevity portfolio in EMEA. We increased
our deployed capacity and premiums
written in our life and health business,
where we remained the number one
provider of reinsurance globally. During
2020, L&H Re reinsured 235 million
policies and paid out USD 10.8 billion in
claims. In P&C Re, 3 223 clients benefitted
from our support with USD 10.9 billion
paid in claims.
Transactions are tailor-made reinsurance
structures that enable clients to achieve
their objectives. Reinsurance engaged in
over 200 deals in 2020. Our Transactions
portfolio is spread across all lines of business
and increasingly across all regions and
markets, bringing attractive diversification
within this business segment.
Beyond traditional risk transfer, more clients
used our Solutions offerings in 2020 than
ever before. We have continued to grow
our breadth of services to support clients
in accessing and understanding new risk
pools and opportunities in accelerated
technology developments. In life and health
markets, COVID-19 increased the demand
for automated underwriting systems such
as Magnum, which enables a faster and
better assessment of risk by leveraging
electronic health records. In property and
casualty markets, we achieved our best
year by far for SwiftRe®, our digital channel
for automated single-risk reinsurance
capacity that is available 24/7. The business
placed through SwiftRe® grew by 20%
in 2020 and we also saw a record number
of new clients onboarded. In addition, we
successfully concluded more than 400
solutions deals, including many innovative
propositions such as digital and lean motor
insurance aimed at millennials in the US
and Asia Pacific region, and parametric
earthquake products supporting the needs
of small businesses.
Swiss Re | Financial Report 2020
19
Financial year
Reinsurance
Property & Casualty Reinsurance
Property & Casualty Reinsurance
Property & Casualty Reinsurance (P&C Re)
reported a net loss for 2020 of
USD 247 million. The result included claims
and reserves related to the COVID-19 crisis
of USD 1.9 billion, reflecting affirmative
non-damage business interruption,
cancelled or postponed events, casualty
and credit & surety losses. COVID-19 losses
increased in the fourth quarter, mainly due
to business interruption claims. Excluding
the after-tax impact of these losses, net
income would have been USD 1.3 billion,
up from USD 396 million in 2019. P&C Re
delivered strong new business generation
with higher premiums earned, taking
advantage of price improvements,
particularly in April and July renewals.
Natural catastrophe losses amounted to
USD 1.7 billion for 2020. This was largely
driven by the Atlantic hurricane season,
which included a record 30 named storms,
and secondary perils across the globe.
Large man-made losses were dominated
by the Beirut port explosion in the third
quarter. The result was further impacted by
prior-year development, the majority of
which was in the first quarter from higher
cedent-reported claims in casualty. In
comparison, 2019 was affected by a larger
natural catastrophe loss burden and late
claims development from Typhoon Jebi.
The investment portfolio made a strong
contribution with an ROI of 3.0% for 2020,
as the impact of global financial market
turbulence was partly mitigated by timely
and effective portfolio management actions
taken early on in the first half year.
Premiums
Net premiums earned increased by 8.1% to
USD 20.8 billion, driven by strong new
business generation. This included growth
in natural catastrophe business, taking
advantage of price improvements. In
addition, the increase was supported by
large casualty transactions written in 2019.
Premiums written included portfolio mix
Property & Casualty Reinsurance results
USD millions
Revenues
Gross premiums written
Net premiums written
Change in unearned premiums
Premiums earned
Net investment income
Net realised investment gains/losses
Other revenues
Total revenues
Expenses
Claims and claim adjustment expenses
Acquisition costs
Operating expenses
Total expenses before interest expenses
Income before interest and income tax
expense
Interest expenses
Income/loss before income tax expense
Income tax expense/benefit
Net income/loss attributable to common shareholders
Claims ratio in %
Expense ratio in %
Combined ratio in %
2019
2020
Change in %
–
–1
–
8
–17
–23
44
5
11
6
1
9
–99
–9
–
–
–
21 562
20 882
–1 607
19 275
1 419
883
18
21 595
21 512
20 636
196
20 832
1 178
683
26
22 719
–14 783
–4 810
–1 189
–20 782
–16 403
–5 104
–1 200
–22 707
813
–352
461
–65
396
76.7
31.1
107.8
12
–321
–309
62
–247
78.7
30.3
109.0
changes and active management actions
implemented in 2020. As a result,
gross premiums written were stable at
USD 21.5 billion in 2020.
Combined ratio
The P&C Re combined ratio was 109.0%
in 2020, compared with a reported
combined ratio of 107.8% in 2019. Excluding
the impact of COVID-19-related losses,
the combined ratio would have been
99.8%. This was above the expected level
for the year due to adverse large natural
catastrophe experience of 1.4% points and
the unfavourable prior-year development
of 1.5% points. The normalised1 combined
ratio was 96.9%, in line with the estimate
of 97% for the full year provided at the
beginning of 2020.
Administrative expense ratio2
The administrative expense ratio decreased
to 5.8% in 2020, compared with 6.2% in
2019, due to higher net premiums earned,
while expenses had significant efficiency
gains, supported by lower travel activity.
Lines of business
The property combined ratio increased
to 109.4% in 2020, compared with 101.3%
a year earlier. While both periods were
impacted by large natural catastrophe
losses, the 2020 deterioration also included
COVID-19-related losses of 17.4% points
and the Beirut port explosion loss. This was
partly compensated by natural catastrophe
reserve releases.
1 Assumes an average large natural catastrophe loss burden and excludes prior-year reserve developments as well as the COVID-19 impact.
2 Operating expenses divided by premiums earned.
20
Swiss Re | Financial Report 2020
Premiums earned by
line of business, 2020
Premiums earned by line
Total: USD 20.8 billion
of business, 2020
46% Casualty
46% Casualty
40% Property
40% Property
14% Specialty
14% Specialty
Outlook
Property business showed improving
margins, which enabled us to continue to
de-risk the portfolio from business most
exposed to climate change and non-
modelled risks, and minimise infectious
disease business interruption coverage,
while meeting planned profit targets.
Specialty lines, especially marine,
engineering and aviation, showed positive
momentum, and we continued to capitalise
on our leading franchise in these lines.
For casualty, we further de-risked our
US liability portfolio with a clear focus
on profitability. We see increasing rate
momentum in several markets, which
is partially offset by loss trends and
yield reduction.
P&C Re continues to see some good
opportunities for transactions and solutions
and participated in those that meet its
return requirements. Upcoming 2021
renewals will likely show further market
hardening, albeit with decreasing
momentum due to an increasingly
competitive environment.
The casualty combined ratio was 111.8%
in 2020, compared with 116.6% in 2019.
This included COVID-19-related losses
of 3.2% points and an adverse casualty
experience, the majority of which was
in the first quarter of 2020.
The specialty combined ratio deteriorated
to 98.7% in 2020, compared with 95.3%
in 2019. The current period included
COVID-19-related claims in credit & surety
of 5.3% points, partly compensated by
positive experience in marine business.
Investment result
The return on investments was 3.0%
for 2020, compared with 4.3% in 2019,
reflecting a decrease in the investment
result of USD 603 million.
Net investment income decreased by
USD 267 million to USD 1 043 million for
2020, driven by declining yields on fixed
income securities.
Net realised gains were USD 649 million
for 2020, compared with USD 985 million
for the prior period, as the prior year
benefitted from significant equity market
value gains.
Insurance-related investment results
and foreign exchange gains/losses are
not included in the figures above.
Shareholders’ equity
Shareholders’ equity increased to
USD 9.2 billion as of 31 December 2020
from USD 8.3 billion on 31 December 2019,
primarily driven by unrealised gains and the
impact from a restructure of internal loans.
This was compensated by the net loss and
the dividend paid to the Group. The return
on equity for 2020 was –2.8%, compared
with 4.4% in 2019. Excluding the after-tax
impact of COVID-19-related losses,
the ROE was 13.2%.
Swiss Re | Financial Report 2020
21
Financial year
Reinsurance
Life & Health Reinsurance
Life & Health Reinsurance results
USD millions
Revenues
Gross premiums written
Net premiums written
Change in unearned premiums
Premiums earned
Fee income from policyholders
Net investment income – non-participating business
Net realised investment gains/losses –
non-participating business
Net investment result – unit-linked and with-profit
business
Other revenues
Total revenues
Expenses
Life and health benefits
Return credited to policyholders
Acquisition costs
Operating expenses
Total expenses before interest expenses
Income before interest and income tax expense
Interest expenses
Income before income tax expense
Income tax expense
Net income attributable to common shareholders
Management expense ratio in %
Net operating margin in %
2019
2020
Change in %
14 452
12 734
101
12 835
169
1 207
15 067
13 657
68
13 725
158
1 140
628
445
118
4
14 961
–32
4
15 440
–10 587
–162
–1 975
–746
–13 470
–12 204
5
–1 999
–786
–14 984
1 491
–445
1 046
–147
899
5.2
10.0
456
–367
89
–18
71
5.2
2.9
4
7
–33
7
–7
–6
–29
–
–
3
15
–
1
5
11
–69
–18
–91
–88
–92
Lines of business
Income before interest and income tax
(EBIT) for the life segment decreased
to USD –168 million in 2020, from
USD 581 million in the prior year. The
current-year result was impacted by
COVID-19-related losses of USD 889 million,
driven primarily by higher mortality claims
in the US and the UK. Excluding this impact,
the underlying result showed further
signs of continuous improvements in the
Americas mortality experience.
EBIT for the health segment was
USD 221 million in 2020, compared with
USD 258 million in the prior-year period.
COVID-19 losses included in this result
amounted to USD 110 million, mainly
related to disability claims which emerged
in the second half of the year. Further
profitable growth of the health business
was partly muted by adverse experience
across various markets in Asia impacting
both years.
Life & Health Reinsurance
Life & Health Reinsurance (L&H Re)
reported a net income for 2020 of
USD 71 million. COVID-19-related claims
and reserves included in this result
amounted to USD 999 million (pre-tax),
driven primarily by higher mortality rates in
the US and the UK, as well as increased
disability claims mainly in ANZ. Excluding
the after-tax impact of COVID-19-related
losses, net income was USD 855 million in
2020, compared with USD 899 million in
2019. This result was supported by a strong
investment performance, which delivered
an ROI of 3.7%, despite the global financial
market volatility. The underwriting result
reflected continuous improvements
in the Americas mortality experience,
compensated by adverse morbidity
experience mainly in ANZ.
The ROE, excluding the impact of COVID-
19-related losses, would have been 10.4%,
compared to 12.4% reported in 2019.
This was mainly due to the significantly
higher average equity base in 2020.
Reflecting the after-tax impact of COVID-19,
the ROE was 0.9% in 2020.
Premiums
Net premiums earned and fee income
increased by 6.8% to USD 13.9 billion,
compared with USD 13.0 billion in 2019,
supported by individual large transactions,
including longevity deals. Gross premiums
written in 2020 increased by USD 0.6 billion,
or 4.3%, to USD 15.1 billion, compared
with USD 14.5 billion in 2019.
Net operating margin
The net operating margin, excluding the
pre-tax impact of COVID-19-related losses,
would have been 9.4% in 2020, compared
with 10.0% reported in 2019. Both years
benefitted from a strong investment
performance.
Management expense ratio
The management expense ratio in 2020
was 5.2%, in line with prior year. An
increase in operating expenses was in
line with strong premium growth.
22
Swiss Re | Financial Report 2020
Outlook
While the current pandemic has led to
disruption in sales and claims activity for
insurers, L&H Re expects increases in life
and health treaty reinsurance new business
to remain driven by high-growth markets,
with more modest growth in mature
markets. However, the prolonged low
interest rate environment continues to have
an unfavourable impact on long-term life
business. Cession rates are expected to
remain broadly stable in major markets.
L&H Re sees a continued strong focus of
clients on capital, risk and balance sheet
optimisation in mature markets, leading to
ongoing opportunities for large transactions.
L&H Re will continue to pursue growth
opportunities in high-growth markets and
in large transactions, including longevity
deals. L&H Re is responding to the
expanding need for health protection driven
by ageing societies, and is applying its risk
knowledge to help reduce the protection
gap in all regions.
Premiums earned by
line of business, 2020
Total: USD 13.7 billion
2020
Life
Health
2019
Life
Health
2020
Life
Health
2019
Life
Health
9192
4533
8648
4187
9192
4533
8648
4187
Investment result
The return on investments for 2020 was
3.7%, down from 5.0% in 2019, reflecting
a decrease in the investment result of
USD 323 million driven by the impact of
global financial market volatility.
Net investment income decreased by
USD 74 million to USD 1 039 million in
2020 and was driven by recurring income
on the fixed income portfolio. The running
yield for 2020 was 3.0%, compared to
3.3% in 2019.
Net realised gains were USD 438 million
for 2020, compared with USD 687 million
for the prior period. The decrease was
mainly due to fewer gains from sales of
fixed income securities, as well as lower
market value gains on equity securities.
Insurance-related investment results as well
as foreign exchange gains/losses are not
included in the figures above.
Shareholders’ equity
Shareholders’ equity decreased to
USD 7.4 billion as of 31 December 2020,
compared with USD 8.3 billion as of
31 December 2019. Positive change in net
unrealised gains was more than offset by
the dividend paid to the Group, as well as
foreign exchange and the impact from
restructuring of internal loans.
Return on equity, excluding the after-tax
impact of COVID-19-related losses,
was 10.4%.
Swiss Re | Financial Report 2020
23
Financial year
Corporate Solutions
Corporate Solutions’ turnaround is ahead of plan at the end of
2020, reflecting the successful execution on the management
actions and continued pricing momentum.
Andreas Berger
CEO Corporate Solutions
Corporate Solutions’ underlying results for 2020
are the reward for all the hard work and
discipline that has gone into turning the Business
Unit around. We have made big steps to become
a significant contributor to Swiss Re’s profitable
growth ambitions. At the same time, we are
making good progress in addressing customer
pain points and industry inefficiencies.
Strategy and priorities
Corporate Solutions’ turnaround is ahead of
plan, with pruning and gross cost reductions
largely completed by the end of 2020.
Portfolio repositioning, a low level of large
man-made claims, together with efficiency
improvements and improved momentum in
insurance rates, helped Corporate Solutions
to achieve a normalised1 combined ratio of
96.8%, well ahead of the estimate of 105%
for 2020. The Business Unit will now target
a normalised combined ratio of less than
97% in 2021, compared with the original
98% goal. While maintaining a strong
focus on underwriting and operational
performance, Corporate Solutions continues
its longer-term strategic transformation
as it invests in new capabilities and moves
towards being a truly customer-focused,
better diversified and more cycle- resilient
commercial insurance provider.
Performance
Corporate Solutions’ net profit, excluding
the COVID-19 impact, would have been
USD 393 million in 2020 with a net
operating margin of 11.6%, compared with
a net loss of USD 647 million in 2019 with
a net operating margin of –16.7%. The
strong improvement in the result excluding
COVID-19 impacts reflected the benefits
of the management actions taken to
improve profitability, as well as continued
rate increases, favourable prior-year
development and lower-than-expected
large man-made losses.
In addition, strict execution of the expense
management actions laid out in 2019
helped the unit achieve almost all of the
expense savings. Claims and reserves
related to COVID-19 amounted to
USD 943 million pre-tax, resulting in a net
reported loss of USD 350 million for 2020.
The investment performance contributed
to the result, although to a lesser extent
than in 2019.
1 Assumes an average large natural catastrophe loss burden and excludes prior-year reserve developments, as well as the COVID-19 impact.
24
Swiss Re | Financial Report 2020
Premiums
Net premiums earned were USD 4.0 billion
in 2020, a decrease of 2.9% year-on-year,
as active portfolio pruning was cushioned
by realised rate increases and higher
volumes in targeted growth areas. Gross
premiums written decreased by 2.7%
to USD 4.8 billion in 2020, reflecting the
pruning impacts, a more selective
underwriting approach in credit & surety
and reduced business activity due to
the COVID-19 pandemic. These factors
were partially offset by the strong pricing
momentum which continued in 2020,
with Corporate Solutions achieving an
average price increases of 15%, as well
as a higher volume of fronted business.
Combined ratio
The Business Unit’s combined ratio
decreased to 116.5% in 2020 from 127.9%
in 2019, mainly driven by strongly
improved underlying business, a reduction
in large man-made losses and favourable
development from prior accident years,
partially offset by COVID-19 impacts. The
normalised1 combined ratio was 96.8%,
reflecting the successful execution on the
management actions to improve profitability,
achieved rate increases, as well as lower-
than-expected large man-made losses.
Lines of business
The property combined ratio for 2020
deteriorated by 12.2 percentage points
to 128.8%, mainly driven by COVID-19
reserves related to event cancellation
and non-damage business interruption.
Excluding COVID-19 impacts, the
combined ratio would have been 83.6%.
The casualty combined ratio decreased
to 108.1% in 2020, compared with
137.6% in 2019, reflecting the benefits
of management actions previously taken.
Excluding COVID-19 impacts, the
combined ratio would have been 106.6%.
The specialty combined ratio for 2020
improved by 19.3 percentage points
to 109.9%, driven by management
actions to improve profitability, partially
offset by COVID-19-related losses on
the credit & surety portfolio. Excluding
COVID-19 impacts, the combined ratio
would have been 89.7%.
Corporate Solutions results
USD millions
Revenues
Gross premiums written
Net premiums written
Change in unearned premiums
Premiums earned
Net investment income
Net realised investment gains/losses
Other revenues
Total revenues
Expenses
Claims and claim adjustment expenses
Acquisition costs
Operating expenses
Total expenses before interest expenses
Loss before interest and income tax expense
Interest expenses
Loss before income tax expense
Income tax expense/benefit
Net loss before attribution of non-controlling interests
Income/loss attributable to non-controlling interests
Net loss attributable to common shareholders
Claims ratio in %
Expense ratio in %
Combined ratio in %
2019
2020
Change in %
–3
–10
–
–3
–40
–54
–
–7
–12
–8
–12
–12
–41
–23
–40
–5
–48
–
–46
4 974
4 253
–87
4 166
234
162
5
4 567
4 839
3 824
223
4 047
140
74
5
4 266
–3 900
–640
–788
–5 328
–3 433
–592
–690
–4 715
–761
–40
–801
143
–658
11
–647
93.6
34.3
127.9
–449
–31
–480
136
–344
–6
–350
84.8
31.7
116.5
Investment result
The return on investments was 2.6%
for 2020, compared with 3.4% in 2019,
reflecting a decrease in the investment
result of USD 97 million.
Net investment income decreased by
USD 86 million to USD 154 million in 2020,
mainly due to reinvestment into lower
yields, as well as a lower average invested
asset base.
Net realised gains were USD 73 million in
2020, down from USD 84 million in 2019,
reflecting lower market value gains
on equity securities, partially offset by
additional realised gains on sales of
fixed income securities.
Insurance-related derivative results
and foreign exchange gains/losses are
not included in the investment figures.
Corporate Solutions offers insurance
protection against weather perils and
other risks, which is accounted for as
derivatives. Insurance in derivative form
reported a net realised loss of USD 8 million
in 2020, compared with a net realised
gain of USD 89 million in 2019. The current
period was impacted by the mild winter
temperatures in Europe.
Shareholdersʼ equity
Shareholdersʼ equity remained unchanged
at USD 2.0 billion since the end of 2019,
as the net loss for the period was offset by
net unrealised gains and the conversion
of a subordinated loan of USD 300 million
from debt to equity in the second quarter
of 2020.
The ROE was –17.4% in 2020, compared
with –34.1% in 2019. Excluding COVID-19
impacts, the ROE would have been 16.5%.
Outlook
The commercial insurance market
experienced significant price gains through
2020, continuing the trend started in 2019.
Swiss Re expects the positive momentum in
commercial insurance to continue in 2021,
but to potentially slow down by the end of
the year as pricing deficiencies narrow and
capital re-enters the market.
Swiss Re | Financial Report 2020
25
Financial year
Life Capital
Life Capital achieved its key strategic milestone
in 2020 with the sale of ReAssure and continued strong
growth of its digital B2B2C business.
Julien Descombes
CEO Life Capital, ad interim
In 2020, Life Capital delivered a strategic
milestone by completing the sale of ReAssure
while continuing to grow its open book
businesses. In a difficult COVID-19 environment,
iptiQ’s dynamic growth demonstrates the
resilience of its B2B2C business and the strength
of its operating model.
26
Swiss Re | Financial Report 2020
Strategy and priorities
Life Capital continued its strong growth
in the open book businesses and achieved
major strategic milestones with the
completion of the ReAssure sale and the
deconsolidation of the business.
The completion of the sale of ReAssure
to Phoenix Group on 22 July 2020
represented a significant strategic
milestone for the Group. The transaction
had valued ReAssure at GBP 3.25 billion,
with Swiss Re receiving a cash payment
of GBP 1.2 billion and shares representing
a 13.3% stake in Phoenix.
The successful deconsolidation of ReAssure
allowed Life Capital to pay a dividend
to Swiss Re Group of USD 1.5 billion in
September 2020. In our open book
businesses, Life Capital continued to further
enhance Swiss Re’s access to primary
risk pools. Through the use of technology,
elipsLife and iptiQ demonstrated strong
growth despite the headwinds created by
COVID-19. In 2020, iptiQ’s gross premiums
written in its core business increased by
76% compared to 2019 and elipsLife’s core
gross premiums written increased by 22%.
iptiQ currently operates with 40 partners
globally, a net increase of 11 compared
with 2019. The successful expansion into
the EMEA property and casualty business
in 2020 has contributed positively to the
overall growth and development of the
business. iptiQ currently provides protection
to 668 000 customers globally. Continued
progress was made for expansion into
Asia with the intention to enter China in the
near term. The continued dynamic growth
of the business contributes to its positive
standalone valuation.
Performance
Life Capital reported a net loss of
USD 265 million in 2020. The result was
driven by continued investment into
the growth of our open book businesses,
underperformance in the elipsLife unit
and COVID-19 losses. Overall, COVID-19
losses of USD 27 million for Life Capital
are within expectations, given the
underlying businesses.
The net operating margin in 2020 was
–6.6%, compared with 2.4% in the prior
year, in line with movements in income.
Premiums
Gross premiums written in the open book
businesses increased by 22% during 2020
when measured at constant exchange rates.
Overall, net premiums earned and fee
income were at USD 2.0 billion for 2020,
compared with USD 2.1 billion in 2019,
driven by the deconsolidation of the
ReAssure business for five months in 2020.
This was partially offset by solid growth
in the open book businesses.
Investment result
The return on investments was 3.4% for
2020, compared with 3.7% in 2019. In
2020, the investment portfolio return related
to ReAssure Group plc was excluded from
the ROI calculation for the Business Unit and
the Group due to the interim classification
of ReAssure Group plc as held for sale.
Net investment income decreased by
USD 674 million to USD 113 million in 2020,
mainly due to the exclusion of the ReAssure
investment portfolio from the investment
result.
Net realised gains decreased by
USD 148 million to USD 43 million in 2020.
The current period was largely driven by
market value gains on equity securities.
Insurance-related investment results as well
as foreign exchange gains/losses are not
included in the figures above.
Operating expenses
Operating expenses were USD 613 million
in 2020, compared with USD 721 million
in 2019. The decrease was driven by the
deconsolidation of ReAssure for five months
of the year, partially offset by the continued
investment into the growth of the open
book businesses.
Life Capital results
USD millions
Revenues
Gross premiums written
Net premiums written
Change in unearned premiums
Premiums earned
Fee income from policyholders
Net investment income – non-participating business
Net realised investment gains/losses – non-participating
business
Net investment result – unit-linked and with-profit business
Other revenues
Total revenues
Expenses
Life and health benefits
Return credited to policyholders
Acquisition costs
Operating expenses
Total expenses before interest expenses
Income/loss before interest and income tax expense
Interest expenses
Income/loss before income tax expense/benefit
Income tax expense/benefit
Net loss before attribution of non-controlling interests
Loss attributable to non-controlling interests
Net loss attributable to common shareholders
2019
2020
Change in %
2 831
1 780
–82
1 698
451
1 193
18
4 821
1
8 182
–2 500
–4 471
–409
–721
–8 101
81
–72
9
–133
–124
–53
–177
2 533
1 686
7
1 693
291
827
243
–2 155
1
900
–1 718
1 755
–527
–613
–1 103
–203
–55
–258
41
–217
–48
–265
–11
–5
–
–
–35
–31
–
–
–
–89
–31
–
29
–15
–86
–
–24
–
–
75
–9
50
Shareholdersʼ equity
Shareholdersʼ equity decreased by
USD 3.5 billion to USD 1.8 billion, mainly
driven by the USD 1.5 billion dividend
payment as well as a reduction in unrealised
gains related to the disposal of ReAssure and
the net loss. Return on equity was –7.5%
for 2020, compared with –3.4% for 2019.
Outlook
As of 1 January 2021, the Life Capital
segment is officially disbanded, with the
former Life Capital businesses reported in
their new operating segments from the first
quarter of 2021. Swiss Re will continue to
increase access to the primary insurance
risk pool through its global B2B2C digital
platform iptiQ, which is becoming a
standalone division. elipsLife will be reported
as part of the Corporate Solutions segment.
iptiQ currently writes property and casualty
business in Europe and intends to launch
operations in China in 2021. On the life and
health front, iptiQ operates in Europe,
the US, Australia and New Zealand, and
is exploring other expansion opportunities
in Asia.
Although the outlook has improved,
COVID-19 continues to shape our business
environment in 2021. While the pandemic
is clearly a challenge for society and
insurers, it has significantly accelerated the
shift toward digital insurance channels.
This is of strategic importance for iptiQ.
We have already witnessed an increased
rate of flow and activity in digital interaction
models and we expect this to continue
further. This trend plays to iptiQ’s strengths,
and we are well placed to help partners
become closer to consumers as they
increasingly use digital channels to
purchase insurance.
Swiss Re | Financial Report 2020
27
Financial year
Swiss Re Institute
Thierry Léger
Chairman Swiss Re Institute &
Group Chief Underwriting Officer
Our research and development insights
are the foundation for how we model
and understand risk.
28
Swiss Re | Financial Report 2020
Underwriting performance in 2020
As a result of the COVID-19 pandemic and
its unparalleled containment measures,
the Group booked substantial claims and
reserves for the event across the year,
amounting to USD 3.9 billion. Most of
these are incurred but not reported (IBNR)
reserves, reflecting a developing situation.
Besides higher mortality claims, reserves
are primarily related to non-damage business
interruption and event cancellations.
Swiss Re’s large natural catastrophe and
man-made large losses, excluding the impact
of COVID-19, amounted to USD 2.4 billion
in 2020. Natural catastrophe events were
above expectations, predominantly from
secondary perils across the globe. The largest
man-made loss was the explosion in Beirut.
While the impact of COVID-19, natural
catastrophes and man-made losses are
significant, our P&C businesses showed
improved underlying performance following
determined actions to strengthen the
quality of our underwriting. We steered
our portfolio mix to an increasingly
attractive risk-return profile with continued
growth in special lines, a cautious cycle
management approach in credit and surety,
and continuous updates to our natural
catastrophe risk models to reflect recent
events. Furthermore, we executed a
focused de-risking of our P&C Re casualty
business in North America. We continued
Corporate Solutions’ exit from North
America general liability.
Our underwriting performance was
supported by a hardening price
environment to compensate for lower
interest rates, continued negative
loss trends and years of soft markets.
Underwriting outlook:
data and analytics at the core
Underwriting excellence and discipline
are the key success factors in a changing
insurance landscape. We are evolving our
underwriting capabilities through cutting-
edge research, while putting emphasis on
more and better data, advanced analytics
and sharpening the skills of our people.
Underwriting data at an individual contract
level and live monitoring that enables
real-time underwriting decisions are a
cornerstone of our efforts. End-to-end
digitisation of our contracts helps us track
exposures and review wordings, aided
by machine learning. We are strengthening
geospatial risk insights for individual
locations, risks and policies. These
enhancements to our core underwriting
will strengthen our portfolio quality further.
They will be supported by an increasingly
data-driven Target Liability Portfolio,
including advanced scenario modelling.
Underwriting discipline and covering the
true cost of risk is imperative. Swiss Re
is well-equipped to benefit from improving
market conditions. We see a confluence
of factors working towards further rate
increases: growth in insurance demand
alongside economic recovery, COVID-19-
triggered risk awareness and widening
protection gaps. We will remain focused
on sharper risk assessment, application
of tighter terms and conditions and working
closely with our clients.
Increasing rates and successful growth in
natural catastrophe business helped P&C Re
achieve a normalised combined ratio
of 96.9%. L&H Re achieved a strong ROE
of 10.4%, excluding the impact of COVID-19.
This was supported by strict new business
underwriting rules and careful capital
deployment to disability business.
Corporate Solutions delivered on its
turnaround plans, with pruning and gross
cost reductions largely completed.
Together with significant rate increases
and low large man-made loss activity,
the decisive management actions resulted
in a normalised combined ratio of 96.8%.
Swiss Re underwriting and COVID-19
The COVID-19 pandemic has been a major
mortality event for Swiss Re’s L&H portfolio.
Despite the high human cost of COVID-19,
the overall mortality impact is significantly
below our modelled one-in-two-hundred-
year pandemic event.
The pandemic highlighted the need to
increase the clarity of reinsurance contracts
in order to manage our exposure to
complex risk scenarios. We are engaging
with clients to improve our insights into
their products. This will ensure that all
exposures transferred to us are understood
and priced for and that we have content
clarity in our reinsurance contracts.
Looking forward, the arrival of vaccines is a
cause for optimism and we are hopeful that
the expected reopening of economies will
provide a boost for our re/insurance business.
The switch to digital working and home
office will continue into the future, requiring
new forms of cyber coverage at individual,
business and platform levels. Swiss Re
can support the development of cyber
insurance from both the investment and
underwriting sides of the business.
An evolving natural catastrophe
risk landscape
The 2020 hurricane season saw a record
number of hurricanes in the North Atlantic
and significant insured losses from
secondary perils. Severe convective storms,
hail and tornados in Australia, Canada and
the United States caused USD 36 billion
in insured losses for the industry. Wildfires
in Australia and in the United States
caused total insured losses well exceeding
USD 10 billion.
A warming climate explains some of the
increase in secondary perils. However, since
1980, a steady growth of losses associated
with weather events has mainly been due
to exposure accumulation that comes with
economic growth and urbanisation.
In 2020, we advanced our understanding of
the contribution of climate change and other
climate conditions to hurricane and typhoon
activity. Climate data points to an ongoing
elevated hurricane activity level for 2021.
Through our research, we have continued
to develop forward-looking models for
new and emerging risks. In 2020, this led to
significant revisions of underwriting risk
views for multiple markets, most notably in
Asia. These models allowed us to better
reflect emerging risks in our underwriting,
addressing the need for sustainable pricing.
At the same time, we have applied our
modelling insights to a range of new
natural catastrophe risk transfer solutions,
enabling our clients and partners to
offer new insurance products. These
include index-based cover schemes
for communities and public entities.
We have sharpened our focus on
sustainability by steering our risk-taking
away from carbon-intensive industries,
expanding into sustainable industrial
activities like renewable energy and
developing sustainability metrics to steer
our liability portfolios, alongside our
financial metrics.
Swiss Re | Financial Report 2020
29
Financial year
Group Investments
Guido Fürer
Group Chief Investment Officer
Asset Management’s proactive portfolio
management helped successfully navigate
exceptional financial market volatility,
delivering a strong result for the Group.
30
Swiss Re | Financial Report 2020
Financial markets and investment
strategy
The COVID-19 pandemic as well as the
ensuing monetary and fiscal policy
responses were the key drivers of financial
markets in 2020. In February/March, risk
assets sold off sharply amid the first wave
of COVID-19 infections, the related
lockdown measures in many countries and
the collapse in economic activity. However,
decisive actions by central banks and
governments to provide significant amount
of stimulus contributed to an impressive
recovery in equity and other asset classes
that has continued.
Swiss Re’s investment performance was
strong in 2020, despite the global financial
market volatility. The focus on high-quality
fixed income assets helped to reduce the
impact of the financial market turmoil, as
did our industry-leading ESG approach.
Active and timely portfolio management
activities also contributed to the strong
investment performance. Actions included
the targeted and early reduction of sectors
with high vulnerability to COVID-19-related
market impacts, as well as dynamically
managed portfolio hedging following the
onset of the crisis.
In terms of specific key market developments,
US 10-year Treasury yields declined to just
above 0.5% in August, a new all-time low.
Since then, they have increased again amid
the economic recovery. Meanwhile, credit
spreads of investment grade corporate
bonds moved to their widest levels since
the Global Financial Crisis in March, before
narrowing again to levels close to the
beginning of the year, in part due to the
Federal Reserve providing a backstop to
credit markets. Our active portfolio
management and emphasis on high-quality
exposure resulted in minimal impairments.
Finally, equities rose sharply after hitting
multi-year lows in late March, with the
S&P 500 reaching new record highs in
December as the uncertainty surrounding
the US election outcome dissipated and
positive news emerged on the effectiveness
of various COVID-19 vaccines. This led
to notable market value gains in the
equity portfolio.
3.0
Net investment
income in USD
billions, 2020
(2019: USD 4.2 billion)
3.5%
Group return on
investments 2020
(2019: 4.7%)
2.4%
Group running
yield 2020
(2019: 2.8%)
Investment result
Fundamentally, the portfolio performed
well with insignificant impairments
alongside gains generated from the fixed
income portfolio, as well as market value
gains on equity positions.
The Group’s non-participating investment
portfolio decreased from USD 134.5 billion
at the end of 2019 to USD 125.7 billion
in 2020, in part due to the sale of the
ReAssure portfolio in July 2020. The ROI
was 3.5% for 2020, compared with 4.7%
for 2019. The strong investment result,
although lower than in the prior year, was
driven by timely and effective portfolio
management actions throughout the
global financial market turbulence.
The Group’s non-participating net
investment income was USD 3.0 billion
in 2020, compared with USD 4.2 billion
in 2019. The decrease was mainly driven
by the impact of reinvestment into lower
yields and reduced contribution from
equity-accounted investments, as well
as the absence of the ReAssure portfolio
in the second half of the year. The Group’s
running yield was 2.4% in 2020, compared
with 2.8% in 2019, reflecting the impact
from historically low reinvestment yields
alongside de-risking actions. A high
concentration of unrealised gains on
long-maturity fixed income securities
supports our running yield’s persistency
looking forward.
The Group reported non-participating net
realised gains of USD 1.7 billion in 2020,
compared with USD 1.6 billion in 2019.
The increase reflects the fact that the prior
year was impacted by the loss from the
agreed sale of ReAssure and additional
foreign exchange losses, while the current
year reflects reduced gains from sales of
fixed income securities.
Outlook
The global economy has seen a
stronger-than-expected recovery after
the pandemic-induced “sudden stop” in
spring. However, renewed COVID-19 waves
in both the US and Europe weighed on
economic growth in the fourth quarter,
resulting in global real GDP growth
in 2020 that is still deeply negative.
Looking ahead, the global economy is
expected to recover in 2021, although
not all economies are expected to reach
pre-COVID-19 GDP levels this year.
Inflationary pressure is expected to remain
moderate even though base effects are
likely to lead to a temporary increase in
the very near term. In this environment,
monetary policy is set to remain highly
accommodative. Continued fiscal support
is likely necessary to sustain the recovery.
Our investment portfolio remains well
diversified across asset classes and
underlying sectors, with an ongoing focus
on quality and ESG integration. We look
to moderately increase our allocation to
private markets, including investments in
private debt and private equity, which
will further diversify the overall investment
portfolio. Subject to market conditions,
we also plan to add to our credit and
equity allocations.
Additionally, we intend to further increase
our focus on thematic investing, in
light of a financial market outlook where
differentiation within asset classes will
become even more key to generating
performance. We will also continue our
efforts to apply technology, such as big
data and smart analytics, across the
investment process to enable continued
outperformance. Lastly, we remain
committed towards responsible investing,
having incorporated ESG across the
entire investment value chain.
Swiss Re | Financial Report 2020
31
Financial year
Share performance
Swiss Re shares
Swiss Re had a market capitalisation of
CHF 26.5 billion on 31 December 2020,
with 317.5 million shares outstanding, of
which 289 million were entitled to dividends.
Swiss Re shares are listed in accordance
with the International Reporting Standard
on the SIX Swiss Exchange (SIX) and are
traded under the ticker symbol SREN.
typically two working days after the
ex-dividend date. The corresponding dates
in 2021 are 20 and 22 April.
Dividends
The Board of Directors proposes a regular
dividend of CHF 5.90 per share for 2020.
The dividend paid for 2020 will be subject
to 35% Swiss withholding tax.
Public share buyback programme
On 17 April 2020, shareholders authorized
a new public share buyback programme of
up to CHF 1 billion purchase value. At the
post-AGM meeting, the Board of Directors
decided that the share buyback programme
will not be launched.
For further information please visit
www.swissre.com/investors/shares/
share_buyback/
American Depositary Receipts (ADR)
In the US, Swiss Re maintains an ADR level I
programme (OTC symbol SSREY).
Share price performance
Swiss Re shares opened the year at
CHF 108.75. An intra-day high of
CHF 117.05 was achieved on 19 February
2020. On 19 March 2020, the shares
experienced an intra-day low of CHF 52.68.
The year-end share price was CHF 83.34.
During 2020, the STOXX Europe 600
Insurance index (SXIP) decreased by 13.8%
and the broader index of Swiss blue chips
(SMI) increased by 0.8%. The Swiss Re
share decreased by 23.3%.
Share trading
The average on-exchange daily trading
volume for 2020 was 1 million shares.
Trading volume peaked at 8 million shares
on 30 April 2020.
Swiss Re’s dividend policy
Swiss Re’s dividend policy is a central
element of Swiss Re’s capital management
priorities.
The Group aims to ensure superior
capitalisation at all times and to maximise
financial flexibility, growing the regular
dividend with long-term earnings and, at
a minimum, maintaining it. Swiss Re will
then deploy capital for business growth
where it meets its strategy and profitability
requirements and finally repatriate further
excess capital to shareholders, with the
preferred form of future capital repatriation
being share buyback programmes.
Weighting in indices
As of 31 December 2020
Swiss/blue chip indices
SMI
SPI
Insurance indices
STOXX Europe 600 Insurance
Bloomberg Europe 500 Insurance
FTSEurofirst 300 Insurance
Dow Jones Insurance Titans 30
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
Sustainability indices
Dow Jones Sustainability Europe
Dow Jones Sustainability World
FTSE4Good Global
Bloomberg Gender Equality
32
Swiss Re | Financial Report 2020
In line with the Group’s capital management
priorities, the Board has decided not to seek
approval at the AGM 2021 for a new share
buyback programme.
Index representation
In addition to its relevant industry indices,
Swiss Re is also represented in various
Swiss, European and global indices,
including the SMI and the SXIP. Swiss Re
is also a member of various sustainability
indices, including the Dow Jones
Sustainability World and Europe,
FTSE4Good, Euronext Vigeo Europe 120,
Bloomberg Gender Equality Index, MSCI
World ESG Leaders and MSCI World
Socially Responsible (2020) index families.
In November 2020, Swiss Re received a
AAA rating on the MSCI ESG assessment.
Information for investors
More information is available on Swiss Re’s
website: www.swissre.com/investors
Index weight (in %)
2.26
1.58
4.87
4.76
5.80
2.56
0.60
0.24
0.07
0.20
General information on Swiss Re shares
Identification numbers
Share
Swiss Security Number (Valorennummer)
12688156
ADR
–
ISIN (International Securities Identification Number) CH0126881561 US8708861088
Ticker symbols
Share
ADR1
Bloomberg
SREN:SW
SSREY:US
Telekurs
SREN
SSREY
Reuters
SREN.SW
SSREY.PK
1 Swiss Re’s ADR are not listed but traded over the counter; four ADRs correspond to one Swiss Re share.
Swiss Re share price and trading volume in 2020
Swiss Re share price and trading volume in 2020
120
Closing price in CHF
Volume in millions
12
1
2
543
6
7
8
100
80
60
40
20
0
10
8
6
4
2
0
January
February
March
April
May
June
July
August
September
October
November
December
Closing price Volume on-exchange Volume off-exchange
Closing price Volume on-exchange Volume off-exchange
1 A nnual results 2019 (20 February)
2 A nnual report 2019 (19 March)
3 E x dividend date (21 April)
4 D ividend payment (23 April)
5 Q 1 results 2020 (30 April)
6 H 1 results 2020 (31 July)
7 9M results 2020 (30 October)
8 I nvestors’ Day 2020 (20 November)
Key share statistics 2015 – 2020
Swiss Re share price and trading volume in 2020
As of 31 December
Shares outstanding1
120
2015
370 706 931
2016
360 072 561
2017
349 452 281
2018
338 619 465
2019
327 404 704
of which Treasury shares and shares
reserved for corporate purposes
Shares entitled to dividend
100
CHF unless otherwise stated
Dividend paid per share
80
Dividend yield8 (in %)
Earnings per share9
Book value per share10
60
Price per share year-end
Price per share year high (intra-day)
40
Price per share year low (intra-day)
Daily trading volume (in CHF millions)
Market capitalisation11 (in CHF millions)
20
ADR price at year-end (in USD)
32 967 2262
337 739 705
34 093 8343
325 978 727
34 866 5164
314 585 765
38 575 3245
300 044 141
36 749 7626
290 654 942
4.257
4.33
12.93
96.04
98.15
99.75
74.95
134
36 385
24.5312
4.60
4.77
10.55
107.64
96.50
97.85
79.00
120
34 747
23.76
4.85
5.32
1.02
103.37
91.25
98.50
81.65
129
31 888
23.38
5.00
5.55
1.34
91.72
90.12
98.80
84.20
126
30 516
22.84
5.60
5.15
2.46
97.46
108.70
110.45
88.90
120
35 589
28.12
2020
317 497 306
12
28 520 907
288 976 399
10
5.90
8
7.08
–3.04
83.00
6
83.34
117.05
4
52.68
147
26 460
2
23.69
0
0
März
Januar
Februar
1 Nominal value of CHF 0.10 per share.
2 Includes 4.4m shares repurchased under the share buyback programme launched on 12 November 2015, which concluded on 2 March 2016.
3 Includes 5.5m shares repurchased under the share buyback programme launched on 4 November 2016, which concluded on 9 February 2017.
4 Includes 6.3m shares repurchased under the share buyback programme launched on 3 November 2017, which concluded on 16 February 2018.
Closing price Volume on-exchange Volume off-exchange
5 Includes 10.1m shares repurchased under the share buyback programme launched on 7 May 2018, which concluded on 15 February 2019.
6 Includes 9.9m shares repurchased under the share buyback programme launched on 6 May 2019, which concluded on 18 February 2020.
7 In addition to the regular dividend of CHF 4.25 per share, a special dividend of CHF 3.00 per share was paid in 2015.
8 Dividend divided by year-end share price of the corresponding year.
9 Calculated by dividing net income by the weighted average number of common shares outstanding.
10 Based on shareholders’ equity (excluding convertible perpetual capital instruments) divided by the number of external common shares entitled to a dividend.
11 Based on shares outstanding.
12 Since 15 June 2015, every Swiss Re ADR represents one quarter of a Swiss Re share. Prior to close of business on 12 June 2015, one ADR represented one Swiss Re share.
September
November
Oktober
August
April
Juni
Mai
Juli
Dezember
Swiss Re | Financial Report 2020
33
Economic Value Management
Swiss Re’s 2020 economic
result was impacted by
COVID-19, partially offset by
a strong contribution from
investment activities.
34
Swiss Re | Financial Report 2020
Contents
EVM performance
EVM financial information
36
40
Independent Assurance Report
48
Swiss Re | Financial Report 2020
35
Economic Value Management
EVM performance
The economic result in Reinsurance and Corporate Solutions was
impacted by the large losses related to the COVID-19 pandemic,
partially offset by strong performance from investment activities.
Economic Value Management (EVM) is
Swiss Re’s proprietary integrated
economic valuation and steering framework,
which consistently measures economic
performance across all businesses.
Swiss Re reported a total contribution
to economic net worth (ENW) of
USD ‒434 million in 2020, compared to
USD 2.9 billion in 2019. On a risk-adjusted
basis, Swiss Re reported an EVM loss of
USD 3.6 billion in 2020, compared to
an EVM loss of USD 19 million in 2019.
John R. Dacey
Group Chief Financial Officer
The strong underlying business performance
in 2020, excluding COVID-19-related losses,
resulted in economic net worth per share
growth of 10.3%.
36
Swiss Re | Financial Report 2020
‒3.6
EVM profit
in USD billions, 2020
(2019: USD −19 million)
‒434
Total contribution to ENW
in USD millions, 2020
(2019: USD 2.9 billion)
‒0.1%
ENW per share growth
over-the-cycle target: 10%
(2019: 8.2%)
10.3%
ENW per share growth
(excl. COVID-19)
Group performance
The EVM loss of USD 3.6 billion in 2020
reflected the impact of COVID-19 claims
and reserves of USD 3.7 billion (COVID-19-
related impacts disclosed net of expenses,
taxes and capital costs). Excluding COVID-
19-related impacts, Reinsurance and
Corporate Solutions showed strong new
business performance.
The EVM profit on new business was
USD 9 million in 2020, compared to
USD 1.2 billion in 2019. Excluding the
COVID-19 claims and reserves of
USD 1.2 billion, the 2020 result was driven
by strong renewals in Property & Casualty
Reinsurance, transactional growth in
Life & Health Reinsurance and good
underwriting performance in Corporate
Solutions. This was partially offset by
continued investments in the open book
businesses in Life Capital as well as
overhead expenses in Group items.
The EVM loss from previous years’
business amounted to USD 4.3 billion in
2020, compared to an EVM loss of
USD 3.3 billion in 2019. Excluding
COVID-19-related claims and reserves of
USD 2.5 billion, the result mainly reflected
the adverse impacts of capital cost updates
for Life & Health Reinsurance and negative
development for the US liability portfolio in
Property & Casualty Reinsurance.
Investment activities generated an EVM
profit of USD 683 million in 2020,
compared to a profit of USD 2.1 billion in
2019. The 2020 result reflected favourable
interest rate impacts on a net long duration
position and strong real estate performance.
The 2019 result was driven by spread
tightening on credit investments as well as
strong performance across equities and
alternative investments.
ENW per share growth amounted to ‒0.1%
in 2020, below the over-the-cycle target of
10%. Excluding COVID-19-related claims
and reserves the ENW per share growth
was 10.3%.
Key information
USD millions, unless otherwise stated
EVM profit
Total contribution to ENW
Economic net worth (ENW)
Economic net worth per share in USD
Economic net worth per share growth, %1
Profit margin − new business, %
Profit margin − previous years’ business, %
Profit margin − investments, %
Change in %
−
−
−7
−6
2019
−19
2 932
36 138
124.33
8.2
3.0
−14.2
21.8
2020
−3 590
−434
33 652
116.45
−0.1
0.0
−16.1
5.9
1 ENW per share growth is calculated as follows: (current-year closing ENW per share + current year dividends
per share) ÷ (prior-year closing ENW per share + current year opening balance sheet adjustments per share).
Swiss Re | Financial Report 2020
37
unfavourable performance from the implied
equity exposure arising from the unit-linked
business. This was partially offset by
positive performance of Phoenix shares
following the sale of ReAssure and the
related hedge as well as the favourable
interest rate impacts on a net long duration
position in Life Capital.
Group items reported an EVM loss of
USD 191 million in 2020, compared to a
loss of USD 184 million in 2019. The EVM
loss on new business was USD 238 million
in 2020, mainly driven by overhead
expenses and capital costs on excess
capital, partially offset by trademark licence
fees charged to the business segments.
The EVM loss on previous years’ business
was USD 169 million, mainly driven by an
increase in overhead expenses and
the impact of a business re-segmentation
from Life & Health Reinsurance and Life
Capital to Group items. Investment activities
generated an EVM profit of USD 216 million
in 2020, compared to a loss of USD 6 million
in 2019, reflecting improved performance
from Principal Investments.
Economic Value Management
EVM performance
Business segment performance
Property & Casualty Reinsurance reported
an EVM loss of USD 2.0 billion in 2020,
compared to a loss of USD 1.4 billion in
2019. EVM loss on new business of
USD 433 million was driven by COVID-19-
related claims and reserves of USD 1.2 billion.
EVM profit excluding COVID-19-related
impacts was USD 720 million with strong
renewals from property natural catastrophe
and specialty. The casualty business was
impacted by lower interest rates, partially
offset by volume and profitability
improvements. EVM loss on previous years’
business was USD 1.5 billion due to
COVID-19-related claims of USD 689 million,
US liability experience and assumption
updates, large natural catastrophe losses
mainly in Australia as well as several
man-made loss updates. This was partially
compensated by reserve releases for large
natural catastrophe losses. Investment
activities generated an EVM loss of
USD 91 million in 2020, compared to a
profit of USD 627 million in 2019. The
2020 loss reflected the impact from
declining interest rates on a net short
duration position, partially offset by strong
real estate performance. The 2019 EVM
profit reflected strong performance across
equity and alternative investments as well
as the impact of credit spread tightening.
Life & Health Reinsurance reported an EVM
loss of USD 207 million in 2020 compared
to a profit of USD 1.8 billion in 2019. EVM
profit on new business of USD 1.0 billion
reflected strong transactional business
growth in EMEA, mainly due to large
longevity transactions, as well as life
transactions in the Americas. EVM loss on
previous years’ business of USD 1.8 billion
included the impact of COVID-19-related
claims and reserves of USD 995 million,
mainly driven by higher incurred and
expected mortality claims in the US and
the UK as well as higher disability claims
mainly in Australia. In addition, the result
was impacted by capital cost updates.
Investment activities generated an EVM
profit of USD 551 million in 2020, compared
to USD 739 million in 2019. The 2020 EVM
profit was driven by favourable interest
rate impacts on a net long duration position.
The 2019 EVM profit reflected the impact
of credit spread tightening as well as
positive equity performance.
38
Swiss Re | Financial Report 2020
Corporate Solutions reported an EVM loss
of USD 706 million in 2020, compared to a
loss of USD 805 million in 2019. The EVM
loss on new business of USD 98 million
was mainly driven by COVID-19-related
claims and reserves, and losses on insurance
in derivative form due to the mild winter
in Europe. Excluding COVID-19-related
impacts, the new business loss was
USD 41 million. The EVM loss on previous
years’ business of USD 624 million was
significantly impacted by COVID-19-related
claims and reserves, driven by anticipated
claims for event cancellations, non-damage
business interruption losses, and credit &
surety claims. Excluding COVID-19-related
impacts, the previous years’ business
reported a profit of USD 156 million, a
turnaround of USD 1.2 billion compared to
2019. The profit reflected the benefits of
the management actions taken to improve
profitability and low large man-made claims
activity, partially offset by credit & surety
recession-related anticipated losses on the
existing portfolio, as well as a credit & surety
premium takedown to account for future
cancellations. Investment activities
generated an EVM profit of USD 17 million
in 2020, compared to a profit of
USD 112 million in 2019, with results in
2020 driven by interest rates and equity
performance, albeit lower than in the prior
year. The 2019 EVM profit reflected
the impact of credit spread tightening
and favourable performance from
equity investments.
Life Capital generated an EVM loss of
USD 511 million in 2020, compared
to a profit of USD 591 million in 2019.
The EVM loss on new business was
USD 268 million, mainly driven by expenses
for the open books and the running of
Life Capital as well as capital costs, which
more than offset the gross underwriting
result generated by the open books. The
EVM loss on previous years’ business was
USD 233 million, impacted by a true-up
to the gain on the sale of ReAssure mainly
driven by an unfavourable movement
in the Phoenix share price prior to the sale,
underperformance in elipsLife and
unfavourable persistency in the closed book
US business. Investment activities
generated an EVM loss of USD 10 million,
compared to a profit of USD 596 million
in 2019. The 2020 EVM loss was mainly
related to ReAssure with unfavourable
performance driven by spread widening
on UK credit investments as well as
Business segments – key information
USD millions, unless otherwise stated
2019
EVM profit
Total contribution to ENW
Profit margin − new business, %
Profit margin − previous years’ business, %
Profit margin − investments, %
2020
EVM profit
Total contribution to ENW
Profit margin − new business, %
Profit margin − previous years’ business, %
Profit margin − investments, %
Property & Casualty
Reinsurance
Life & Health
Reinsurance
Corporate
Solutions
Life
Capital
Group
items
−1 396
−351
−1.1
−19.5
23.2
−1 975
−714
−2.7
−12.7
−3.8
1 775
2 656
7.8
−2.5
18.8
−207
820
4.6
−14.6
13.2
−805
−727
5.3
−88.8
20.5
−706
−513
−4.3
−42.4
3.1
591
937
7.2
−6.9
n/a
−511
−302
−33.7
−17.3
n/a
−184
417
n/a
n/a
−0.3
−191
276
n/a
n/a
5.1
Total
−19
2 932
3.0
−14.2
21.8
−3 590
−434
0.0
−16.1
5.9
Swiss Re | Financial Report 2020
39
Economic Value Management
EVM financial
information
EVM income statement
For the years ended 31 December
USD millions, unless otherwise stated
Underwriting result
Gross premiums and fees
Gross premiums and fees growth rate, %
Premiums and fees
Premiums and fees retention rate, %
Premiums and fees growth rate, %
Claims and benefits
Commissions
Other
Gross underwriting result – new business
Expenses
Net underwriting result – new business
Taxes
Capital costs
EVM profit – new business
EVM profit – previous years’ business
EVM profit – underwriting
Investment result
Mark-to-market investment result
Benchmark investment result
Gross outperformance (underperformance)
Other
Expenses
Net outperformance (underperformance)
Taxes
Capital costs
EVM profit – investments
EVM profit
Cost of debt
Release of current year capital costs
Additional taxes
Total contribution to ENW
Profit margin – new business, %
Profit margin – previous years’ business, %
Profit margin – investments, %
40
Swiss Re | Financial Report 2020
2019
2020
58 325
30.2
57 120
97.9
30.2
−40 913
−9 536
452
7 123
−3 639
3 485
−607
−1 672
1 206
−3 293
−2 087
9 565
−5 645
3 920
117
−249
3 788
−810
−910
2 068
−19
−841
2 911
881
2 932
3.0
−14.2
21.8
60 449
3.6
58 641
97.0
2.7
−43 488
−8 827
−44
6 282
−3 731
2 551
−573
−1 970
9
−4 282
−4 274
8 409
−6 143
2 265
123
−241
2 147
−469
−994
683
−3 590
−259
2 443
972
−434
0.0
−16.1
5.9
EVM balance sheet
As of 31 December
USD millions
Assets
Investments
Cash and cash equivalents
In-force business assets
Retrocession assets
Other assets
Total assets
Liabilities
In-force business liabilities
Retrocession liabilities
Provision for capital costs
Future income tax liabilities
Debt
Other liabilities
Total liabilities
Economic net worth
Total liabilities and economic net worth
Statement of economic net worth
For the years ended 31 December
USD millions
Economic net worth as of 1 January
Change in EVM methodology1
Adjusted economic net worth as of 1 January
Total contribution to ENW
Dividends and share buyback
Other, including foreign exchange on economic net worth
Economic net worth as of 31 December
Common shares outstanding as of 31 December
Economic net worth per share in USD as of 31 December
2019
2020
155 013
9 611
266 327
26 072
3 457
460 480
369 967
19 752
9 850
4 203
13 718
6 852
424 342
36 138
460 480
123 601
5 458
318 440
26 848
2 818
477 165
384 141
21 900
11 800
3 510
14 817
7 345
443 513
33 652
477 165
2019
2020
35 993
0
35 993
2 932
−2 590
−197
36 138
290 654 942
124.33
36 138
−492
35 646
−434
−1 956
395
33 652
288 976 399
116.45
1 The Group decided to adopt an intensity-based approach for modelling EVM capital of underwriting activities. The impact of the change in EVM methodology was recorded as an adjustment
to the opening balance of 2020 economic net worth.
Swiss Re | Financial Report 2020
41
Economic Value Management
EVM financial information
Business segments – EVM income statement
For the year ended 31 December
USD millions, unless otherwise stated
Property & Casualty
Reinsurance
Life & Health
Reinsurance
Corporate
Solutions
Life
Capital
Group
items
Consolidation
Total
2019
Underwriting result
Gross premiums and fees
Gross premiums and fees growth rate, %
Premiums and fees
Premiums and fees retention rate, %
Premiums and fees growth rate, %
Claims and benefits
Commissions
Other
Gross underwriting result – new business
Expenses
Net underwriting result – new business
Taxes
Capital costs
EVM profit – new business
EVM profit – previous years’ business
EVM profit – underwriting
Investment result
Mark-to-market investment result
Benchmark investment result
Gross outperformance (underperformance)
Other
Expenses
Net outperformance (underperformance)
Taxes
Capital costs
EVM profit – investments
EVM profit
Cost of debt
Release of current year capital costs
Additional taxes
Total contribution to ENW
Profit margin – new business, %
Profit margin – previous years’ business, %1
Profit margin – investments, %
24 174
27.1
23 540
97.4
26.5
−15 937
−5 873
14
1 745
−1 411
334
−209
−334
−209
−1 814
−2 023
3 370
−2 099
1 272
66
−103
1 234
−269
−338
627
−1 396
−273
931
386
−351
−1.1
−19.5
23.2
27 244
37.9
27 213
99.9
34.4
−21 021
−2 702
−6
3 484
−828
2 656
−417
−931
1 308
−272
1 036
3 388
−2 166
1 222
26
−71
1 178
−242
−197
739
1 775
−322
980
223
2 656
7.8
−2.5
18.8
4 767
6.2
4 071
85.4
2.8
−2 197
−626
59
1 307
−875
432
−90
−178
164
−1 081
−917
541
−357
185
11
−20
175
−38
−25
112
−805
−45
176
−52
−727
5.3
−88.8
20.5
2 656
92.9
2 296
86.5
120.4
−1 758
−334
380
584
−402
182
39
−88
133
−137
−4
1 870
−933
937
13
−28
922
−188
−139
596
591
−151
346
151
937
7.2
−6.9
n/a
n/a
n/a
n/a
4
4
−123
−119
70
−140
−190
11
−179
395
−91
304
1
−26
278
−72
−211
−6
−184
−50
479
172
417
n/a
n/a
−0.3
−517
0
0
0
0
0
0
0
0
0
0
n/a
n/a
n/a
58 325
30.2
57 120
97.9
30.2
−40 913
−9 536
452
7 123
−3 639
3 485
−607
−1 672
1 206
−3 293
−2 087
9 565
−5 645
3 920
117
−249
3 788
−810
−910
2 068
−19
−841
2 911
881
2 932
3.0
−14.2
21.8
1 The overall previous years’ business profit margin for the Reinsurance Business Unit was –10.4%.
42
Swiss Re | Financial Report 2020
Business segments – EVM income statement
For the year ended 31 December
USD millions, unless otherwise stated
Property & Casualty
Reinsurance
Life & Health
Reinsurance
Corporate
Solutions
Life
Capital
Group
items
Consolidation
Total
2020
Underwriting result
Gross premiums and fees
Gross premiums and fees growth rate, %
Premiums and fees
Premiums and fees retention rate, %
Premiums and fees growth rate, %
Claims and benefits
Commissions
Other
Gross underwriting result – new business
Expenses
Net underwriting result – new business
Taxes
Capital costs
EVM profit – new business
EVM profit – previous years’ business
EVM profit – underwriting
Investment result
Mark-to-market investment result
Benchmark investment result
Gross outperformance (underperformance)
Other
Expenses
Net outperformance (underperformance)
Taxes
Capital costs
EVM profit – investments
EVM profit
Cost of debt
Release of current year capital costs
Additional taxes
Total contribution to ENW
Profit margin – new business, %
Profit margin – previous years’ business, %1
Profit margin – investments, %
23 853
−1.3
22 886
95.9
−2.8
−15 749
−5 595
14
1 555
−1 397
158
−133
−458
−433
−1 451
−1 884
2 763
−2 331
432
73
−99
405
−97
−399
−91
−1 975
−40
854
447
−714
−2.7
−12.7
−3.8
29 754
9.2
29 565
99.4
8.6
−23 461
−2 377
−13
3 714
−912
2 802
−559
−1 197
1 046
−1 804
−758
2 891
−1 872
1 019
29
−68
981
−202
−228
551
−207
−71
826
273
820
4.6
−14.6
13.2
4 604
−3.4
3 767
81.8
−7.5
−2 399
−506
−34
828
−814
13
−7
−104
−98
−624
−723
371
−314
57
11
−15
53
−10
−25
17
−706
37
137
19
−513
−4.3
−42.4
3.1
3 089
16.3
2 423
78.4
5.5
−1 878
−348
−3
193
−418
−225
48
−91
−268
−233
−501
1 694
−1 572
122
9
−30
101
−21
−89
−10
−511
−41
237
12
−302
−33.7
−17.3
n/a
n/a
n/a
n/a
−8
−8
−189
−197
79
−120
−238
−169
−407
690
−54
636
1
−29
607
−138
−253
216
−191
−144
389
221
276
n/a
n/a
5.1
−851
0
0
0
0
0
0
0
0
0
0
n/a
n/a
n/a
60 449
3.6
58 641
97.0
2.7
−43 488
−8 827
−44
6 282
−3 731
2 551
−573
−1 970
9
−4 282
−4 274
8 409
−6 143
2 265
123
−241
2 147
−469
−994
683
−3 590
−259
2 443
972
−434
0.0
−16.1
5.9
1 The overall previous years’ business profit margin for the Reinsurance Business Unit was –13.7%.
Swiss Re | Financial Report 2020
43
Economic Value Management
EVM financial information
Business segments – EVM balance sheet
As of 31 December
USD millions
2019
Assets
Investments
Cash and cash equivalents
In-force business assets
Retrocession assets
Other assets
Total assets
Liabilities
In-force business liabilities
Retrocession liabilities
Provision for capital costs
Future income tax liabilities
Debt
Other liabilities
Total liabilities
Economic net worth
Total liabilities and economic net worth
Property & Casualty
Reinsurance
Life & Health
Reinsurance
Corporate
Solutions
Life
Capital
Group
items
Consolidation
Total
61 167
3 675
20 125
2 744
5 101
92 812
63 537
662
922
−93
6 968
10 681
82 676
10 136
92 812
39 811
1 697
250 985
37 957
3 208
333 658
249 676
38 753
7 231
4 635
15 216
3 260
318 772
14 887
333 658
8 027
1 696
2 564
6 741
1 058
20 087
14 870
1 390
257
−264
866
662
17 780
2 306
20 087
53 808
2 540
39 076
25 049
1 022
121 496
87 513
25 392
1 441
183
1 847
1 164
117 540
3 955
121 496
5 745
2
1 756
7 503
−13 544
−46 424
−46 419
−8 689
−115 075
776
−46 405
−46 445
−259
626
1 505
2 649
4 854
7 503
−11 807
−10 419
−115 075
0
−115 075
155 013
9 611
266 327
26 072
3 457
460 480
369 967
19 752
9 850
4 203
13 718
6 852
424 342
36 138
460 480
44
Swiss Re | Financial Report 2020
Business segments – EVM balance sheet
USD millions
2020
Assets
Investments
Cash and cash equivalents
In-force business assets
Retrocession assets
Other assets
Total assets
Liabilities
In-force business liabilities
Retrocession liabilities
Provision for capital costs
Future income tax liabilities
Debt
Other liabilities
Total liabilities
Economic net worth
Total liabilities and economic net worth
Property & Casualty
Reinsurance
Life & Health
Reinsurance
Corporate
Solutions
Life
Capital
Group
items
Consolidation
Total
72 541
2 941
20 967
2 589
5 694
104 732
73 095
919
1 206
−886
5 774
15 872
95 981
8 751
104 732
41 946
1 625
280 433
21 872
4 741
350 616
280 803
20 367
10 022
5 121
16 353
3 428
336 094
14 522
350 616
9 119
546
2 567
7 179
858
20 268
16 528
870
207
−425
538
457
18 175
2 093
20 268
4 707
294
15 486
636
822
21 945
18 465
535
361
110
66
606
20 142
1 803
21 945
8 230
53
177
4 223
12 683
1 084
5
−411
2 688
2 836
6 202
6 481
12 683
−12 943
−1 189
−5 428
−13 520
−33 080
−5 834
−790
−10 602
−15 854
−33 080
0
−33 080
123 601
5 458
318 440
26 848
2 818
477 165
384 141
21 900
11 800
3 510
14 817
7 345
443 513
33 652
477 165
Swiss Re | Financial Report 2020
45
Economic Value Management
EVM financial information
Business segments – statement of economic net worth
For the year ended 31 December
USD millions
2020
Economic net worth as of 1 January
Change in EVM methodology1
Adjusted economic net worth as of 1 January
Total contribution to ENW
Dividends and share buyback
Other, including foreign exchange on
economic net worth
Economic net worth as of 31 December
Property & Casualty
Reinsurance
Life & Health
Reinsurance
Corporate
Solutions
Life
Capital
Group
items
Total
3 955
4 854
10 136
−183
9 953
−714
−470
−18
8 751
14 887
−344
14 543
820
−1 200
359
14 522
2 306
34
2 341
−513
3 955
−302
−1 487
266
2 093
−363
1 803
36 138
−492
35 646
−434
−1 956
395
33 652
4 854
276
1 201
150
6 481
1 The Group decided to adopt an intensity-based approach for modelling EVM capital of underwriting activities. The impact of the change in EVM methodology was recorded as an adjustment
to the opening balance of 2020 economic net worth.
46
Swiss Re | Financial Report 2020
Comparison of EVM and US GAAP
The most significant differences between
EVM and US GAAP are as follows:
• Discounting: For EVM, all future
expected cash flows are discounted using
risk-free interest rates. Under US GAAP,
most property and casualty reserves
are undiscounted (except for reserves
acquired in business combinations),
whereas life and health reserves are
usually discounted based on book yields.
• Investments and debt: For EVM, all
investments and debt positions are
carried at fair value. Under US GAAP,
different treatment applies for certain
investments (eg real estate is held at
depreciated cost) and debt is carried at
amortised cost rather than at fair value.
• Reserving basis: For EVM, best-
estimate current assumptions are used
for all re/insurance reserves. Under
US GAAP, life and health assumptions,
including book yield discounting
assumptions, are usually locked in
and can include a provision for
adverse deviation.
• Recognition differences: EVM
considers the economic value related
to annual management charges
on unit-linked funds and adjusts for
counterparty credit risk in the valuation
of insurance-related net assets. In
addition, EVM does not show minority
interests on the balance sheet, but
consolidates assets and liabilities
based on the proportion of the interest
held by Swiss Re.
• Goodwill and other intangibles: EVM
excludes the recognition of potential
future new business activities, including
potential renewals. As a result, no
goodwill or other intangible assets are
carried in the EVM balance sheet.
• Taxes: For EVM, deferred tax assets and
liabilities are recognised for temporary
differences between US GAAP and EVM.
• Capital costs: EVM recognises
opportunity costs for shareholders’
capital. The present value of capital costs
allocated to existing contracts are
recognised in the EVM balance sheet.
Business segments – reconciliation to US GAAP
As of 31 December
USD millions
2019
US GAAP shareholders’ equity
Discounting
Investments and debt
Reserving basis
GAAP margins
Other
Recognition differences
Goodwill and other intangibles
Taxes
Capital costs
Other
Total EVM valuation adjustments
Economic net worth
2020
US GAAP shareholders’ equity
Discounting
Investments and debt
Reserving basis
GAAP margins
Other
Recognition differences
Goodwill and other intangibles
Taxes
Capital costs
Other
Total EVM valuation adjustments
Economic net worth
Property & Casualty
Reinsurance
Life & Health
Reinsurance
Corporate
Solutions
Life
Capital
Group
items
Total
8 318
3 484
2 302
80
−30
−1 943
−1 043
−808
−224
1 818
10 136
9 168
1 220
2 401
−135
117
−1 978
−721
−1 108
−213
−417
8 751
8 253
−745
−2 305
20 796
−35
193
−1 847
−2 213
−7 187
−21
6 634
14 887
7 381
−981
−2 378
24 658
912
−955
−1 884
−2 312
−9 964
46
7 141
14 522
2 005
162
−34
850
−25
−342
−58
−230
−22
301
2 306
2 021
1
−19
608
−55
−299
20
−179
−5
72
2 093
5 289
−3 796
−39
3 162
−281
87
−31
570
−1 802
796
−1 334
3 955
1 751
−232
1
897
−96
−82
−59
−62
−360
47
52
1 803
5 386
491
−776
−515
139
129
−532
4 854
6 814
668
85
−938
−29
−489
246
−5
129
−333
6 481
29 251
−895
414
23 958
−163
225
−4 678
−2 605
−10 026
659
6 887
36 138
27 135
8
674
25 639
351
−1 004
−4 708
−2 830
−11 615
3
6 517
33 652
Swiss Re | Financial Report 2020
47
Independent Assurance Report
on the Economic Value Management financial information as of
31 December 2020 to the Board of Directors of Swiss Re Ltd
Zurich
We have been engaged to perform a reasonable assurance engagement on the Economic Value Management (‘EVM’)
financial information of Swiss Re Ltd (the ‘Company’) for the year ended 31 December 2020 (the ‘EVM financial
information’). The EVM financial information consists of the income statement, balance sheet, statement of economic net
worth and information on business segments as set out on pages 40 to 47 in the Company’s 2020 Annual Report.
All other EVM information included in, or made available outside, the Company’s 2020 Annual Report was not subject to
assurance procedures and, accordingly, we express no conclusion on this information.
The reporting criteria used by the Company are described in the summary of significant EVM principles (hereafter
referred to as “EVM principles”) as published on the Company’s website (swissre.com/EVM_principles).
Board of Directors’ responsibility
The Board of Directors is responsible for the preparation of the EVM financial information in accordance with the
Company’s EVM principles including data, valuation and accounting principles, assumptions and factors used and the
related internal controls as determined necessary to enable the preparation of the EVM financial information that is free
from material misstatement.
Practitioner’s responsibility
Our responsibility is to perform a reasonable assurance engagement to express a conclusion on the EVM financial
information as set out on pages 40 to 47 in the Company’s 2020 Annual Report. We conducted our reasonable
assurance engagement in accordance with International Standards on Assurance Engagements 3000 (Revised)
‘Assurance engagements other than audits or reviews of historical financial information’ issued by the International
Auditing and Assurance Standards Board. This standard requires that we plan and perform this engagement to obtain
reasonable assurance about the assurance conclusions.
A reasonable assurance engagement involves performing procedures to obtain evidence about the execution of the
valuation and accounting for the purpose of the EVM financial information in accordance with the Company’s EVM
principles. The procedures selected depend on our judgment, including the assessment of the risks of material
misstatement of the EVM financial information, whether due to omissions, misrepresentation, fraud or error. In making
those risk assessments, we consider internal controls relevant to the preparation of the EVM financial information in
order to design assurance procedures that are appropriate in the circumstances, but not for the purpose of expressing a
conclusion on the effectiveness of the entity’s internal controls regarding the EVM financial information. A reasonable
assurance engagement also includes evaluating the appropriateness of the policies used and reasonableness of
significant estimates made, as well as evaluating the adequacy of the overall presentation of the EVM financial
information in accordance with the Company’s EVM principles.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our assurance
conclusion.
Our Independence and Quality Control
We have complied with the independence and other ethical requirements of the Code of Ethics for Professional
Accountants issued by the International Ethics Standards Board for Accountants, which is founded on the fundamental
principles of integrity, objectivity, professional competence and due care, confidentiality and professional behavior.
Our firm applies International Standard on Quality Control 1 and accordingly maintains a comprehensive system of
quality control including documented policies and procedures regarding compliance with ethical requirements,
professional standards and applicable legal and regulatory requirements.
PricewaterhouseCoopers Ltd, Birchstrasse 160, Postfach, CH-8050 Zurich, Switzerland
Telefon: +41 58 792 44 00, Telefax: +41 58 792 44 10, www.pwc.ch
PricewaterhouseCoopers Ltd is a member of the global PricewaterhouseCoopers network of firms, each of which is a separate and independent legal entity.
48
Swiss Re | Financial Report 2020
Conclusion
In our opinion, the EVM financial information of the Company for the year ended 31 December 2020 as set out on pages
40 to 47 is prepared, in all material respects, in accordance with the Company’s EVM principles applied as published on
the Company’s website (swissre.com/EVM_principles).
PricewaterhouseCoopers Ltd
Roy Clark
Jasmine Chang
Zurich, 17 March 2021
2 Swiss Re Ltd | Independent Assurance Report on the Economic Value Management financial information
to the Board of Directors of Swiss Re Ltd
Swiss Re | Financial Report 2020
49
Risk and capital management
Swiss Re maintained its
very strong capital position
in 2020 despite the impact of
COVID-19, while successfully
deploying capital to attractive
risk pools.
50
Swiss Re | Financial Report 2020
Contents
Overview
Financial strength and
capital management
Liquidity management
Risk management
Risk assessment
52
54
60
61
67
Swiss Re | Financial Report 2020
51
Risk and capital management
Our resilient balance sheet
protects our franchise and
makes us a reliable partner
for our clients.
The Group’s capital position remains very strong with a
Group SST ratio of 215% as of 1 January 2021, compared
with a target range of 200–250%. This is supported by
our diversified business model and disciplined risk-taking.
Swiss Re’s overarching target is to maintain
a very strong capital position that operates
efficiently within constraints imposed
by regulators and requirements from rating
agencies, while giving the company
maximum financial flexibility. Swiss Re’s
capital allocation decisions are steered to
make capital and liquidity fungible to the
Group wherever possible, while complying
with local regulations and client needs.
Cash dividends paid by our Business Units
to the Group’s parent holding company,
Swiss Re Ltd, have amounted to
USD 28.1 billion since 2013.
Based on the Group’s capital strength,
the Board of Directors proposes a 2020
regular dividend of CHF 5.90 per share.
In accordance with the Group’s capital
management priorities, the Board of
Directors has not proposed a public share
buyback programme for 2021.
Liquidity
Our core insurance and reinsurance
operations generate liquidity primarily
through premium income. Our exposure to
liquidity risk stems mainly from two sources:
the need to cover potential extreme loss
events and regulatory constraints that limit
the flow of funds within the Group.
The amount of liquidity held is largely
determined by internal liquidity stress tests,
which estimate the potential funding
requirements stemming from extreme
loss events. Based on these internal
liquidity stress tests, we estimate that
Swiss Reinsurance Company Ltd, the
most important legal entity of the Group
from a liquidity perspective, currently
holds significant surplus liquidity.
John R. Dacey
Group Chief Financial Officer
The strength of
our business model
allows us to continue
to offer an attractive
dividend even in
these unprecedented
times.
Financial strength
Despite significant loss events during 2020,
the Group’s capital position remains very
strong with a Group Swiss Solvency Test
(SST) ratio of 215% as of 1 January 2021,
which is within Swiss Re’s 200–250%
target Group capitalisation range. Rating
agencies A.M. Best, Moody’s and
Standard & Poor’s (S&P) rated Swiss Re’s
financial strength “superior”, “excellent”
and “very strong”, respectively. This capital
strength enables Swiss Re to support its
clients while continuing to return capital
to shareholders.
52
Swiss Re | Financial Report 2020
Swiss Re also provides FINMA, its principal
regulator, with a yearly report on its
liquidity position, in accordance with
FINMA Circular 13/5, “Liquidity — Insurers”.
Risk Management
Group Risk Management is key to
the controlled risk-taking that underpins
Swiss Re’s financial strength. Risk
Management is mandated to ensure that
the Group and its legal entities have
the necessary expertise, frameworks and
infrastructure to support good risk-taking.
In addition, it monitors and ensures
adherence to applicable frameworks
and also performs reserving and
reporting activities.
Risk Management is embedded throughout
Swiss Re’s business. The Group has
dedicated Chief Risk Officers and risk
teams for all major legal entities and
regions. These are closely aligned to
Swiss Re’s business structure, in order to
ensure effective risk oversight, but remain
part of the Risk Management function
under the Group CRO, thus ensuring their
independence as well as a consistent
Group-wide approach to overseeing and
controlling risks. They are supported in
this by central risk teams that provide
specialised risk expertise and oversight.
The Group’s risk-taking is steered by
Swiss Re’s Risk Appetite Framework, which
consists of two interlinked components:
risk appetite and risk tolerance. The risk
appetite statement facilitates discussions
about where and how Swiss Re should
deploy its capital, liquidity and other
resources under a risk/return view. The
risk tolerance sets clear boundaries
to risk-taking.
Swiss Re’s proprietary integrated risk model
provides a meaningful assessment of the
risks to which the Group is exposed and
represents an important tool for managing
our business. It determines the capital
requirements for internal purposes and forms
the basis for regulatory reporting under
the SST and under Solvency II for our legal
entities in the European Economic Area (EEA)
and the United Kingdom.
Swiss Re continuously reviews and updates
its internal model and parameters to reflect
the Group’s experiences and changes in the
risk environment and current best practice.
Swiss Re’s risk profile
In SST 2021, Swiss Re’s overall risk
increases to USD 22.4 billion (compared to
USD 21.3 billion in SST 2020), driven by
higher insurance risk, offset partly by lower
financial market and credit risk. The higher
weight of insurance risk leads to increased
diversification at risk category level.
The increase in property and casualty risk is
mainly driven by a rise in non-life claims
inflation risk reflecting the heightened
probability of extreme inflation outcomes,
as well as an increase in costing and
reserving risk mainly due to COVID-19-
related reserves.
Higher life and health risk mainly reflects
the business growth in Asia and the US,
resulting in higher exposure to mortality
trend, lethal pandemic and critical
illness risk.
The decrease in financial market risk and
credit risk is driven mainly by the sale
of ReAssure Group Plc and an increase
in credit hedges.
Patrick Raaflaub
Group Chief Risk Officer
Swiss Re’s resilience
to the impact of
COVID-19 reflects our
financial strength and
disciplined approach
to risk-taking.
Swiss Re | Financial Report 2020
53
Risk and capital management
Financial strength
and capital management
Swiss Re’s capital position remains very strong, demonstrating
resilience to large losses and market volatility.
Solid capitalisation enabling
market opportunities
Swiss Re’s policy of ensuring superior
capitalisation at all times has meant
that even after four consecutive years
with large insurance losses, our very strong
capital position and high financial
flexibility enabled us to respond to market
opportunities and therefore create
sustainable long-term shareholder value
by maintaining the regular dividend.
Swiss Re’s capital management priorities
aim to ensure the ability to continue
operations following an extremely adverse
year of losses from insurance and/or
financial market events. Swiss Re’s Board
of Directors has also defined an SST
capitalisation target range of 200–250%
for the Swiss Re Group.
The below subsections describe Swiss Re’s
capitalisation according to the SST and
the financial strength ratings.
Swiss Solvency Test (SST)
Swiss Re is supervised by FINMA at the
Group level as well as for its regulated
legal entities domiciled in Switzerland.
FINMA supervision comprises minimum
solvency requirements, along with a
wide range of qualitative assessments
and governance standards.
1
4
Ensure superior
capitalisation at all times
and maximise
financial flexibility
2
Grow the regular
dividend with long-term
earnings, and at a
minimum maintain it
Capital
management
priorities
Repatriate further
excess capital
to shareholders
3
Deploy capital for
business growth where
it meets our strategy
and profitability targets
54
Swiss Re | Financial Report 2020
SST 2021
SST RBC – MVM
SST TC – MVM
19 308
215%
SST 2020
SST RBC – MVM
SST TC – MVM
18 021
232%
41 504
41 873
41 504
19 308
SST 2021
SST RTK – MVM
SST ZK – MVM
215%
SST 2020
SST ratio
SST RTK – MVM
(2021)
SST ZK – MVM
The SST ratio is calculated as SST risk-
bearing capital (SST RBC) minus market
value margin (MVM), divided by SST target
capital (SST TC) minus MVM.
The Group SST 2021 report will be filed
with FINMA in April 2021. Accordingly,
the information presented below is based
on currently available information and
may differ from the final Group SST 2021
figures.
Despite a challenging year, Swiss Re Group
maintains a very strong solvency level of
215% in SST 2021. The decrease of 17pp
compared to SST 2020 is mainly driven
by COVID-19-related claims and reserves,
the significant decline in interest rates
and higher financial market volatilities.
These effects are partly offset by the sale
of ReAssure Group Plc, a positive
investment and underwriting performance
(excluding COVID-19) and higher
supplementary capital.
The Group SST 2021 ratio lies within the
new target range of 200–250%, which
replaces the fixed Group SST target to
better align with market practice.
215%
Swiss Re Group SST Ratio
41 873
18 021
232%
USD millions
SST risk-bearing capital – market value margin
SST target capital – market value margin
SST ratio
SST 2020
41 873
18 021
232%
SST 2021
41 504
19 308
215%
Change
–370
1 287
–17pp
SST risk-bearing capital (SST RBC)
The SST RBC is derived from the SST net
asset value (SST NAV), which represents
the difference between the market
consistent value of assets and best estimate
of liabilities, according to the valuation
methodology prescribed under SST. For
this purpose, the SST NAV is adjusted for
the items in the table below.
Changes to the SST NAV mainly include
economic capital generation or depletion
due to underwriting and investment
SST risk-bearing capital
USD millions
SST net asset value
Deductions
SST core capital
Supplementary capital
SST risk-bearing capital
Market value margin
SST risk-bearing capital – market value margin
activities, foreign exchange movements,
and capital management actions (such
as dividend payments and share buyback
programmes).
The decrease in SST NAV to USD 48.8 billion
is mainly driven by underwriting contribution,
dividends paid and share buyback
programmes, partly offset by positive
investment contribution and foreign
exchange movements.
SST 2020
49 231
–3 174
46 057
5 239
51 295
9 422
41 873
SST 2021
48 804
–2 433
46 370
6 914
53 284
11 780
41 504
Change
–427
741
314
1 675
1 989
2 359
–370
Swiss Re | Financial Report 2020
55
Risk and capital management
Financial strength and capital management
The overall contribution from underwriting
activities is negative, mainly reflecting
underwriting contributions from Property &
Casualty Reinsurance, Corporate Solutions
and Life Capital, partly offset by positive
underwriting contribution from Life & Health
Reinsurance:
• The Property & Casualty Reinsurance
negative contribution is mainly driven
by losses related to COVID-19, adverse
experience and assumption updates
mainly in US liability business as well as
by large natural catastrophe losses mainly
in Australia and several man-made loss
updates. This is partially compensated
by natural catastrophe reserve releases
for typhoons Jebi and Hagibis,
Hurricane Dorian and strong renewals
from property natural catastrophe
and specialty.
• The Life & Health Reinsurance positive
contribution reflects profitable
transactional business growth across all
regions, in particular in EMEA, mainly
due to large longevity transactions, as
well as life transactions in the Americas.
This is partly offset by losses related to
COVID-19 mainly driven by higher
incurred and expected mortality claims
in the US and the UK as well as higher
disability claims mainly in Australia.
• The Corporate Solutions negative
contribution mainly reflects losses related
to COVID-19. This is partly offset by
management actions taken to improve
profitability and by low large man-made
loss activity.
• The Life Capital underwriting contribution
to SST NAV is negative, driven by the
loss on the sale of ReAssure Group Plc
to Phoenix Group Holdings Plc, expenses
for open books, underperformance
in elipsLife as well as unfavourable
persistency in the closed book US
business.
The contribution from investment activities
is positive, mainly driven by favourable
interest rate impact on the net duration
position and strong real estate
performance.
Positive foreign exchange movements are
driven by the appreciation of major
currencies against the US dollar.
56
Swiss Re | Financial Report 2020
Dividend payments and the completion of
the last tranche of the 2019 share buyback
programme resulted in a decline in the
SST NAV of USD 2.0 billion. No share
buyback programmes have been launched
after Q1 2020 following the BoD decision
of the post-AGM 2020 meeting.
Deductions mainly reflect projected
dividends (to be paid in 2021 and subject
to AGM 2021 approval and subsequent
BoD approval) as well as deferred taxes on
real estate. No share buyback programmes
are included.
Supplementary capital is recognised as
risk bearing under SST. The change in SST
supplementary capital of USD 1.7 billion
mainly reflects the issuance of two new
subordinated debt instruments.
A description of the change in market
value margin, which represents the capital
costs for the run-off period, is provided
together with the SST target capital
comments below.
SST target capital (SST TC)
Swiss Re uses an internal risk model to
determine the economic capital required to
support the risks on the Group’s book, as
well as to allocate risk-taking capacity to the
different lines of business. The model also
provides the basis for capital cost allocation
in Swiss Re’s EVM framework, which is
used for pricing, profitability evaluation and
compensation decisions. In addition to
these internal purposes, the model is used
to determine regulatory capital requirements
under economic solvency frameworks
such as SST and Solvency II.
In 2017, FINMA approved Swiss Re’s
internal model and its components for SST
reporting purposes under their revised
model review process.
Since SST 2020, two major model changes
have been implemented; both changes
were approved by FINMA in October 2020:
• Market value margin – To improve market
consistency and more adequately reflect
differences between interest rates of
different currencies, two changes have
been made: discounting in original
currencies and using forward rates to
discount to future years. These changes
reduce the MVM and increases the
Group’s SST ratio.
• Lapse risk – The model has been further
strengthened by including additional
dependencies and correlations, as well
as anti-selective lapses for lapse trend.
These changes result in minor increases
of lapse and mortality trend shortfall and
have no material impact on the Group’s
total risk or market value margin.
The risk exposure basis for SST is a projection
for the period from 1 January 2021 to
31 December 2021 and is based
on the economic balance sheet as of
31 December 2020 and adjustments
to reflect 1 January 2021 business shifts.
To derive SST TC, total risk is adjusted for the
line item Other impacts as shown below.
SST TC increases to USD 31.1 billion due to
an increase in the market value margin
(reflected under Other impacts) and higher
total risk driven by increased insurance
risk (see Risk assessment p. 67 for details).
Other impacts mainly reflect run-off capital
costs (MVM) – which are deducted again
from target capital to calculate the ratio –
as well as the impact from business
development over the forecasting period
and requirements from FINMA that are
not included in total risk as they are not
consistent with Swiss Re’s own risk view.
The increase in MVM is mainly driven by
the impact of lower interest rates.
SST Target Capital
USD millions
Total risk
Other impacts
SST target capital
Market value margin
SST target capital – market value margin
SST 2020
21 332
6 110
27 443
9 422
18 021
SST 2021
22 353
8 735
31 088
11 780
19 308
Change
1 021
2 625
3 645
2 359
1 287
21.7
Distribution to
shareholders
since 2013,
in USD billions
External dividends to shareholders
Based on the Group’s very strong capital
position and positive market outlook,
the Board of Directors proposes a regular
dividend of CHF 5.90 per share for
the 2020 financial year, maintaining the
dividend per share paid for the 2019
financial year.
Business Unit structure and
capital allocation
Our peer-leading capital repatriation is
supported by strong dividend payments
from our Business Units. The cash dividends
paid to Swiss Re Ltd since 2013 totalled
USD 28.1 billion, while the total amount
of capital returned to shareholders in the
same period is USD 21.7 billion.
The Group also reinvested in the business
by redeploying capital into the Business
Units. The majority of this capital was
allocated to grow profitable business.
Capital returned to shareholders since 2013
Capital returned to shareholders since 2013
Capital created by each business unit
Cash dividends paid from each business unit to SRL
(USD$bn)
(USD billions)
14.4 Reinsurance P&C
14.4 Reinsurance P&C
4.4 Reinsurance L&H
4.4 Reinsurance L&H
1.8 Corporate Solutions
1.8 Corporate Solutions
5.7 Life Capital
5.7 Life Capital
$28.1bn
USD28.1bn
total cash dividends
total capital created for
paid to Swiss Re Ltd1
Swiss Re Ltd1
$21.7bn
USD21.7 bn
distribution to shareholders2
distribution to shareholders2
1 Principal Investments has paid to the Group dividends of USD 1.7 billion between January 2013 and December 2020.
2 Reflects total external dividend and public share buyback programmes between January 2013 and December 2020.
Swiss Re | Financial Report 2020
57
Risk and capital management
Financial strength and capital management
Rating agencies
Rating agencies assign credit ratings to
the obligations of Swiss Re and its rated
subsidiaries. The agencies evaluate Swiss Re
based on a set of criteria that include
an assessment of our capital adequacy,
governance and risk management. Each
rating agency uses a different methodology
for this assessment.
On 6 May 2020, Moody’s affirmed
Swiss Re’s insurance financial strength
rating and outlook as “Aa3” stable.
The rating reflects Swiss Re’s excellent
market position, extensive diversification
by line of business and geography, very
strong capital adequacy and good
reserve adequacy.
On 17 July 2020, A.M. Best confirmed
the Group Swiss Re financial strength
Rating of A+ (Superior) with stable outlook.
The rating reflects A.M. Best’s assessment
of Swiss Re’s balance sheet strength as
“strongest”, strong operating performance,
very favourable business profile and very
strong enterprise risk management.
A.M. Best, Moody’s and S&P rate
Swiss Re’s financial strength based upon
interactive relationships. The insurance
financial strength ratings are shown
in the table below.
On 25 November 2020, S&P affirmed the
AA– financial strength of Swiss Re and its
core subsidiaries. The outlook on the rating
is “negative”. The rating reflects Swiss Re’s
very strong capital adequacy, its excellent
franchise and diversified product suite
across non-life and life reinsurance.
Swiss Re’s financial strength ratings
As of 31 December 2020
Standard & Poor’s
Moody’s
A.M. Best
Financial strength rating
AA–
Aa3
A+
Outlook
Negative
Stable
Stable
Last update
25 November 2020
6 May 2020
17 July 2020
58
Swiss Re | Financial Report 2020
Funding activities
During 2020, Swiss Re took advantage of
attractive market conditions to execute the
following planned funding activities:
• In May 2020, Swiss Re Finance (UK) Plc
issued EUR 800 million of subordinated
fixed rate reset step-up callable notes
with a coupon of 2.714%. The notes,
which are guaranteed on a subordinated
basis by Swiss Re Ltd, have a first call
date in June 2032 and a scheduled
maturity in June 2052.
• In June 2020, Swiss Re Finance (UK) Plc
issued SGD 350 million of subordinated
fixed rate reset callable notes with a
coupon of 3.125%. The notes, which are
guaranteed on a subordinated basis
by Swiss Re Ltd, have a first call date
in July 2025 and a scheduled maturity
in July 2035.
In addition, Swiss Re also undertook
the following activities in connection with
management of its funding platform:
• In April 2020, in connection with the
pending sale (and deconsolidation) of the
ReAssure Group Plc to Phoenix Group
Holdings Plc in July 2020, Swiss Re
Finance (UK) Plc was substituted as the
issuer of the EUR 750 million senior
notes due 2023 in place of Swiss Re
Finance (Jersey) Ltd following a
noteholder consent process. The notes
are guaranteed by Swiss Re Ltd.
• In September 2020, Swiss Reinsurance
Company Ltd exercised its option to early
redeem its CHF 175 million subordinated
contingent write-off notes.
• In December 2020, in connection
with the announced reorganisation of
the legal entity structure of the Group,
Swiss Reinsurance Company Ltd was
substituted as the issuer of the
USD 500 million subordinated fixed
rate resettable callable loan notes with
a scheduled maturity in 2024 in place
of Swiss Re Corporate Solutions Ltd
following a noteholder consent process.
As of 31 December 2020, the Group’s total
leverage ratio was 24%.
The USD 2.7 billion undrawn, off-balance
sheet pre-fundedsubordinated debt
facilities, add further strength to the Group’s
financial flexibility.
Financial flexibility strengthened through reduced leverage
USD billions
USD bn
36.6
37.7
36.0
36.1
28%
26%
24%
24%
24%
33.7
Additional
USD 2.7bn
pre-funded
subordinated debt
available on
demand.
5.0
5.2
4.1
4.4
4.6
4.1
4.0
4.1
3.5
6.7
3.1
1.9
6.6
3.2
1.0
2016
2017
2018
2019
2020
LOC1
Core capital4
Senior debt
Senior debt3
Total subordinated incl. contingent capital2
Total hybrid incl. contingent capital2
Core capital3
LOC1
Total leverage ratio5
Total leverage ratio4
1 Utilised unsecured LOC and related instruments.
2 Funded subordinated debt and contingent capital instruments, excluding non-recourse positions.
3 Core capital of Swiss Re Group is defined as economic net worth (ENW).
4 Total on-balance sheet senior and subordinated debt and contingent capital, including utilised LOCs, divided by
total capitalisation.
in Milliarden USD
36,6
37,7
28%
26%
36,0
36,1
33,7
24%
24%
24%
Swiss Re | Financial Report 2020
59
5,0
5,2
4,1
4,4
4,6
4,1
4,0
4,1
3,5
6,7
3,1
1,9
6,6
3,2
1,0
2016
2017
2018
2019
2020
Core capital4
Senior debt3
Total hybrid incl. contingent capital2
LOC1
Total leverage ratio5
Risk and capital management
Liquidity management
The active management of liquidity risks ensures the
Group’s ability to satisfy its financial obligations.
As a re/insurance group, Swiss Re’s
core business generates liquidity
primarily through premium income.
The Group’s exposure to liquidity risk
stems mainly from two sources: the
need to cover potential extreme loss
events and regulatory constraints
that limit the flow of funds within
the organisation.
A range of liquidity policies and
measures are in place to manage these
risks, in particular 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
Swiss Re’s internal transfer pricing;
• diversified sources are used to meet the
Group’s residual funding needs; and
• long-term liquidity needs are taken
into account in the Group’s planning
process and in the management of
financial market risk.
Liquidity risk management
Swiss Re’s core liquidity policy is to retain
access to sufficient liquidity in the form
of unencumbered liquid assets, cash and
pre-funded facilities, to meet potential
funding requirements arising from a range
of possible stress events. To allow for
regulatory restrictions on intra-Group
funding, liquidity is managed from a legal
entity perspective. The amount of liquidity
held is determined by internal liquidity
stress tests, which estimate the potential
funding requirements stemming from
extreme loss events.
The funding requirements under
stress include:
• Cash and collateral outflows, as well
as potential capital and funding support
required by subsidiaries as a result
of loss events
• Repayment or loss of all maturing
unsecured debt and credit facilities
• Additional collateral requirements
associated with a potential ratings
downgrade
• Further contingent funding requirements
related to asset downgrades
• Other large committed payments, such
as expenses, commissions and tax
The stress tests also assume that funding
from assets is subject to conservative
haircuts, intra-Group funding is not available
if subject to regulatory approval, no new
unsecured funding is available and funding
from new re/insurance business is reduced.
The primary liquidity stress test is based
on a one-year time horizon and a loss event
corresponding to 99% tail value at risk
(see page 67).
Swiss Re’s liquidity stress tests are reviewed
regularly and their main assumptions
are approved by the Group Executive
Committee. Swiss Re provides FINMA with
a yearly report on its liquidity position,
in accordance with FINMA circular 13/5,
“Liquidity — Insurers.”
Liquidity position of
Swiss Reinsurance Company Ltd (SRZ)
From a liquidity perspective, SRZ is the
most important legal entity of the Group.
The estimated total liquidity sources in SRZ
available within one year, after haircuts and
net of short-term loans from Swiss Re Ltd
and securities lending, amounted to
USD 26.7 billion as of 31 December 2020,
compared with USD 21.7 billion as of
31 December 2019. Based on the internal
liquidity stress tests described above,
we estimate that SRZ holds surplus
liquidity after dividends to Swiss Re Ltd.
In 2020, the amount of surplus liquidity
increased. This increase was largely due to
changes to intra-Group retrocession
agreements, the decrease in interest rates,
and changes in foreign exchange rates,
which more than offset the negative impact
associated with COVID-19 losses.
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Swiss Re | Financial Report 2020
Risk management
Risk Management provides independent oversight and applies an
integrated approach to managing current and emerging risks.
Embedded throughout the business,
the Group Risk Management function
ensures an integrated approach to
managing current and emerging threats.
Risk Management plays a key role
in business strategy and planning
discussions, where Swiss Re’s
risk appetite framework facilitates
risk/return discussions and sets
boundaries to Group-wide risk-taking.
Swiss Re applies a differentiated
governance approach at the legal entity
level, depending on the materiality of
individual entities. Major legal entities
within the Group that are designated as
so-called “Level I entities”, are subject to
enhanced governance, which includes the
following requirements:
• Develop and maintain corporate and risk
governance documentation that governs
the responsibilities of the legal entity
Board, committees and management
• Establish an Audit Committee as well
as a Finance and Risk Committee to
support the legal entity Board in
performing its oversight responsibility
for risk and capital steering
• Designate a Chief Risk Officer and
Chief Financial Officer
Taking and managing risk is central to
Swiss Re’s business. All risk-related
activities, regardless of the legal entity in
which they are undertaken, are subject to
the Group’s risk management framework.
Consequently, the framework is applied
at Group level and cascaded to all legal
entity levels.
The risk management framework sets
out how Swiss Re organises and applies
its risk management practices to ensure
that all activities are conducted in line
with the principles and limits mandated
by the Group Risk Policy.
The framework comprises the following
major elements:
• Risk governance documentation,
including Group Risk Policy
• Key risk management principles
• Fundamental roles for delegated
risk-taking
• Risk culture and behaviour
• Organisation of risk management,
including responsibilities at Board and
executive level
• Risk control framework
• Risk appetite framework, including limits
Swiss Re | Financial Report 2020
61
Risk and capital management
Risk management
Risk governance documentation
Swiss Re’s risk management framework is
set out in risk governance documentation at
Group and legal entity level. Risk governance
is the subset of corporate governance that
describes the risk management framework
and documents risk management practices.
Group-level risk documents form the basis
for all risk governance across Swiss Re.
Additional risk governance for legal entities
is prepared as an addendum to the Group
or parent entity document.
Group risk governance documents are
organised hierarchically across five
levels, which are mirrored by equivalent
documents at legal entity (LE) level:
• The Bylaws define Swiss Re’s governance
framework and include the responsibilities
of the Board of Directors and the Group
Executive Committee and their members,
including the responsibilities related to
risk management.
• The Group Risk Policy is defined by the
Group Board and articulates Swiss Re’s
risk appetite framework (risk appetite and
tolerance) as well as fundamental risk
and capital structure principles.
• The Group Risk Management Standards
outline how the Group organises and
applies its risk management practices.
• Risk category standards describe how
risk practices are implemented for a
specific category.
• The lowest level comprises risk
management methodology and process
documentation.
Key risk management principles
Swiss Re’s risk management is based on
four fundamental principles. These apply
consistently across all risk categories at
Group and legal entity level:
• Controlled risk-taking – Financial
strength and sustainable value creation
are central to Swiss Re’s value
proposition. The Group thus operates
within a clearly defined risk policy and
risk control framework.
Fundamental roles for delegated
risk-taking
In order to ensure clear control,
accountability and independent monitoring
for all risks, Swiss Re’s risk governance
distinguishes between three fundamental
roles in the risk-taking process:
• Risk owner – establishes a strategy,
delegates execution and control, and
retains ultimate responsibility for the
outcomes.
• Clear accountability – Swiss Re’s
• Risk taker – executes an objective
operations are based on the principle of
delegated and clearly defined authority.
Individuals are accountable for the
risks they take on, and their incentives
are aligned with Swiss Re’s overall
business objectives.
• Independent risk controlling – Dedicated
units within Risk Management control all
risk-taking activities. These are supported
by Compliance and Group Internal Audit
functions.
• Transparency – Risk transparency,
knowledge-sharing and responsiveness
to change are integral to the risk
control process. The central goal of risk
transparency is to create a culture of
mutual trust, and reduce the likelihood
of surprises in the source and potential
magnitude of losses.
within the authority delegated by the risk
owner; risk takers are required to provide
the respective risk controller with all
information required to monitor and
control their risks.
• Risk controller – is tasked by the risk owner
with independent oversight of risk-taking
activities to mitigate potential conflicts of
interest between the risk owner and risk
taker; risk controllers are responsible for
escalating relevant concerns.
Risk-taking activities are typically subject to
three lines of control. The first line comprises
the day-to-day risk control activities
performed by risk takers in the business as
well as in Group functions, including
identification of risks and design of effective
controls. Independent oversight performed
by functions such as Risk Management
and Compliance represents the second line
of control. The third line consists of
independent audits of processes and
procedures carried out by Group Internal
Audit or by external auditors. This approach
is designed to achieve a strong, coherent
and Group-wide risk culture built on the
principles of ownership and accountability.
Risk Governance documentation hierarchy
Level 0 ‒ Risk management tasks of Boards and Executive Management
Level 1 ‒ Risk Appetite Framework incl. risk and capital principles
SRL
Bylaws
LE
bylaws
Group
Risk Policy
LE risk appetite
Level 2 ‒ Risk-taking oversight throughout the Group
Group Risk
Management Standards
Level 3 ‒ Risk-taking oversight for specific risk categories
Group risk category standards
LE risk
management
standards
Level 4 ‒ Method and process documentation
Documentation on specific topics
LE specific topics
62
Swiss Re | Financial Report 2020
Key risk takers across Swiss Re are a
particular focus in promoting good risk-
and control-related behaviours. The
relevant positions are identified in a regular
process, and those who hold them are
subject to additional behavioural objectives
and assessments.
Risk culture is directly linked to Swiss Re’s
performance management, which is based
not only on business results but also on
behaviours. Swiss Re’s compensation
framework aims to foster compliance and
support sensible risk-taking. Swiss Re also
has a range of incentive programmes that
reflect the long-term nature of its business
by rewarding sustained performance rather
than short-term results. This helps to align
shareholder and employee interests.
Swiss Re’s compensation principles
and framework are captured within the
Swiss Re Group Compensation Policy.
The Group’s Finance and Risk Committee
conducts a regular risk assessment for
all changes to this policy.
Risk culture
Swiss Re fosters and maintains a strong
risk culture to promote risk awareness
and discipline across all its activities. This
risk culture stands for the risk- and control-
related values, knowledge and behaviour
shared by all employees. Its principal
components are summarised in a framework
that builds on the Group’s Code of Conduct
as well as on key risk management
principles in the Group Risk Policy.
The risk culture framework serves to
influence appropriate risk-taking behaviour
in four key aspects, which are assessed
annually for all employees in the performance
and compensation process:
• Leadership in providing clear vision
and direction
• Consideration of risk-relevant information
in decision-making
• Risk governance and accountability
of risk takers as well as transparent flow
of risk information
• Embedding of risk management skills
and competencies
Swiss Re’s risk culture provides the
foundation for the efficient and effective
application of its Group-wide risk
management framework. Group Risk
Management reinforces the risk culture
by ensuring risk transparency and fostering
open discussion and challenge in the
Group’s risk-taking and risk management
processes.
Swiss Re | Financial Report 2020
63
Risk and capital management
Risk management
Key Risk Management bodies and responsibilities
Board of Directors of Swiss Re Ltd
• Responsible for the Group’s governance principles and policies
• Acts through the Finance and Risk Committee, Investment Committee and Audit Committee
Group Executive Committee
• Develops and implements
risk management framework
• Sets and monitors risk limits
• Some responsibilities
delegated to Group CRO
and major legal entities
Group CRO
• Principal independent
Central Risk Management units
• Oversight of financial market,
Group Internal Audit
• Independent risk
risk controller
• Heads the Risk
Management function
• Member of Group
Executive Committee
• Reports to Board as
well as to Group CEO
credit and liquidity risk
• Shared risk expertise: risk
modelling and governance, as
well as political, sustainability
and emerging risks
• Strategic control services:
operational and regulatory
risk management
controller
• Assesses adequacy
and effectiveness
of internal control
systems
Legal entity management
• Manages underwriting
decisions and operational
risks in its area
Legal entity CROs
• Responsible for risk oversight and establishing risk governance
in their respective legal entities
• Supported by functional, regional and subsidiary CROs as well
as dedicated risk teams
Compliance
• Compliance with
applicable laws,
Code of Conduct
• Manages compliance
risks
Organisation of risk management
The Board of Directors of Swiss Re Ltd
(the Group Board) is ultimately responsible
for Swiss Re’s overall risk governance
principles and policies. It defines basic risk
management principles and the risk
appetite framework, including the Group’s
risk appetite and risk tolerance; in addition,
it approves the Group’s risk strategy. The
Group Board mainly performs risk oversight
and governance through three committees:
• Finance and Risk Committee − defines
the Group Risk Policy, reviews risk
capacity limits, monitors adherence
to risk tolerance, and reviews top
risk issues and exposures.
• Investment Committee − reviews the
financial risk analysis methodology and
valuation related to each asset class, and
ensures that the relevant management
processes and controlling mechanisms
are in place.
• Audit Committee − oversees internal
controls and compliance procedures.
The Group Executive Committee is
responsible for developing and implementing
Swiss Re’s Group-wide risk management
framework. It also sets and monitors major
risk limits, oversees the Economic Value
Management framework, determines
product policy and underwriting standards,
and manages regulatory interactions
and legal obligations. The Group Executive
Committee has delegated various
risk management responsibilities to the
Group Chief Risk Officer (Group CRO)
as well as to certain legal entity CROs.
The Group CRO is appointed as the principal
independent risk controller of Swiss Re.
He is a member of the Group Executive
Committee and reports directly to the
Group CEO as well as to the Board’s
Finance and Risk Committee. The Group
CRO also advises the Group Executive
Committee, the Chairman or the respective
Group Board Committees, in particular the
Finance and Risk Committee, on significant
matters arising in his area of responsibility.
The Group CRO leads the independent
Risk Management function, which is
responsible for risk oversight and control
across Swiss Re. It thus forms an integral
part of Swiss Re’s business model and
risk management framework. The Risk
Management function comprises
dedicated risk teams for legal entities and
regions, as well as central teams that provide
specialised risk expertise and oversight.
While the Risk Management organisation
is closely aligned to Swiss Re’s business
structure, in order to ensure effective risk
oversight, all embedded teams and CROs
remain part of the Group Risk Management
function under the Group CRO, thus
ensuring their independence as well as
a consistent Group-wide approach to
overseeing and controlling risks.
Legal entity risk teams are led by
dedicated CROs who report directly or
indirectly to their top-level entity CRO,
with a secondary reporting line to their
respective legal entity CEO. These legal
entity CROs are responsible for risk
oversight in their respective entities, as
well as for establishing the proper risk
governance to ensure efficient risk
identification, assessment and control.
They are supported by functional, regional
and subsidiary CROs who are responsible
for overseeing risk management issues
that arise at regional or subsidiary level.
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Swiss Re | Financial Report 2020
The central risk teams oversee Group
liquidity and capital adequacy and maintain
the Group frameworks for controlling
these risks throughout Swiss Re. They also
support CROs at Group and legal entity
level in discharging their oversight
responsibilities. They do so by providing
services, such as:
• Financial risk management
• Specialised risk category expertise
and accumulation control
• Risk modelling and analytics
• Regulatory relations management
• Maintaining the central risk
governance framework
Risk Management is also in charge of
actuarial reserving and monitoring of reserve
holdings for Corporate Solutions business
while for Reinsurance business the setting
of the reserves is performed by valuation
actuaries within the P&C and L&H Business
Management units.
Risk management activities are
complemented by Swiss Re’s Group
Internal Audit and Compliance units:
• Group Internal Audit performs
independent, objective assessments
of the adequacy and effectiveness of
internal control systems. It evaluates the
execution of processes within Swiss Re,
including those within Risk Management.
• The Compliance function oversees
Swiss Re’s compliance with applicable
laws, regulations, rules and the Code of
Conduct. It also assists the Group Board,
Group Executive Committee and other
management bodies in identifying,
mitigating and managing compliance risks.
Risk control framework
Swiss Re operates within a clearly
defined risk control framework. This is
set out in the Group Risk Management
Standards and comprises a body of
standards that establish an internal control
system for taking and managing risk.
These standards set responsibilities for risk
takers and risk controllers. The risk control
framework defines key tasks, which are
the core components of Swiss Re’s risk
management cycle:
• Risk tolerance and appetite assessment
of plan – ensures that the risk
implications of plans are understood,
and determines whether business
and investment plans adhere to the risk
appetite framework (risk appetite
and tolerance).
• Risk identification – ensures that all
risks to which Swiss Re is exposed are
transparent in order to make them
controllable and manageable.
• Risk measurement – enables Swiss Re
to understand the magnitude of its risks
and to set quantitative controls that limit
its risk-taking.
• Risk limit framework – allows Swiss Re
to control its risk-taking decisions and
total risk accumulations, including the
passive risk we are exposed to through
our operations.
• Risk reporting – creates internal risk
transparency and enables Swiss Re to
meet external disclosure requirements.
In addition, Risk Management performs
the following risk control activities:
• Model and tool assurance – ensures
that models or tools used for costing,
valuation and risk capital determination
are based on sound scientific concepts,
have been implemented and calibrated
correctly, and produce accurate results.
• Valuation assurance – assesses the
quality of valuations for financial
instrument prices and reserves.
• Insurance risk reviews – assess the
quality of decision-making in the taking
of insurance risks by performing
independent evaluations of underwriting,
costing, pricing and claims handling.
Swiss Re has implemented a principle-
based integrated internal control system
to mitigate identified operational risks
including financial reporting and
compliance risks, as well as risks that could
impair the effectiveness and efficiency of
operations. This control system represents a
subset of Swiss Re’s risk control framework
and is based on international standards
established by COSO (the Committee of
Sponsoring Organisations of the Treadway
Commission). It is applied on multiple
organisational levels, including Group,
functions, regions and legal entities.
Risk transfer
To efficiently manage capital across
the Group and ensure that risk-taking in
individual legal entities is well diversified,
the Group employs internal retrocession
and funding agreements. These serve
to improve the fungibility of capital and
consequently Group-wide diversification.
In addition, the Group aims to maximise
the amount of funds available centrally by
optimising the excess capital held within
its subsidiaries and branches.
Swiss Re also manages and mitigates
insurance risk through external retrocession,
insurance risk swaps or by transferring risk
to capital markets through insurance-linked
securities, industry loss warranties or other
derivatives. This provides protection against
extreme catastrophic events, further
diversifies risk, stabilises economic results
and releases underwriting capacity.
In addition, Swiss Re uses financial market
derivative instruments as well as financial
market securities to hedge financial market
and credit risks arising from investments
and insurance liabilities. Interest rate
risk from insurance liabilities is managed
through investments in fixed-income
instruments whose pricing is sensitive
to changes in government yields, such
as government bonds.
Swiss Re | Financial Report 2020
65
To meet the first objective, the Risk Policy
defines respectability limits to ensure that
the Group has enough resources to meet
capital requirements at Group level as well
as respectability and liquidity requirements
for all legal entities. These limits ensure that
Swiss Re has adequate capital and liquidity
above minimum requirements to be
considered a respectable counterparty by
external stakeholders. To meet the second
objective, Swiss Re's risk tolerance criteria
includes resilience limits for SRZ to ensure
that the main operating entity is able to
withstand capital and liquidity stresses.
To meet the third objective, the Group has
established a Group-wide risk matrix
methodology in which key operational risks
are assessed against an acceptable level
of expected losses. Any operational risk
exposure that exceeds the Group’s
operational risk tolerance limit is subject to
a mitigation plan that is monitored by the
Group's Finance and Risk Committee.
The risk tolerance respectability criteria
for the Swiss Re Group are set out in the
Group Risk Policy. The Group and SRZ
Boards are responsible for approving the
risk tolerance criteria, as well as for
monitoring and reviewing risk tolerance.
Breaches or anticipated breaches of limits
established to control the risk tolerance
criteria must be communicated to the
Finance and Risk Committee.
Swiss Re’s risk-taking is governed by a
limit framework in order to ensure that
accumulation risk and large losses remain
at an acceptable level, as well as to steer
the allocation of available risk capacity.
The limit framework is rooted in the risk
appetite and risk tolerance objectives set in
the Group Risk Policy and helps to translate
these objectives into concrete, measurable
criteria. In addition, lower level limits are
implemented to allocate scarce capacity.
The limit framework also allows for risk
monitoring and thus supports risk controlling
during the execution of the plan.
Risk and capital management
Risk management
Risk Appetite Framework
The risk appetite framework establishes the overall approach through which
Swiss Re practices controlled risk-taking throughout the Group. The framework
is set out in the Group Risk Policy and consists of two interlinked components:
risk appetite and risk tolerance.
Risk appetite
Risk tolerance
Risk appetite
statement
Risk tolerance
objectives and limits
Target liability portfolio
and strategic asset
allocation
Risk capacity limits
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Group Risk
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Group
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Annual planning
process
Business plans
Operational limits
Risk Appetite Framework
In the context of business strategy and
planning, the risk appetite statement
facilitates discussions about where and
how Swiss Re should deploy its capital,
liquidity and other resources under a
risk/return view, while the risk tolerance
sets clear boundaries to risk-taking.
During strategic planning and target-
setting, Risk Management provides an
opinion on the proposed strategy and
targets to the Group Executive Committee
and ultimately the Group Board. The opinion
focuses on the risk impact of the proposed
strategy and the risks related to its
implementation. The strategic plan, risk
appetite and capital allocation ambition
are expressed in a target portfolio for
the Group’s assets and liabilities, which
should ultimately deliver the Group’s
targeted performance.
Swiss Re’s risk appetite outlines the
Group’s principles on acceptable risks and
provides key directions for risk-taking
and risk controlling as part of implementing
Swiss Re’s strategy: achieving targeted
performance, providing liquidity and
financial flexibility, managing capital
adequacy, and protecting and growing
franchise value.
The Group Board further details Swiss Re’s
risk appetite through its approval or review
of the following key steering frameworks as
part of the Group’s planning process: target
liability portfolio, strategic asset allocation
and the Group’s target capital structure.
Swiss Re’s risk tolerance describes the
extent to which the Group and SRZ Boards
have authorised executive management to
assume risk. It represents the amount of
risk that Swiss Re is willing to accept within
the constraints imposed by its capital and
liquidity resources, its strategy, and the
regulatory and rating agency environment
within which it operates.
Swiss Re’s risk tolerance is based on
the following objectives:
• To maintain Group capital at a level that
safeguards respectability with clients
and regulators.
• To ensure the resilience of SRZ as the
main operating entity from a capital and
liquidity perspective.
• To avoid material operational risks that
could subject the Group to large
operational losses with corresponding
consequences from an economic,
reputational or regulatory perspective.
66
Swiss Re | Financial Report 2020
Risk assessment
In SST 2021, total risk increases to USD 22.4 billion driven by
higher insurance risk, offset partly by lower financial market
and credit risk.
Swiss Re’s internal model provides a
meaningful assessment of the risks
to which the company is exposed and
is an important tool for managing
the business. It is used to measure
the Group’s risk position and related
capital requirements as well as for
defining the risk tolerance, risk limits
and liquidity stress tests.
Swiss Re is exposed to insurance and
financial risks that are calculated in its
internal risk model, as well as other risks
that are not explicitly part of the economic
capital requirement but are actively
monitored and controlled due to their
significance for Swiss Re. These include
operational, liquidity, model, valuation,
regulatory, political, strategic and
sustainability risks (see Swiss Re’s risk
landscape, p. 68).
Property and casualty insurance risk is
mainly driven by underlying risks inherent
in the business Swiss Re underwrites, in
particular natural catastrophe risk, non-life
claims inflation, costing and reserving and
man-made risk. The main drivers of life and
health insurance risk are mortality trend
and lethal pandemic risk.
The Group’s financial risk derives from
financial market risk as well as from credit
risk. Key drivers of financial market risk
are credit spread and equity risk. Credit risk
is mainly driven by the credit and surety
business and default risk of capital
market products.
Total risk is based on 99% tail value-at-risk
(tail VaR) and represents the average
unexpected loss that occurs with a
frequency of less than once in 100 years
over a one-year time horizon.
Total risk increases to USD 22.4 billion
driven by higher insurance risk, offset partly
by lower financial market and credit risk.
The higher weight of insurance risk leads
to increased diversification at risk
category level.
Group capital requirement based on one-year 99% tail VaR
USD millions
Property and casualty
Life and health
Financial market
Credit1
Diversification
Total risk
SST 2020
11 708
9 857
11 218
3 496
–14 945
21 332
SST 2021
12 895
11 852
10 594
3 186
–16 174
22 353
cross reference information
see page 70
see page 71
see page 72
see page 73
Change
1 187
1 996
–624
–310
–1 228
1 021
1 Credit comprises credit default and credit migration risk from both asset management and underwriting. Credit spread risk falls under financial market risk.
Swiss Re’s internal risk model takes account of the accumulation and diversification between individual risks. The effect of diversification
at the category level is demonstrated in the table above, which represents the difference between the Group 99% tail VaR and the sum of
standalone tail VaR amounts in the individual risk categories. The extent of diversification is largely determined by the selected level of
aggregation – the higher the aggregation level, the lower the diversification effect.
Alternative Risk Measurements for Swiss Re Group
USD billions
99% VaR1
99.5% VaR1
SST 2020
16.1
19.0
SST 2021
17.2
20.1
Change in %
7
6
1 For the alternative risk measurements, the same risk exposure and data basis is applied as for the SST calculation.
Alternative risk measurements — 99% and 99.5% VaR — increase to USD 17.2 billion and USD 20.1 billion, respectively.
Swiss Re | Financial Report 2020
67
Risk and capital management
Risk assessment
Swiss Re’s risk landscape
The risk categories shown in the table below are discussed on the following pages. Across these categories we identify
and evaluate emerging threats and opportunities through a systematic framework that includes the assessment of
potential surprise factors that could affect known loss potentials. Liquidity risk management is discussed on page 60.
Core risks in Swiss Re’s internal model
Insurance risk
Financial risk
Property & Casualty
• Natural catastrophe
• Man-made
• Costing and reserving
• Claims inflation
Life & Health
• Lethal pandemic
• Mortality trend
• Longevity
• Critical illness
• Income protection
• Lapse
Credit
• Default risk
• Migration risk
Financial market
• Credit spread
• Equity
• Foreign exchange
• FM inflation
• Interest rate
• Real estate
Other significant risks
Operational
Regulatory
Liquidity
Political
Model
Valuation
Strategic
Sustainability
Emerging risks
• Financial market risk represents the
potential impact on assets or liabilities
that may arise from movements in
financial market prices or rates, such as
equity prices, interest rates, credit
spreads, hedge fund prices, real estate
prices, commodity prices or foreign
exchange rates. Financial market risk
originates from two main sources:
investment activities and the sensitivity
of the economic value of liabilities to
financial market fluctuations.
• Credit risk reflects the potential
financial loss that may arise due to
diminished creditworthiness or default
of counterparties of Swiss Re or of third
parties; credit risk arises from investment
and treasury activities, structured
transactions and retrocession, as well
as from liabilities underwritten by credit
and surety insurance units.
The risk landscape also includes other
risks that are not explicitly part of the
Group’s economic capital requirement
but are actively monitored and controlled
due to their significance for Swiss Re:
• Liquidity risk represents the possibility
that Swiss Re will not be able to meet
expected and unexpected cash flow
and collateral needs without affecting
either daily operations or Swiss Re’s
financial condition.
• Operational risk represents the potential
economic, reputational or compliance
impact of inadequate or failed internal
processes, people and systems or from
external events, including legal risk
and the risk of a material misstatement
in financial reporting. Swiss Re has
implemented a capital model for
operational risk, which is used for
Solvency II purposes.
• Strategic risk represents the possibility
that poor strategic decision-making,
execution or response to industry
changes or competitor actions could
harm Swiss Re’s competitive position
and thus its franchise value.
Swiss Re is exposed to a broad
landscape of risks. These include
risks that are actively taken as part
of insurance or asset management
operations, and are calculated in
the internal risk model as part of
the Group’s economic capital
requirement as well as to allocate
risk-taking capacity:
• Property and casualty insurance risk
arises from coverage provided for
property, liability, motor, and accident
risks, as well as for specialty risks such
as engineering, agriculture, aviation
and marine. It includes underlying
risks inherent in the business Swiss Re
underwrites, such as inflation or
uncertainty in pricing and reserving.
• Life and health insurance risk arises from
coverage provided for mortality (death),
longevity (annuity) and morbidity (illness
and disability). In addition to potential
shock events (such as a severe
pandemic), it includes underlying risks
inherent in life and health contracts that
arise when mortality, morbidity, or lapse
experience deviates from expectations.
68
Swiss Re | Financial Report 2020
• Regulatory risk arises from changes to
insurance regulations and supervisory
regimes as well as from interactions with
regulatory authorities and supervisory
regimes of the jurisdictions in which
Swiss Re operates.
• Political risk comprises the consequences
of political events or actions that could
have an adverse impact on Swiss Re’s
business or operations.
• Model risk reflects the potential impact
of model errors or the inappropriate
use of model outputs. It may arise from
data errors or limitations, operational
or simulation errors, or limitations in
model specification, calibration or
implementation; model risk may also be
caused by insufficient knowledge of the
model and its limitations, in particular by
management and other decision-makers.
• Valuation risk represents uncertainty
around the appropriate value of assets
or liabilities. It may arise from product
complexity, parameter uncertainty,
quality and consistency of data, valuation
methodology, or changes in market
conditions and liquidity. Swiss Re is
exposed to financial valuation risk from
investment assets it holds as well as
reserve valuation risk from insurance
liabilities that result from the coverage
it underwrites.
• Sustainability risk comprises the
environmental, social and ethical risks
that may arise from individual business
transactions or the way Swiss Re
conducts its operations.
• Across all risk categories, Swiss Re
actively identifies emerging risks and
threats as part of its risk identification
process; this includes new risks as well
as changes to previously known risks
that could create new risk exposures,
or increase the potential exposure or
interdependency between existing risks.
Some of these risks are reflected indirectly
in the risk model, as their realisations
may be contained in the historical data and
scenarios used to calibrate some of the
risk factors. In addition, output from the
model is used in measuring liquidity risk
under stressed conditions. As separate
risk categories, these risks are an integral
part of Swiss Re’s risk landscape. They are
monitored and managed within the Risk
Management organisation, and included in
risk reports to executive management and
the Board at Group and legal entity level.
Reputational risk is not considered a
separate risk category but rather represents
a possible consequence of any risk type
in addition to the potential financial and
compliance impact.
Swiss Re | Financial Report 2020
69
Risk and capital management
Risk assessment
Insurance risk
Insurance risk management involves
identifying, assessing and controlling
risks that Swiss Re takes through
its underwriting activities, including
related risks such as inflation or
uncertainty in pricing and reserving.
Risk Management also provides
independent assurance throughout the
business cycle, starting with the annual
business planning process. It reviews
underwriting standards, costing models
and large transactions, and monitors
exposures, reserves and limits.
Swiss Re’s Group limit framework includes
risk limits for major insurance exposures
that guard against risk accumulations and
ensure that risk-taking remains within
Swiss Re’s risk tolerance. At the entity level,
underwriting and capacity limits are
assigned that are used to steer the business,
and ensure adherence to the Group’s risk
limits and SST capitalisation targets.
Regular internal reports ensure
transparency across the Group, providing
management with quantitative and
qualitative risk assessments. Swiss Re’s
insurance risk landscape and related
governance processes are regularly
discussed and reviewed by the Senior Risk
Council and other insurance risk oversight
bodies in order to assist and advise the
Group CRO in the risk oversight.
Swiss Re also manages and mitigates
insurance risk through external retrocession,
insurance risk swaps or by transferring risk
to capital markets. This provides protection
against extreme catastrophic events, further
diversifies risk, stabilises economic results
and releases underwriting capacity.
Property and
casualty risk
+10%
Change since
SST 2020
Risk developments
The increase in property and casualty risk is mainly
driven by a rise in non-life claims inflation risk
reflecting the heightened probability of extreme
inflation outcomes, as well as an increase in costing
and reserving risk mainly due to COVID-19-related
reserves.
otherwise complex or unusual triggers an escalation
process that extends up to the Group Executive
Committee. Certain single risks and specified
renewable treaty classes with non-material changes
can be authorised by only one individual underwriter
with the necessary authority − but these risks
and treaties are subject to checks after acceptance.
Management
Legal entity CROs are responsible for overseeing
all property and casualty exposures written in their
areas. In addition, Group Risk Management monitors
and controls accumulated exposures across Swiss Re
to ensure that they remain within the defined risk
tolerance level.
The first line of control for property and casualty risks
lies within Swiss Re’s underwriting units. In general,
all transactions must be reviewed by at least two
authorised individuals, and are subject to authority
limits. Each underwriter is assigned an individual
authority based on technical skills and experience. In
addition, capacity limits are allocated to local teams;
any business that exceeds this authority or is
All transactions that could materially impact the
risk at Group level or for key legal entities require
independent review and sign-off by Risk Management
before they are authorised. This is part of a three-
signature principle, under which key transactions
must be approved by Client Markets, Underwriting
and Risk Management. For transactions of defined
types and within defined limits, this may be applied
through the approval of underwriting or pricing
guidelines. For other transactions, the signatures
must be secured through an individual review.
Swiss Re’s limit framework for property and casualty
exposures includes risk limits for major natural
catastrophe scenarios and other key risks, such as
terrorism, claims inflation, reserving and liability.
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Swiss Re | Financial Report 2020
Insurance risk stress tests with a 200-year return period
Annualised unexpected loss, 99.5% VaR in USD millions1
Atlantic hurricane
Californian earthquake
European windstorm
Japanese earthquake
Lethal pandemic
SST 2021
5 826
4 739
2 345
4 101
3 616
1 Excluding the impact of earned premiums for the business written and reinstatement premiums that could be triggered as a result of the event.
In SST 2021, the largest natural catastrophe exposure for Swiss Re Group derives from the Atlantic hurricane scenario with a
USD 5.8 billion loss. The lethal pandemic loss is estimated to be at USD 3.6 billion.
Life and health
risk
+20%
Change since
SST 2020
Risk developments
Higher life and health risk mainly reflects the
business growth in Asia and the US, resulting in
higher exposure to mortality trend, lethal pandemic
and critical illness risk. The increase is further driven
by the impact of lower interest rates and the
appreciation of the Canadian dollar and the British
pound against the US dollar.
Management
Legal entity CROs are responsible for overseeing all
life and health exposures written in their respective
areas. Accumulated exposures across Swiss Re are
monitored and controlled by Group Risk Management
to ensure that they remain at an acceptable level
for the Group.
Costing actuaries represent the first line of control
for life and health risks. All transactions that could
materially change risk at Group level or for key legal
entities require independent review and sign-off by
Risk Management before they can be authorised.
This is part of a three-signature principle, under which
key transactions must be approved by Client Markets,
Products and Risk Management. For transactions of
defined types and within defined limits, this may
be applied through the approval of underwriting or
pricing guidelines. For other transactions, the
signatures must be secured through a review of the
individual transaction.
Swiss Re’s limit framework for life and health
exposures includes risk limits for key risks, such as
mortality, longevity, lethal pandemic, critical illness
and income protection. Market exposure limits
are in place for catastrophe and stop loss business.
Swiss Re pays particular attention to densely
populated areas and applies limits for individual
buildings to guard against risk exposure accumulations.
Swiss Re | Financial Report 2020
71
Risk and capital management
Risk assessment
Financial risk
Financial risk management involves
identifying, assessing and controlling
risks inherent in the financial markets
as well as counterparty credit risks,
while monitoring compliance with
Swiss Re’s risk appetite and risk
management standards.
Swiss Re’s central Financial Risk
Management team oversees all activities
that generate financial market or credit
risk. Its mandate covers internally and
externally managed assets, strategic
participations, treasury activities, and
credit and market risks that derive from
Swiss Re’s underwriting and retrocession
activities, including structured transactions,
credit insurance and surety business.
The Head of Financial Risk Management
reports to the Group Chief Risk Officer,
with a secondary reporting line to the
Group Chief Investment Officer.
Financial Risk Management controls
exposure accumulation for financial market
and credit risks. In addition, the team is
responsible for assurance activities related
to asset valuation and financial risk models,
as well as for reporting Swiss Re’s financial
risks. These responsibilities are exercised
through defined governance processes,
including regular reviews by Swiss Re’s
Senior Risk Council and other financial risk
oversight bodies.
All activities with financial market and
credit risk are subject to limits at various
levels of the organisation (eg Group, legal
entities and lines of business). At the
highest level, the Group Board of Directors
sets a financial risk concentration limit
which defines how much of the Group’s risk
exposure can derive from financial risk. The
Group Executive Committee establishes
the principal risk limits for aggregate
financial market and credit risk at Group
level. Where required, additional risk limits
are established by Risk Management for
legal entities, key business lines, individual
counterparties and countries. Furthermore,
as part of the planning process, the
risk-taking functions employ capacity limits
to control the amount of risk mandated
from the risk owner to the risk takers. Limits
may be expressed in terms of notional
value of policies, losses in a stress scenario,
value at risk based on historic market
moves, linear sensitivities to a particular
risk factor or different methodologies
of exposure aggregation.
Financial
market risk
–6%
Change since
SST 2020
Risk developments
The decrease in financial market risk is driven mainly
by the sale of ReAssure Group Plc and an increase
in credit hedges, which reduced credit spread risk.
This is partly offset by higher financial market
volatilities resulting from the COVID-19-related
market turbulence, as well as by the appreciation
of major currencies against the US dollar.
Management
Financial market risk is monitored and controlled by
dedicated experts within the Group’s Financial Risk
Management team. Financial Risk Management
regularly reports on key financial market risks and risk
aggregations, as well as on specific limits for internally
and externally managed investment mandates. These
reports track exposures, document limit usage and
provide information on key risks that could affect the
portfolio. The reports are presented and discussed
with those responsible for the relevant business line
at the Financial Market Risk Council.
The reporting process is complemented by regular
risk discussions between Financial Risk Management,
Asset Management and the Group’s external
investment managers, as well as by regular interactions
with other key units that take financial market risk,
such as Principal Investments and Acquisitions,
Treasury, and the respective business teams that
write transactions.
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Swiss Re | Financial Report 2020
Financial Market SST ratio sensitivities
Impact on SST ratio
Interest rates +50bps
Interest rates –50bps
Spreads +50bps
Spreads –50bps
Equity values +25%
Equity values –25%
Real estate values +25%
Real estate values –25%
SST 2021
12pp
–14pp
–5pp
5pp
3pp
–4pp
6pp
–7pp
Among financial market sensitivities, the Group is most sensitive to a 50-basis point decrease in interest rates, leading to an estimated
decrease in the SST ratio of 14 percentage points.
Credit risk stress test with a 200-year return period
Annualised unexpected loss, 99.5% VaR in USD millions
Credit default1
SST 2021
2 228
1 Excluding the impact of earned premiums for the business written and reinstatement premiums that could be triggered as a result of the event.
Credit risk
–9%
Change since
SST 2020
Risk developments
Credit risk decreases mainly due to the sale of
ReAssure Group Plc and the increase in credit
hedges.
Management
Credit risk is monitored and controlled by experts
within the Financial Risk Management team. Financial
Risk Management regularly monitors and reports
on counterparty credit quality, credit exposures and
limits. In addition, it is responsible for regularly
monitoring corporate counterparty credit quality and
exposures, and for compiling watch lists of cases that
merit close attention. These reports are presented
and discussed with those responsible for the relevant
business line at the Credit Council.
The reporting process is supported by a Group-wide
credit exposure information system that contains all
relevant data, including counterparty details, ratings,
credit risk exposures, credit limits and watch lists.
Key credit practitioners across Swiss Re have access
to this system, thus providing the necessary
transparency to implement specific exposure
management strategies for individual counterparties,
industry sectors and geographic regions.
Credit risks are aggregated by country in order to
monitor and control risk accumulation to specific
risk drivers, such as economic, sovereign, and
political risks.
Swiss Re | Financial Report 2020
73
Risk and capital management
Risk assessment
Management of other significant risks
Operational risk
The Group has implemented an internal
control system to mitigate operational
risks through three lines of control. This
system assigns primary responsibility for
identifying and managing operational risks
to individual risk takers (first line of control),
with independent oversight and control
by the Risk Management and Compliance
functions (second line of control) as well
as Group Internal Audit (third line of control).
Members of the Group Executive Committee
are required to certify the effectiveness of
the internal control system for their area of
responsibility on a quarterly basis.
Operational risk is inherent within Swiss Re’s
business processes. As the company
does not receive an explicit financial return
for such risks, the approach to managing
operational risk differs from the approach
applied to other risk categories. The purpose
of Operational Risk Management is not
to eliminate risks but rather to identify
and cost-effectively mitigate operational
risks that approach or exceed
Swiss Re’s tolerance.
Risk Management is responsible for
monitoring and controlling operational
risks based on a centrally coordinated
methodology. This includes a pre-defined
taxonomy that is used for identifying,
classifying and reporting operational risks,
as well as a matrix in which risks are
assessed according to their estimated
probability and impact. Risks are assessed
for their residual economic, financial
reporting, reputational and compliance
impact, taking into account existing
mitigation and controls.
The matrix is also used to assess residual
exposures against Swiss Re’s tolerance
limits for operational risk. This limit
represents the level of operational risk that
the Board of Directors and executive
management teams are willing to accept.
Material risks that exceed or are approaching
risk tolerance are reported to executive
management and Boards of Directors at
Group and legal entity level. In addition,
mitigation strategies are required for all risks
that are outside of operational risk limits
in order to bring them within tolerance.
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Swiss Re | Financial Report 2020
Operational events and issues are recorded
and managed in a central Operational
Risk Management system in order to
address the identified problems and avoid
the recurrence of similar events. The
results are reviewed by the relevant CRO
and reported to the company’s
management team and Board of Directors.
COVID-19 has impacted many aspects of
our risk and control landscape, in particular
around outsourcing, financial reporting and
data security. The Group did not experience
any major operational or compliance
failings thanks to early lessons from our
Asia operations, and the resilience and
pragmatism of our employees in adapting
to a new work environment. In addition,
effective communications and collaboration
across teams, and between business and
risk functions, enabled us to maintain all
our critical processes throughout the crisis.
Strategic risk
Overall responsibility for managing
strategic risk lies with the Group Board,
which establishes Swiss Re’s overall
strategy. The Boards of legal entities are
responsible for the strategic risk inherent in
their specific strategy development and
execution. Strategic risks are addressed by
examining multi-year scenarios, considering
the related risks, as well as monitoring the
implementation of the chosen strategy year
by year in terms of the annual business plan.
As part of their independent oversight
role, Risk Management, Compliance and
Group Internal Audit are responsible for
controlling the risk-taking arising from the
implementation of the strategy.
Regulatory risk
Regulatory developments and related risks
that may affect Swiss Re and its subsidiaries
or branches are identified, assessed and
monitored as part of regular oversight
activities. Swiss Re is actively engaged in a
dialogue with relevant regulators to improve
mutual understanding of the implications
arising from new regulatory proposals.
Periodic reports and recommendations on
regulatory issues are provided to executive
management and the Board of Directors
at Group and legal entity level.
The regulatory environment of the insurance
industry continues to evolve on the national,
regional and international level. While some
regulatory changes create new business
opportunities, others come with significant
costs and business restrictions. Growing
regulatory complexity, increased national
protectionism and a fragile global economy
are persistent themes affecting regulation
and the way Swiss Re operates worldwide.
Regulatory efforts are becoming increasingly
forward-looking, aimed at a broad range
of emerging risks, both actual and perceived.
If new regulation is not based on clearly
understood risks, the resulting requirements
may create an excessive burden for both
insurers and policyholders. It remains
a key priority for Swiss Re to highlight the
negative impacts of market access
restrictions or impediments to global
diversification towards regulators. At the
same time, such risks are mitigated by
seeking solutions that reduce the negative
impact on Swiss Re and its clients.
Several regulators, particularly in Europe
and Asia, have developed specific
expectations of how climate risks should
be managed and are translating these
expectations into concrete regulations.
New climate-related regulations are
expected, even in jurisdictions which have
thus far been hesitant to act. Swiss Re
supports such measures and will continue
to advocate for a harmonised and gradual
implementation of these requirements
in line with international standards, such
as those recommended by the Financial
Stability Board Task Force for Climate-
related Financial Disclosure (TCFD),
in order to avoid regulatory fragmentation
and improve comparability.
Swiss Re consistently advocates the removal
or reduction of market access barriers, so
that policyholders, governments and
national economies can fully benefit from
international diversification and reliable,
sound and affordable risk cover and transfer.
The ongoing pandemic presents challenges
not only for the insurance industry, but for
the entire global economic system. Swiss Re
is a strong proponent of coordinated
responses to COVID-19 as it believes that
only through collaboration among
governments, regulators and industry,
can societies effectively manage events
of such magnitude.
Political risk
Political developments can threaten
Swiss Re’s operating model but also open up
opportunities for developing the business.
The Group adopts a holistic view of political
risk and analyses developments in individual
markets and jurisdictions, as well as
cross-border issues such as war, terrorism,
energy-related issues and international
trade controls.
Dedicated political risk analysts identify,
monitor, and assess political developments
across the world. Swiss Re’s political risk
experts also exercise oversight and control
functions for named political risks, such as
in the political risk insurance business; this
includes monitoring political risk exposures,
providing recommendations on particular
transaction referrals and risk reporting.
In addition, the Political Risk team provides
specific country ratings that cover political,
economic and security-related country
risks; these ratings complement sovereign
credit ratings and are used to support risk
control activities and inform underwriting
or other decision-making processes
throughout the Group.
model parameters (and the data on which
calibration relies) must be trustworthy,
while expert judgments are required to be
sensible, documented and evidenced.
Analytical or financial models that are
used for costing, valuation and risk capital
calculations are governed by Swiss Re’s
Model and Tool Assurance Framework.
Material models used for costing, valuation
of reserves and assets, as well as Swiss Re’s
internal risk model, are validated by
dedicated teams within Risk Management.
These teams provide independent
assurance that the framework has been
adhered to, and also conduct independent
validations. Swiss Re’s risk model is also
subject to regulatory scrutiny.
Model-related incidents are captured within
Swiss Re’s operational risk framework.
In addition, material model developments,
incidents and risks are reported in regular
risk updates to executive management and
the Board of Directors at Group and legal
entity level.
Valuation risk
Financial valuation risk is managed by
internal and external portfolio managers,
who ensure that valuations remain in line
with the market. In addition, Swiss Re has
a function within Financial Risk Management
that independently assesses valuations and
valuation techniques; this team performs
independent price verification for financial
risk positions to confirm that valuations are
reasonable and ensure there are no material
misstatements of fair value in Swiss Re’s
financial reports. The results of the
independent price verification process are
reviewed by the Asset Valuation Committee.
Summary results are regularly reported
to executive management and the Board
of Directors at Group and legal entity level.
In addition, Swiss Re’s external auditor
conducts quarterly reviews as well as a
comprehensive year-end audit of controls,
methodology and results.
In addition to identifying and assessing
the impact of political risk on its business,
the Group seeks to raise awareness of
political risk issues within the industry and
among the broader public, through active
dialogue with clients, the media and
other stakeholders. The Group also builds
relationships that expand its access
to information and intelligence, and
allow Swiss Re to further enhance its
methodologies and standards. For example,
Swiss Re participates in specialist events
hosted by institutions such as industry
and risk management associations, and
maintains relationships with political risk
specialists in other industries, think tanks and
universities, as well as with governmental
and non-governmental organisations.
Swiss Re continues to operate in the UK
mainly through the UK branches of its
Luxembourg entities. From 1 January 2021,
Swiss Re’s UK branches are operating
under the UK’s Temporary Permissions
Regime which, subject to certain
conditions, allows third country branches
to carry on insurance and reinsurance
business in the UK until licences are granted
by UK regulators. Applications for licenses
for third country branches have been
submitted and Swiss Re is in regular
contact with the UK’s Prudential Regulatory
Authority to progress the applications.
Model risk
Swiss Re uses models throughout its
business processes and operations, in
particular to price insurance products,
value financial assets and liabilities, assess
reserves and portfolio cash flows, and
estimate risk and capital requirements.
Model owners have primary responsibility
for model-related risks and are required
to adhere to a robust tool development
process, including testing, peer review,
documentation and sign-off. A similar
process also applies to model maintenance.
Swiss Re’s model governance is based on
Group-wide standards for model assurance.
These standards seek to ensure that each
model has a clear scope, is based on sound
mathematical and scientific concepts, has
been implemented correctly and produces
appropriate results given the stated
purpose. Furthermore, the calibration of
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75
Risk and capital management
Risk assessment
Reserve valuation risk is managed by
Swiss Re’s Actuarial Control function,
with dedicated teams for property and
casualty, and for life and health valuations.
These teams ensure that Swiss Re’s
reserve setting process uses an appropriate
governance framework, including defined
accountabilities and decision-making
processes for risk takers (as the first line
of control) as well as for Actuarial Control.
The framework ensures that there is
independent assurance on the data,
assumptions, models and processes used
for valuation purposes; for all property
and casualty business and selected life
and health portfolios, it also includes
an independent valuation of coverage
provided to ensure that reserves are within
an adequate range. Regular deep-dive
investigations are performed into
selected portfolios in order to review the
appropriateness of both the reserves
and the applied reserving approach. In
addition, Swiss Re’s external auditor
conducts quarterly reviews as well as a
comprehensive year-end audit of controls,
methodology and results.
Sustainability risk
Swiss Re’s continued business success
depends on the successful management of
sustainability risks, thus helping to maintain
the trust of its stakeholders. The Group has
a long-standing commitment to sustainable
business practices, active corporate
citizenship, as well as good, transparent
governance. All employees are required
to commit to and comply with Swiss Re’s
values and sustainability policies.
Potential sustainability risks are mitigated
through clear corporate values, active
dialogue and engagement with affected
external stakeholders, and robust internal
controls. These include a Group-wide
Sustainability Risk Framework to identify
and address sustainability risks across
Swiss Re’s business activities. The framework
comprises sustainability-related policies
− with pre-defined exclusions, underwriting
criteria and quality standards − as well as
a central due diligence process for related
transactional risks.
Sustainability risks are monitored and
managed by dedicated experts in
Swiss Re’s Group Sustainability Risk team,
which is also responsible for maintaining
the Sustainability Risk Framework. In
addition, this unit supports Swiss Re’s
management and business strategy
through tailored risk assessments and risk
portfolio reviews. It fosters risk awareness
through internal training, and facilitates
development of innovative solutions
to address sustainability issues. Finally,
it represents and advocates Swiss Re’s
position on selected sustainability risk
topics to external stakeholders.
Swiss Re is a founding signatory of the
UN Principles for Sustainable Insurance
(UN PSI) and is currently a board member
of this initiative. The UN PSI seeks to
promote sustainable insurance, which is
intended, among other goals, to contribute
to environmental, social and economic
sustainability. Swiss Re has been actively
contributing to the initiative for several years.
During 2020, Swiss Re and the UN PSI
convened four virtual events for insurers to
continue work on promoting sustainable
insurance.
As a signatory of the Paris Pledge for
Action, the Group reinforced its support by
committing to reach net-zero emissions for
our insurance and investment portfolios by
2050 and for our own operations by 2030.
Swiss Re is developing a methodology
to assess the carbon footprint of our
underwriting business. This will serve as a
basis for carbon risk steering and will support
Swiss Re and our clients in their transition.
In this context, Swiss Re has contributed to
a CRO Forum publication on methodologies
to measure and eventually disclose the
carbon footprint of insurance portfolios.
Reflecting the Group’s strong overall
commitment to sustainability, Swiss Re
continued to be included in leading
sustainability indices and rankings, such
as FTSE4Good, Euronext Vigeo World 120,
Ethibel Excellence Global, oekom Prime
Investment and the Dow Jones
Sustainability Index. For more information
on Swiss Re’s sustainability practices,
see the Sustainability Report 2020.
Emerging risk
Anticipating possible developments in
the risk landscape is a central element of
Enterprise Risk Management. Swiss Re
promotes pre-emptive thinking on risk in all
areas of the business in order to reduce
uncertainty and diminish the volatility of
the Group’s results, while also identifying
new business opportunities and raising
awareness for emerging risks.
For this purpose, Swiss Re’s risk
identification processes are supported by
a systematic framework that identifies,
assesses and monitors emerging risks and
opportunities across all areas of Swiss Re’s
risk landscape. This framework combines
a bottom-up approach driven by employee
input with regional experts on emerging
risk. The resulting information is
complemented with insights from external
parties such as think tanks, academic
networks and international organisations,
as well as from interaction with clients.
Findings are reported to management and
internal stakeholders, including a prioritised
overview of newly identified emerging risks
and an estimate of their potential impact
on Swiss Re’s business. Swiss Re also
publishes an annual emerging risk report
(Swiss Re SONAR) to raise awareness
across the industry.
To further advance risk awareness across
the industry and beyond, Swiss Re
maintains regular exchanges on emerging
risks with its clients and continues to
participate actively in strategic risk initiatives
such as the CRO Forum’s Emerging Risk
Initiative and the International Risk
Governance Council.
The following significant long-term
emerging risks are deemed particularly
important for Swiss Re’s business:
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Swiss Re | Financial Report 2020
Cyber risk – Edge computing
An emerging aspect of cyber risk is related
to data processing at the periphery or edge
of a network which is increasingly relevant
with the prevalence of the Internet of Things
(IoT). An important example is autonomous
vehicles where time-lags in signal
transmission and processing can prove fatal.
Edge computing involves minimising latency
in data transactions by adding computing
power close to connected end-devices.
It is playing a pivotal role in innovating and
maintaining digital ecosystems across
manufacturing, utilities, robotics and other
spheres. In addition to such benefits,
there are also inherent risks.
Potential business impact
Edge computing can lead to an increased
cyber risk for the devices themselves but
also to the network they are connected to.
Heightened exposure can be a result of poor
implementation and maintenance of edge
computing devices. Such devices may not
be designed and operated following the
same security principles as for an e-banking
system or a smartphone. The security focus
on Operational Technology is still not the
same as on Business IT. This emerging
cyber risk is relevant to Swiss Re both as
an operational threat and as a subject
for insurance and reinsurance solutions
for clients.
Mitigation measures
Swiss Re’s Digital Governance Framework
considers all activities where digital services
are introduced, irrespective of whether
it is Business IT or Operational Technology.
Therefore, minimum baseline standards are
being ensured for the secure usage of edge
computing devices. Swiss Re regularly
monitors and reassesses cyber security
robustness against latest standards and
threats, including the maintenance of an
inventory of IoT devices.
Prolonged large-scale power blackout
Long-lasting power blackouts can be
triggered by natural catastrophes (eg solar
storms), and intentional (eg cyber risk) or
unintentional man-made events. Power
blackout becomes more likely as energy
grids are increasingly operating at capacity
limits and are not always well maintained.
Adding to the complexity and
interdependency are alternative energy
supplies and the digitisation of parts of the
grid interacting with older installed
infrastructure. All of these can trigger or
exacerbate power blackouts.
Potential business impact
A prolonged large-scale power blackout
can lead to widespread property damage,
business interruption, financial market
impacts and operational disruptions.
Importantly, it is likely that business impacts
will increase non-linearly the longer a power
blackout lasts. This could lead to catastrophic
economic losses. Loss exposure for the
insurance industry could be significant,
though many of these risks remain uninsured.
Mitigation measures
Swiss Re actively addresses prolonged
power blackout risk through scenario
assessment to estimate the potential
business impact. As an example of such
a scenario assessment, Swiss Re looked
at direct and indirect loss potentials from
a long-duration power blackout in the
US triggered by a solar storm. Enriched by
findings from vulnerability assessments
for the US energy industry, as well as from
internal exposure data, this also provided
insights for underwriting.
Swiss Re maintains a risk dialogue with
governmental bodies, power suppliers
and other stakeholders to discuss power
blackout risk and potential mitigation
measures. Considerations include
preventive measures, possibilities for
public-private partnerships to create
insurance pool solutions and other
approaches to improve resilience.
Climate change – Moving to a low
carbon future
To meet the objectives of the Paris
agreement, global warming needs to stay
below 2˚C compared to pre-industrial
levels. To achieve this, the target is to reduce
greenhouse gas emissions to net-zero by
2050. A rapid transition to a low carbon
economy is required. The changes are
needed across all industries and entail an
entire cluster of new risks which need to be
understood, assessed and where possible
mitigated. Swiss Re, and the insurance
industry in general, regularly assesses the
changing risk landscape and can help
accelerate this transition through risk transfer
products and as a long-term investor.
Potential business impact
The insurance sector is exposed to transition
risks which may arise as a result of policy,
legal, technology and market changes that
are required to facilitate the transition to
a low-carbon economy. For insurers and
reinsurers, investment risks arising from this
transition are mainly linked to the potential
re-pricing of carbon-intensive financial
assets, and the speed at which any such
re-pricing might occur. To a lesser extent,
insurers and reinsurers may also need to
adapt to potential impacts on insurance
resulting from, for example, reductions in
insurance premium volumes from carbon-
intensive sectors or coverage of new
technologies without established loss
histories, which may increase uncertainties
in lines of business such as property
and engineering.
Mitigation measures
Swiss Re is taking proactive measures to
reduce potential business impacts on our
investment and insurance portfolios, for
example, reducing exposure to assets
with the potential to be stranded in carbon-
intense energy infrastructure (eg thermal
coal). More generally, climate change
requires global risk mitigation actions and
Swiss Re is dedicated to supporting
decarbonisation pathways. Swiss Re
underwrites renewable energy risk and is
actively adapting existing products, as well
as developing new risk transfer solutions.
A new focus area for the future will be the
risk cluster related to innovations in carbon
removal which will be an integral part of
reaching net-zero.
For more information about
emerging risk, see the Swiss Re
SONAR report.
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77
Corporate governance
Swiss Re’s strong governance
supports the Board of Directors’
and the Group Executive
Committee’s leadership during
the COVID-19 crisis.
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Swiss Re | Financial Report 2020
Contents
Overview
80
Group structure and shareholders
84
Capital structure
Board of Directors
Executive Management
86
88
102
Shareholders’ participation rights
108
Changes of control and
defence measures
Auditors
Information policy
109
110
112
Swiss Re | Financial Report 2020
79
Corporate governance
Overview
The global pandemic has forced companies to better articulate their
corporate strategies and to explain how their boards and
management teams are furthering those strategies in fraught times.
Walter B. Kielholz
Chairman of the Board of Directors
The Board of Directors’ dedicated
commitment and strong leadership
are key to navigate through a crisis.
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Swiss Re | Financial Report 2020
COVID-19 Governance
Swiss Re has navigated the crisis very
successfully and ensured seamless
continuity of business operations. To
address the crisis, the Board of Directors
and its Board committees increased the
frequency of their meetings, demonstrating
their commitment to decisive leadership
and providing critical support for the Group
Executive Committee (Group EC). The Board
of Directors received regular updates on
the spread of the pandemic, its impact on
Swiss Re’s employees, operations and
business, as well as the mitigating efforts
put in place. The Board of Directors was
informed of how management handled the
evolving pandemic and its effect on client
interactions, writing new business and
managing claims, as well as the many
reporting necessities. The Board committees
dealt with COVID-19-related topics based
on their respective competencies and
responsibilities. Their tasks are described
in the section on the Board committees
(see page 98). Swiss Re’s Group Crisis
Management Team (GCMT), under the lead
of the Group CRO and the Group COO as
deputy, held weekly meetings between
February and May 2020. The GCMT is
composed of Group EC members (Group
CFO, Group CIO, Group CUO, Group HRO,
Group CLO) as well as further senior
management members, such as the Head
Group Communications, Head Investor
Relations and Head IT. The GCMT took the
lead in developing and coordinating the
implementation of business continuity
measures across the Swiss Re Group to
protect the health and safety of our
employees. Measures included work-from-
home protocols, guidelines on travel and the
closure of our premises. Coordination was
handled through local incident management
teams. The GCMT reported to the Group EC
after each of its meetings. Beginning in May,
the Group EC held regular calls to address
pandemic-related matters. GCMT and
Group EC directives and actions were in line
with the recommendations and guidelines
set by the Swiss Federal Council and
Switzerland's Federal Office of Public Health
and all local directives.
Cyber Risk
The cyber threat landscape is constantly
evolving, and Swiss Re’s Board of Directors
continues to closely monitor the company’s
cyber threat resilience. The Board of
Directors were updated on important cyber
security developments, in particular the
increase of Covid-19 related attacks across
the globe and the wide-ranging SolarWinds
cyber incident. Swiss Re’s IT infrastructure
and cyber defence measures proved to
be resilient and no breaches were reported.
Besides the ever-changing cyber threat
landscape, Swiss Re’s exposure and digital
footprint is expanding due to our
digitalisation efforts, the move of critical
business applications to the cloud and
our business transformation with the
development of new markets and new
innovative products. The Finance and Risk
Committee received an in-depth report on
cloud security with the focus on protecting
Swiss Re and client data related to public
cloud services. In April 2020 the Finance
and Risk Committee also reviewed the
annual cyber risk assessment report, which
evaluates Swiss Re’s cyber risk exposure
and cyber threat resilience. The regular
re-assessment enables the Board members
to understand how well the company’s
assets are protected against the evolving
risks of intrusions, data breaches, and loss
of access. Members of the Finance and
Risk Committee regularly share their cyber
expertise with Management and the topic
of cyber risk remains a standing item on
the Finance and Risk Committee agenda.
The company’s cyber risk strategy will
continue to be a key focus area for the
Board and its Committees.
Corporate Governance Trends
Sustainability remains top priority
Legislators, regulators, asset managers,
shareholders and other stakeholders are
increasingly looking to corporate governance
as a means of improving transparency
and accountability for sustainability. In
particular, companies are now expected
to have appropriate governance structures
and governance priorities to address
environmental, social and governance
(ESG) issues. Corporate governance
objectives over which boards have
assumed greater oversight responsibility
in recent years, such as diversity, better
alignment of executive compensation and
stakeholder engagement, are increasingly
seen as having ESG aspects, making these
topics even more important. ESG is figuring
more prominently particularly in Europe,
but also in the United States and in other
key jurisdictions, in investment decisions
and in corporate disclosure. We expect
to see an increased focus on corporate
disclosure, particularly around climate
change. Europe is taking the lead on
climate-related disclosures, and there
is an emerging consensus on the need
for greater standardisation of climate
disclosures and performance measures.
We also expect that demonstrating
leadership on ESG topics will be seen by
asset managers, shareholders and others,
including employees and customers, as a
differentiating factor, providing advantages
across a range of areas for those able
to demonstrate a commitment to, and
significant transparency around, ESG
themes. Please continue reading for more
information on our sustainability highlights
2020/2021. For more information on
our sustainability governance please refer
to the next page.
Sustainability Highlights 2020/21
Sustainability-related targets and
KPIs linked to compensation
As part of our Group Sustainability Strategy
implementation, we introduced sustainability
as an additional qualitative assessment
dimension for determining our Group
Annual Performance Incentive (API) pool.
This establishes a clear connection
between sustainability targets and
compensation for all employees, including
the Group EC. The sustainability assessment
for 2020 is primarily based on qualitative
key performance indicators (KPIs) and
targets. These are aligned with our 2030
Sustainability Ambitions and our net-zero
commitments. In the course of 2020, we
further enhanced the framework by defining
quantitative KPIs and respective targets,
which will form the basis for the 2021
performance assessment. Swiss Re will
continue refining sustainability-related KPIs
and targets to ensure we are reaching our
ambitious sustainability commitments. For
a description of the Group API pool funding
process see our Financial Report 2020
on page 121. For performance outcomes
on the qualitative assessment, including
sustainability aspects, in 2020, please
see our Financial Report 2020, page 133,
as well as our Sustainability Report,
pages 16–21.
For more information on Swiss Re’s
approach regarding sustainability,
please refer to pages 148–179 of this
Financial Report as well as to our
separate Sustainability Report:
https://reports.swissre.com/
sustainability-report/2020
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81
Corporate governance
Overview
Our Sustainability Governance
Swiss Re has a well-defined governance
framework to develop, enhance, implement
and monitor its Group Sustainability
Strategy. At Swiss Re’s highest governance
level, the Board of Directors is responsible
for overseeing the development and
adoption of the Group Sustainability
Strategy and related policies. It has
assigned detailed responsibilities to four
Board committees:
• The Chairman’s and Governance
Committee monitors and reviews general
progress toward achievement of the
Group’s Sustainability Strategy, including
all sustainability-related external
engagements, based on regular updates
from management and the sustainability
team.
• The Compensation Committee
establishes and reviews the compensation
framework, guidelines and performance
criteria. Performance criteria include
sustainability-related topics.
• The Finance and Risk Committee
defines the Group Risk Policy, reviews risk
capacity limits, monitors adherence to
risk tolerance, and reviews all top risk
issues and exposures, including those
with a specific sustainability dimension.
• The Investment Committee
reviews Swiss Re’s Asset Management
activities and, as part of this, receives
regular updates on Group Asset
Management’s approach to enhancing
responsible investing.
While the Board of Directors is responsible
for oversight, the Group EC ensures the
implementation of the Group Sustainability
Strategy. It therefore approves detailed
sustainability policies, such as the oil and
gas policy updated in 2020. For further
details please refer to page 38 in our
Sustainability Report, available at:
https://reports.swissre.com/sustainability-
report/2020 Furthermore, it sets and
monitors risk capacity limits (including for
natural catastrophes) and determines
product policy and underwriting standards.
The Group EC members have explicit
responsibilities related to sustainability,
which include but are not limited to
the following:
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Swiss Re | Financial Report 2020
Sustainability Governance
Group level
Business level2
Board
of Directors
Board committees1
Chairman’s &
Governance Committee
Compensation
Committee
Finance & Risk
Committee
Investment
Committee
Group Executive Committee
Group Functions2
Verwaltungsrat
Verwaltungsratsausschüsse1
Präsidial- und
Governanceausschuss
Vergütungs -
ausschuss
Finanz- und
Risikoausschuss
Anlage -
ausschuss
Geschäftsleitung
Gruppenfunktionen2
Group
Finance
Group Risk
Management
Swiss Re
Institute
Group Asset
Management
Group
Operations
Group Human
Resources
Group
Finance
Group Risk
Management
Swiss Re
Institute
Group Asset
Management
Group
Operations
Group Human
Resources
Group Sustainability Council
Group Sustainability Council
Reinsurance
Corporate Solutions
iptiQ3
Public Sector Solutions
Reinsurance
Corporate Solutions
iptiQ3
Public Sector Solutions
1 Only those Board committees with allocated responsibilities related to sustainability are listed.
2 Dedicated sustainability roles, networks and/or committees in all Group Functions and on Business level.
3 The Division iptiQ has been in place since 1 January 2021. The Business Unit Life Capital was disbanded at
the end of December 2020.
• The Group Chief Underwriting Officer
(Group CUO) is responsible for Swiss Re
Institute’s research agenda which
includes sustainability and resilience-
related topics.
• The Group Chief Operating Officer
(Group COO) is responsible for the
Corporate Real Estate & Services (CRES)
division which steers and monitors the
reduction of Swiss Re’s direct
environmental footprint and is in charge
of Swiss Re’s Greenhouse Neutral
Programme to reduce our own CO2
emissions as well as the commitment
to reach net-zero CO2 emissions in
our operations by 2030.
• The Group Chief Risk Officer (Group CRO)
is responsible for establishing the Group’s
Risk Management Framework for all risk
categories, including risks related to
sustainability. In addition, the Group CRO
chairs the Group Sustainability Council
(GSC). In this role, he guides the GSC’s
sustainability activities across the
Swiss Re Group.
• The Group Chief Investment Officer
(Group CIO) is responsible for ensuring
consistent integration of ESG aspects
across the investment process. The
Group CIO is responsible for investment
decisions within the Strategic Asset
Allocation implementation, including
those related to responsible investing,
and is informed of ESG updates through
various channels, including the Asset
Management Investment Committee.
• The Group Chief Financial Officer
(Group CFO) is responsible for Swiss Re’s
investor relations and public disclosures,
including the Group Annual Report,
which includes our climate-related
financial disclosures.
Find out more
For more information please visit:
www.swissre.com/sustainability
Key Focus Area 2020/2021
Changes to the Group structure
The Business Unit Life Capital, which
combined the closed book business of
ReAssure with the open book businesses
of elipsLife and iptiQ, was disbanded by
the end of December 2020, following the
completion of the sale of ReAssure to
Phoenix Group Holdings plc. Effective
1 September 2020, the CEO Life Capital
ceased to be a member of the Group
Executive Committee. The Business Unit
Corporate Solutions assumed responsibility
for elipsLife as of 1 October 2020, which
provides life and health insurance solutions
and services for corporate clients, allowing
it to better leverage this Business Units
relationships with corporates and brokers.
Swiss Re’s white-labelling digital insurance
platform iptiQ became a standalone division
reporting to the Group CEO, effective
1 January 2021, enabling a greater focus
on this business.
On 25 September 2020, we announced
that we would further streamline the legal
entity structure of the Swiss Re Group.
Swiss Re intends to reorganise the legal
entity structure of its Corporate Solutions
Business. As part of the changes, Swiss Re
intends to make Swiss Reinsurance
Company Ltd the sole direct wholly-owned
operating subsidiary of Swiss Re Ltd.
Swiss Reinsurance Company Ltd would in
turn have separate holding companies for
the Reinsurance and Corporate Solutions
Business Units, as well as the Division iptiQ.
The streamlining of the Group’s legal
entity structure will not change the fact that
these businesses continue to operate
independently. It is expected that the target
legal entity structure will be implemented
by the end of 2021, subject to receipt of the
required regulatory approvals.
Swiss Re’s Corporate Governance
Framework
The Board of Directors has ultimate
responsibility for the success of Swiss Re
Ltd and the Group within a framework
of effective and prudent controls. It is
responsible for the overall direction,
supervision and control of Swiss Re Ltd
and the Group and of the Group EC,
as well as for supervising compliance with
applicable laws, rules and regulations.
Such responsibilities cannot be delegated
and therefore rest with the entire Board.
The Board of Directors has delegated the
management of Swiss Re Ltd and the
Group to the Group EC.
This corporate governance framework
ensures sustainability, fosters transparency
and facilitates a quality assessment
of the Swiss Re Group’s organisation
and business.
Swiss Re’s Governance Documents
Swiss Re’s Code of Conduct provides key
principles that guide Swiss Re in making
responsible decisions and achieving
results using the highest ethical standards.
It is built on the five Swiss Re Corporate
Values: Integrity, Team Spirit, Passion to
Perform, Agility and Client Centricity.
The Corporate Governance Guidelines set
out Swiss Re’s harmonised governance
principles and standards, ensuring a
consistent and tailored corporate
governance approach across the Group.
The Articles of Association define the legal
and organisational framework of Swiss Re
Ltd as the Group’s holding company.
The Bylaws define Swiss Re’s governance
framework and include the responsibilities
of the Board of Directors and the Group EC
and their members.
The Board Committee Charters outline the
duties and responsibilities of the Board
Committees and form part of the Bylaws.
The Bylaws and the Board Committee
Charters are not publicly available.
For Swiss Re’s governance documents
please visit:
Group Code of Conduct
files.swissre.com/codeofconduct/
Corporate Governance Guidelines
www.swissre.com/
corporategovernanceguidelines
Articles of Association (Swiss Re Ltd)
www.swissre.com/articlesofassociation
Swiss Re’s corporate governance adheres to:
• The SIX Swiss Exchange’s Directive on Information Relating to Corporate Governance
(including its annex) dated 20 June 2019, effective as of 2 January 2020.
• The Swiss Code of Best Practice for Corporate Governance (Swiss Code) of
28 August 2014, issued by economiesuisse, the Swiss business federation.
• The Swiss Financial Market Supervisory Authority FINMA provisions on corporate
governance, risk management and internal control system at insurers.
Swiss Re’s corporate governance also complies with applicable local rules and
regulations in all jurisdictions where it conducts business.
Information on compensation
Information on compensation and
shareholdings of, and loans to, the
members of the Board of Directors and
the Group EC are included in the
Compensation Report beginning on
page 114 this Financial Report.
Swiss Re | Financial Report 2020
83
Corporate governance
Group structure and
shareholders
Operational Group structure
Group CEO
Americas
EMEA
Asia
Regional Presidents
Group CFO
Group Finance
Group CRO
Group Risk Management
Group CUO
Swiss Re Institute (SRI)
Group CIO
Group Asset Management
Group COO
Group Operations
Group CHRO
Group Human Resources
Group CLO*
Group Legal**
Group Functions
and Group Legal
Business Unit
Reinsurance
Property &
Casualty
Life &
Health
Business Unit
Corporate Solutions
Business Unit
Life Capital***
* The Group CLO reports with a dual reporting line to the Group CEO and the Group COO.
** Group Legal is not a Group Function.
*** Disbanded at the end of December 2020. Effective 1 January 2021: Division iptiQ. For more details please refer to page 83.
Legal structure — listed and non-listed
Group companies
Swiss Re Ltd, the Group’s holding company,
is a joint stock company, listed in
accordance with the International Reporting
Standard on SIX Swiss Exchange (ISIN
CH0126881561, Swiss Security Number
12688156), domiciled at Mythenquai
50/60 in 8022 Zurich, and organised
under the laws of Switzerland.
Information on its market capitalisation
is provided on pages 32–33 of this
Financial Report. No other Group companies
have shares listed. More information
on the Group companies is provided in
Note 20 to the Group financial statements
on pages 278–280.
Swiss Re Ltd has a level I American
Depositary Receipts (ADR) programme in
the US. The ADR are traded over the
counter (OTC) (ISIN US8708861088, OTC
symbol SSREY). One Swiss Re Ltd share
equals four ADR. Neither the ADR nor the
underlying Swiss Re Ltd shares are listed on
a securities exchange in the US. Shares
represented by ADR for which no specific
voting instructions are received by the
depositary from an ADR holder, are not
voted at shareholder meetings.
84
Swiss Re | Financial Report 2020
Significant shareholders
The following table provides a summary of the disclosure notifications of major
shareholders holding more than 3% of voting rights:
Shareholder
BlackRock, Inc.
Number of shares
15 995 446
% of voting rights
and share capital
5.04
Creation of the
obligation to notify
31 December 2020
For the detailed disclosure notification please visit: www.swissre.com/disclosureofshareholdings
Registered shareholdings by type
Registered shareholdings by type
As of 31 December 2020
Shareholder structure
Registered — unregistered1 shares
62.0% Institutional
62.0% Institutional
shareholders
shareholders
33.9% Individual
33.9% Individual
shareholder
shareholders
4.1% Swiss Re
4.1% Swiss Re
employees
employees
As of 31 December 2020
Registered shares2
Unregistered shares2
Shares held by Swiss Re
Share buy-back programme
Total shares issued
Shares
174 237 358
114 739 041
28 520 907
0
317 497 306
in %
54.9
36.1
9.0
0.0
100.0
1 “Unregistered” shares refers to shares for which no application has been received by the owner to enter the shares
in the share register.
2 Without Swiss Re’s holdings.
Registered shares with voting rights by shareholder type
As of 31 December 2020
Individual shareholders
Swiss Re employees
Total individual shareholders
Institutional shareholders
Total
Shareholders
90 579
6 671
97 250
3 934
101 184
Registered shares with voting rights by country
As of 31 December 2020
Switzerland
UK
US
Other
Total
Shareholders
87 417
969
1 405
11 393
101 184
in %
89.5
6.6
96.1
3.9
100.0
in %
86.4
0.9
1.4
11.3
100.0
Shares
59 109 999
7 146 975
66 256 974
107 980 384
174 237 358
Shares
106 990 760
33 128 665
17 782 985
16 334 948
174 237 358
Registered shares with voting rights by size of holding
As of 31 December 2020
Holdings of 1–2 000 shares
Holdings of 2 001–200 000 shares
Holdings of > 200 000 shares
Total
Shareholders
94 671
6 437
76
101 184
in %
93.6
6.3
0.1
100.0
Shares
34 781 138
58 905 181
80 551 039
174 237 358
in %
33.9
4.1
38.0
62.0
100.0
in %
61.4
19.0
10.2
9.4
100.0
in %
20.0
33.8
46.2
100.0
Cross-shareholdings
Swiss Re has no cross-shareholdings in excess of 5% of capital or voting rights with any
other company.
Registered shareholdings by country
Registered shareholdings by country
As of 31 December 2020
61.4% Switzerland
61.4% Switzerland
19.0% UK
19.0% UK
10.2% US
10.2% USA
9.4% Other registered
9.4% Other registered
shareholders
More information
More information on the Swiss Re Ltd
shares, such as the price performance
and trading volume in 2020, Swiss Re’s
dividend policy and dividends, the
share buy-back programmes and an
overview of the key share statistics
since 2014, is included in the section
“Share performance” on pages 32–33
of this Financial Report.
Swiss Re | Financial Report 2020
85
Corporate governance
Capital structure
Capital
As a result of the cancellation of shares
repurchased under the share buy-back
programme that was completed on
18 February 2020, the fully paid-in share
capital of Swiss Re Ltd as of 31 December
2020 amounted to CHF 31 749 730.60.
It is divided into 317 497 306 registered
shares, each with a par value of CHF 0.10.
Conditional and authorised capital
in particular
Conditional capital for Equity-Linked
Financing Instruments
The conditional capital of Swiss Re Ltd
as of 31 December 2020 amounts to
CHF 5 000 000, permitting the issuance
of a maximum of 50 000 000 registered
shares, payable in full, each with a nominal
value of CHF 0.10, corresponding to 15.74%
of the existing share capital.
Such shares are issued through the voluntary
or mandatory exercise of conversion and/or
option rights granted by the company or
Group companies in connection with bonds
or similar instruments, including loans or
other financial instruments (Equity-Linked
Financing Instruments).
Authorised capital
The authorised capital of Swiss Re Ltd
as of 31 December 2020 amounts to
CHF 8 500 000. The Board of Directors
is authorised to increase the share
capital of the company at any time up to
17 April 2021 through the issue of up
to 85 000 000 registered shares, payable
in full, each with a nominal value of
CHF 0.10, corresponding to 26.77% of
the existing share capital.
For more information on the terms and
conditions of the conditional capital and the
authorised capital please refer to articles 3a
and 3b of the Articles of Association. The
Articles of Association are available at:
www.swissre.com/articlesofassociation
Changes in capital
Changes in 2020
The Annual General Meeting 2020
approved the reduction of the ordinary
share capital by CHF 990 739.80 from
CHF 32 740 470.40 to CHF 31 749 730.60
by cancelling 9 907 398 shares with a
nominal value of CHF 0.10 each repurchased
by Swiss Re Ltd on a second trading line on
the SIX Swiss Exchange, via Cantonal Bank
of Zurich as agent. The 9 907 398 shares
were repurchased under the share buy-back
programme launched on 6 May 2019
until its completion on 18 February 2020.
In line with the requirements of article 733
of the Swiss Code of Obligations, this
reduction of the ordinary share capital
was published in the Swiss Gazette
of Commerce (Schweizerisches
Handelsamtsblatt) on 28 July 2020.
On 17 April 2020 the Annual General
Meeting authorised a public share buy-back
programme for cancellation purposes
of up to CHF 1 billion purchase value for
the Board of Directors to repurchase
Swiss Re Ltd’s shares prior to the 2021
Annual General Meeting. The Board of
Directors concluded at its meeting following
the Annual General Meeting that the share
buy-back programme will not be launched
due to the volatility in the financial markets
and the global economic situation
precipitated by the COVID-19 pandemic.
Changes in 2019
The Annual General Meeting 2019
approved the reduction of the ordinary
share capital by CHF 1 121 476.10 from
CHF 33 861 946.50 to CHF 32 740 470.40
by cancelling 11 214 761 shares with a
nominal value of CHF 0.10 each repurchased
by Swiss Re Ltd on a second trading line on
the SIX Swiss Exchange, via Cantonal Bank
of Zurich as agent. The 11 214 761 shares
were repurchased under the share buy-back
programme launched on 7 May 2018
until its completion on 15 February 2019.
The purchase value of the repurchased
own shares corresponded to
CHF 999 999 983.08.
In line with the requirements of article 733
of the Swiss Code of Obligations, this
reduction of the ordinary share capital
was published in the Swiss Gazette
of Commerce (Schweizerisches
Handelsamtsblatt) on 16 July 2019.
On 17 April 2019 the Annual General
Meeting authorised a public share buy-back
programme for cancellation purposes
consisting of two tranches of up to
CHF 1 billion purchase value each for the
Board of Directors to repurchase Swiss Re
Ltd’s shares prior to the 2020 Annual
General Meeting. The first tranche of the
programme was launched on 6 May 2019
and completed on 18 February 2020.
The purchase value of the repurchased
own shares corresponded to
CHF 999 999 970.00. Together with the
third quarter 2019 results, which were
published on 31 October 2019, the Board
of Directors announced that it had decided
not to launch the second tranche of the
share buy-back programme due to the
capital deployment, significant natural
catastrophe losses in 2019 and the
decision to suspend the initial public
offering of ReAssure.
Share capital
Conditional capital
31 December 2019
31 December 2020
Capital in CHF
32 740 470.40
In % of the
share capital
100%
Shares
327 404 704
Capital in CHF
31 749 730.60
In % of the
share capital
100%
Shares
317 497 306
for Equity-Linked Financing Instruments
Authorised capital
5 000 000.00
8 500 000.00
15.27%
25.96%
50 000 000
85 000 000
5 000 000.00
8 500 000.00
15.74%
26.77%
50 000 000
85 000 000
86
Swiss Re | Financial Report 2020
For further details on the share
buy-back programmes, please visit:
www.swissre.com/sharebuyback
Furthermore, the Annual General Meeting
2019 renewed the authorised capital
(until 17 April 2021) and made further
amendments to the provisions of the
Articles of Association concerning authorised
and conditional capital (re-setting several
sub-limits, and amending the description
of permitted cases of an exclusion of
subscription or advance subscription rights).
Changes in previous years
Information about changes in share capital
of Swiss Re Ltd as well as of our former
parent company Swiss Reinsurance
Company Ltd for earlier years is provided in
the Annual Reports of these companies for
the respective years. For details please visit:
www.swissre.com/investors/financial-
information.html
Shares
All shares issued by Swiss Re Ltd are fully
paid-in registered shares, each with a par
value of CHF 0.10. Each share carries one
vote. The shares rank equally among each
other in all respects (including in respect of
entitlements to dividends and liquidation
proceeds). There are no categories of
shares with a higher or limited voting
power, privileged dividend entitlement or
any other preferential rights, nor are there
any other securities representing a part
of the company’s share capital.
The company cannot exercise the
voting rights of treasury shares. As of
31 December 2020, shareholders had
registered 174 237 358 shares with
the share register for the purpose of
exercising their voting rights, out of a
total of 317 497 306 shares issued.
Profit-sharing and participation
certificates
Swiss Re Ltd has not issued any profit-
sharing and participation certificates.
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. Persons
acquisition registered shares will, upon
application, be entered in the share register
without limitation as shareholder with
voting power if evidence of the acquistion
of the shares is provided and if they
expressly declare that they have acquired
the shares in their own name and for their
own account.
Admissibility of nominee registrations
Persons not expressly declaring in their
application for entry in the share register
that they are holding shares for their own
account (nominees) are entered without
further inquiry in the share register of
Swiss Re Ltd as shareholders with voting
rights up to a maximum of 2% of the
outstanding share capital available at the
time. Additional shares held by such
nominees that exceed the limit of 2% of the
outstanding share capital are entered in the
share register with voting rights only if such
nominees disclose the names, addresses
and shareholdings of any persons for whose
account the nominee is holding 0.5% or
more of the outstanding share capital. In
addition, such nominees must comply with
the disclosure requirements of the FMIA.
For more information on the transfer
of shares please refer to article 4 of the
Articles of Association. The Articles
of Association are available at:
www.swissre.com/articlesofassociation
The Articles of Association
are available at:
www.swissre.com/articlesofassociation
Convertible bonds and options
Convertible bonds
As of 31 December 2020, except as
provided below, neither Swiss Re Ltd nor
any of its subsidiaries has any bonds
outstanding that are convertible into equity
securities of Swiss Re Ltd.
On 6 June 2018, Swiss Re Ltd placed with
the market via a repackaging vehicle
USD 500 000 000 of six-year exchange-
able notes, which may be stock-settled at
the option of Swiss Re Ltd. Subject to the
conditions of the notes, noteholders may
exchange their notes for ordinary shares of
Swiss Re Ltd at a conversion price of
USD 106.6067 (adjusted from the initial
exchange price of USD 115.2593 and the
subsequently adjusted exchange price of
USD 111.6987). The exchange price is
subject to further adjustment in certain
circumstances described in the conditions
of the notes. To economically offset the
settlement of a noteholder-initiated
exchange, Swiss Re Ltd purchased
matching call options on Swiss Re Ltd
shares with a portion of the proceeds.
Consequently, no new Swiss Re Ltd shares
will be issued upon a noteholder-initiated
exchange. The settlement and delivery of
these notes took place on 13 June 2018.
For further details please see Note 7 to the
financial statements on page 302 of this
Financial Report. Assuming all of the notes
were exchanged at the request of
noteholders, 4 690 136 registered shares of
Swiss Re Ltd would have to be delivered
(corresponding to 1.48% of the existing
share capital).
Shares
Vesting of share awards to Swiss Re
employees are physically settled (with
treasury shares). The number of issued
shares will not be affected. For details on
shares granted to Swiss Re employees and
for more information on the quantitative
impact of vested shares please see
Note 16 to the Group financial statements
on page 273 of this Financial Report.
Assuming maximum vesting of all share
awards granted as of 31 December 2020,
2 990 046 registered shares of Swiss Re Ltd
would have to be delivered (corres-ponding
to 0.94% of the existing share capital).
Swiss Re | Financial Report 2020
87
Corporate governance
Board of Directors
The Board of Directors is ultimately responsible for the success
of Swiss Re Ltd and the Group.
Members of the Board of Directors
According to Article 14 of the Articles of Association, the Board of Directors of Swiss Re Ltd, the holding company of the Group, shall
consist of at least seven members. As of 31 December 2020, the Board of Directors consisted of the following members:
Name
Walter B. Kielholz (Chairman)
Renato Fassbind (Vice Chairman, Lead Independent Director)
Raymond K.F. Ch’ien
Sergio P. Ermotti
Karen Gavan
Joachim Oechslin
Deanna Ong
Jay Ralph
Joerg Reinhardt
Philip K. Ryan
Sir Paul Tucker
Jacques de Vaucleroy
Susan L. Wagner
Larry Zimpleman
Nationality
Swiss
Swiss
Chinese
Swiss
Canadian
Swiss
Singaporean
American, Swiss
German
American
British
Belgian
American
American
Age
69
65
68
60
59
50
49
61
64
64
62
59
59
69
Initial election
19981
2011
20081
2020
2018
2020
2020
2017
2017
2015
2016
2017
2014
2018
1
Initially elected to the Board of Directors of Swiss Reinsurance Company Ltd, the Group’s former parent company, and subsequently elected to the Board of Directors of Swiss Re Ltd
in 2011.
The following two members of the Board of Directors did not stand for re-election at the AGM 2020:
Name
Trevor Manuel
Eileen Rominger
Nationality
South African
American
Age
64
66
Initial election
2015
2018
For the biographies of former Board members, please refer to: www.swissre.com/formerboardmembers
Felix Horber
Group Company Secretary
Felix Horber, attorney-at-law, has been
Group Company Secretary of Swiss Re
since 2007. He holds a PhD in Law
and an Executive Master in European
and International Business Law. He is a
Certified Director for Board Effectiveness
and a Lecturer in Law at the University
of St. Gallen (HSG), Switzerland.
88
Swiss Re | Financial Report 2020
Walter B. Kielholz
Chairman, non-executive
Born: 1951
Nationality: Swiss
Renato Fassbind
Vice Chairman and Lead Independent
Director, non-executive and independent
Born: 1955
Nationality: Swiss
Raymond K.F. Ch’ien
Member, non-executive and independent
Born: 1952
Nationality: Chinese
Walter B. Kielholz was elected to the Board
of Directors of Swiss Reinsurance Company
Ltd in 1998 and to the Board of Directors
of Swiss Re Ltd in connection with its
formation in 2011. He was Vice Chairman
from 2003 to April 2009 and has been
Chairman of the Board of Directors since
May 2009. He chairs the Chairman’s and
Governance Committee.
Professional experience
Walter B. Kielholz began his career at the
General Reinsurance Corporation, Zurich,
in 1976, where he held several positions in
the US, in the UK and Italy before assuming
responsibility for the company’s European
marketing. In 1986, he joined Credit Suisse,
where he was responsible for relationships
with large insurance groups. He joined
Swiss Re in 1989, where he became an
Executive Board member in 1993 and was
Chief Executive Officer from 1997 to 2002.
He was also a member of the Board of
Directors of Credit Suisse Group Ltd from
1999 to 2014 and served as Chairman
from 2003 to 2009.
Educational background
• Business Finance and Accounting
degree, University of St. Gallen,
Switzerland
Renato Fassbind was elected to the
Board of Directors of Swiss Re Ltd in 2011.
He was appointed Vice Chairman in 2012
and Lead Independent Director in 2014. He
chairs the Nomination Committee and the
Audit Committee and is a member of the
Chairman’s and Governance Committee
and the Compensation Committee.
Professional experience
After two years with Kunz Consulting AG,
Renato Fassbind joined F. Hoffmann-La
Roche Ltd in 1984, becoming Head of
Internal Audit in 1988. From 1986 to 1987,
he worked as a public accountant with
Peat Marwick in New Jersey, USA. In 1990,
he joined ABB Ltd as Head of Corporate
Staff Audit and, from 1997 to 2002, was
Chief Financial Officer and a member of the
Group Executive Committee. In 2002, he
joined Diethelm Keller Holding Ltd as Group
Chief Executive Officer. From 2004 to
2010, he was Chief Financial Officer and
a member of the Executive Board of
Credit Suisse Group Ltd.
Educational background
• PhD in Economics, University of Zurich,
Switzerland
• Certified Public Accountant (CPA),
Denver, USA
External mandates
• Vice Chairman of the Institute of
International Finance
External mandates
• Board member of Nestlé S.A.*
• Board member of Kühne + Nagel
• Member of the European Financial
International Ltd*
Services Round Table
• Chairman of the Zurich Art Society
Raymond K.F. Ch’ien was elected to the
Board of Directors of Swiss Reinsurance
Company Ltd in 2008 and to the Board
of Directors of Swiss Re Ltd in connection
with its formation in 2011. He is a member
of the Compensation Committee and
the Investment Committee. He is also a
member of the Board of Directors of
Swiss Re Asia Pte. Ltd.
Professional experience
Raymond K.F. Ch’ien was Group Managing
Director of Lam Soon Hong Kong Group
from 1984 to 1997. From 1999 to 2011,
he was Chairman of CDC Corporation,
a software development company, and
from 2003 to 2015 Chairman of MTR
Corporation Limited, which operates a major
public transport network in Hong Kong.
From 1997 to 2020, Raymond K.F. Ch’ien
also served as an Independent Non-
executive Director of the Hongkong and
Shanghai Banking Corporation Limited.
Educational background
• PhD in Economics, University of
Pennsylvania, USA
External mandates
• Chairman of the Board of Directors of
Hang Seng Bank Ltd*
• Board member of China Resources Power
Holdings Company Ltd*
• Honorary President of the Federation
of Hong Kong Industries
* Listed company
Swiss Re | Financial Report 2020
89
Corporate governance
Board of Directors
Sergio P. Ermotti
Member, non-executive and independent
Born: 1960
Nationality: Swiss
Karen Gavan
Member, non-executive and independent
Born: 1961
Nationality: Canadian
Joachim Oechslin
Member, non-executive and independent
Born: 1970
Nationality: Swiss
Sergio P. Ermotti was elected to the Board
of Directors of Swiss Re Ltd in 2020.
Professional experience
Sergio P. Ermotti was Group Chief Executive
Officer and a member of the Group
Executive Board of UBS Group from 2011
to 31 October 2020. Before joining UBS,
he was Head of the Markets & Investment
Banking Division as of December 2005,
and Group Deputy Chief Executive Officer
from 2007 to 2010 at UniCredit Group,
responsible for Corporate and Investment
Banking and Private Banking. Between
1987 and 2004, he held various positions
at Merrill Lynch & Co. in the areas of equity
derivatives and capital markets. He became
Co-Head of Global Equity Markets and a
member of the Executive Management
Committee for Global Markets & Investment
Banking in 2001.
Educational background
• Swiss-certified banking expert
• Advanced Management Programme,
University of Oxford, United Kingdom
External mandates
• Chairman of Investindustrial Acquisition
Corp.* (as of 1 January 2021)
Karen Gavan was elected to the Board of
Directors of Swiss Re Ltd in 2018. She is
a member of the Audit Committee and the
Compensation Committee. She is also
a member of the Board of Directors of
Swiss Re America Holding Corporation.
Professional experience
Karen Gavan started her career in finance
roles at Prudential Insurance, Imperial Life
and Canada Life. She joined Transamerica
Life in 1992 as Chief Financial Officer and
added responsibilities over her tenure
becoming Executive Vice President and
Chief Financial Officer from 2000 to 2002
of Transamerica Life Canada/AEGON
Canada, and from 2003 to 2005 the
company’s Chief Operating Officer. From
2005, Karen Gavan assumed a number of
non-executive board mandates. She joined
the Board of Economical Insurance in 2008
and, until her retirement in November 2016,
also served for five years as President and
Chief Executive Officer at Economical
Insurance, preparing the company for its
initial public offering. During her leadership,
the company also launched Sonnet,
Canada’s first fully digital insurer.
Educational background
• Honours Bachelor of Commerce,
Lakehead University, Canada
• Fellow of the Institute of Chartered
Accountants of Ontario, Canada
External mandates
• Board member of Mackenzie
Financial Corporation
• Board member of HSBC Bank Canada
Joachim Oechslin was elected to the Board
of Directors of Swiss Re Ltd in 2020. He is a
member of the Finance and Risk Committee
and the Investment Committee.
Professional experience
Joachim Oechslin started his professional
career in 1998 as a consultant at
McKinsey & Company, specialising in the
financial services sector. In 2001, he joined
Winterthur Insurance, Switzerland, where
he was Chief Risk Officer of Winterthur
Life & Pensions until 2003 and Group Chief
Risk Officer of Winterthur Group from 2003
to 2006. Joachim Oechslin became a
member of the Executive Committee of
Winterthur Group in 2006. Following the
acquisition of Winterthur Group by AXA in
2006, he assumed the position of Deputy
Group Chief Risk Officer of AXA Group.
In 2007, he joined Munich Re Group as
Group Chief Risk Officer and a member of
the Group Committee. In 2013, he moved
to Credit Suisse Group, where he was Group
Chief Risk Officer and a member of the
Group Executive Board from January 2014
to February 2019. Currently, Joachim
Oechslin serves as Senior Advisor at Credit
Suisse Group.
Educational background
• Degree in Electrical Engineering, Higher
Technical Institute (HTL), Winterthur,
Switzerland
• Master of Science in Mathematics,
Swiss Federal Institute of Technology
(ETH), Zurich, Switzerland
External mandates
• None
* Listed company
90
Swiss Re | Financial Report 2020
Deanna Ong
Member, non-executive and independent
Born: 1971
Nationality: Singaporean
Jay Ralph
Member, non-executive and independent
Born: 1959
Nationality: American and Swiss
Joerg Reinhardt
Member, non-executive and independent
Born: 1956
Nationality: German
Deanna Ong was elected to the Board of
Directors of Swiss Re Ltd in 2020. She is
a member of the Audit Committee. She is
also a member of the Board of Directors
and Chairperson of the Audit Committee
of Swiss Re Asia Pte. Ltd.
Professional experience
Deanna Ong has been Chief People Officer
and a member of the Group Executive
Committee at GIC, a sovereign wealth fund
established by the Government of
Singapore, since 2017, and Managing
Director since 2008. Deanna Ong joined
GIC in 1994 and held various finance roles
covering public and private market assets
until 2009. From 2009 to 2014, she was
Director Finance, responsible for financial
management across GIC’s portfolio. In
2012, she also took on responsibility for
Human Resources & Organisation and
Corporate Governance. Prior to joining GIC,
she was a tax accountant with Arthur
Andersen & Co.
Educational background
• Bachelor of Accountancy, Nanyang
Technological University, Singapore
• Stanford Executive Program, Stanford
University, USA
External mandates
• Board member of the International Forum
of Sovereign Wealth Funds
Jay Ralph was elected to the Board of
Directors of Swiss Re Ltd in 2017. He is a
member of the Finance and Risk Committee
and the Investment Committee.
Professional experience
Jay Ralph was a member of the Board of
Management of Allianz SE from 2010 to
2016, where he also served on a number of
boards of directors of Allianz SE subsidiaries.
He was Chief Executive Officer of Allianz Re
from 2007 to 2009 and President and Chief
Executive Officer of Allianz Risk Transfer
from 1997 to 2006. Before joining Allianz,
he was an auditor at Arthur Andersen & Co.,
Investment Officer at Northwestern Mutual
Life Insurance Company, President at
Centre Re Bermuda Ltd and a member of
the Executive Board of Zurich Re.
Educational background
• MBA in Finance and Economics,
University of Chicago, USA
• BBA in Finance and Accounting,
University of Wisconsin, USA
• Certified Public Accountant (CPA),
Chartered Financial Analyst (CFA) and
Fellow of the Life Management Institute
(FLMI)
Joerg Reinhardt was elected to the
Board of Directors of Swiss Re Ltd in 2017.
He is a member of the Nomination
Committee and the Compensation
Committee.
Professional experience
Joerg Reinhardt has been Chairman of the
Board of Directors of Novartis since 2013.
He was Chairman of the Board of
Management and the Executive Committee
of Bayer HealthCare AG from 2010 to 2013
and, prior to that, held various executive
positions at Novartis. He was Chief
Operating Officer from 2008 to 2010,
headed the Vaccines and Diagnostics
Division from 2006 to 2008 and held a
number of other senior roles, primarily
in research and development, in the
preceding years. Joerg Reinhardt started
his career at Sandoz Pharma Ltd, a
predecessor company of Novartis, in 1982.
Educational background
• PhD in Pharmaceutical Sciences,
Saarland University, Germany
External mandates
• Chairman of the Board of Directors
of Novartis Inc.*
External mandates
• Member of the Siemens Pension
• Chairman of the Board of Trustees
of the Novartis Foundation
Advisory Board
• Treasurer and member of the Georgia
O’Keeffe Museum Board of Trustees
and member of the O’Keeffe Innovations
Board
* Listed company
Swiss Re | Financial Report 2020
91
Corporate governance
Board of Directors
Philip K. Ryan
Member, non-executive and independent
Born: 1956
Nationality: American
Sir Paul Tucker
Member, non-executive and independent
Born: 1958
Nationality: British
Jacques de Vaucleroy
Member, non-executive and independent
Born: 1961
Nationality: Belgian
Philip K. Ryan was elected to the Board of
Directors of Swiss Re Ltd in 2015. He chairs
the Finance and Risk Committee and is a
member of the Chairman’s and Governance
Committee and the Audit Committee. He is
also Chairman of Swiss Re America Holding
Corporation.
Professional experience
Philip K. Ryan held various positions with
Credit Suisse from 1985 to 2008, including
Chairman of the Financial Institutions
Group, Chief Financial Officer of Credit
Suisse Group Ltd, Chief Financial Officer
of Credit Suisse Asset Management, and
Managing Director of CSFB Financial
Institutions Group. He was Chief Financial
Officer of the Power Corporation of Canada
from 2008 to 2012. In that capacity,
he was a director of IGM Financial Inc.,
Great-West Lifeco Inc. and several of their
subsidiaries, including Putnam Investments.
Educational background
• MBA, Kelley School of Business,
Indiana University, USA
• Bachelor’s degree in Industrial and
System Engineering, University of Illinois,
USA
External mandates
• Operating Partner Corsair Capital
• Operating Partner MKB Growth Equity
• Member of the Advisory Board of
Sir Paul Tucker was elected to the Board of
Directors of Swiss Re Ltd in 2016. He is a
member of the Finance and Risk Committee
and the Investment Committee.
Professional experience
Sir Paul Tucker was the Deputy Governor
of the Bank of England from 2009 to 2013.
He held various senior roles at the Bank of
England from 1980 onwards, including as a
member of the Monetary Policy Committee,
Financial Policy Committee, Prudential
Regulatory Authority Board and Court of
Directors. He also served as a member of
the Steering Committee of the G20
Financial Stability Board and as a member
of the Board of the Bank for International
Settlements. In 2014, he was granted a
knighthood for his services to central
banking. Sir Paul Tucker is the author of
Unelected Power: The Quest for Legitimacy
in Central Banking and the Regulatory
State (Princeton University Press, 2018).
Educational background
• BA in Mathematics and Philosophy,
Trinity College, Cambridge,
United Kingdom
External mandates
• Chairman of the Systemic Risk Council
• Research Fellow at the Harvard Kennedy
School of Government
• Board member of the Financial Services
NY Green Bank
Volunteers Corps
• Member of the Smithsonian
• Senior Fellow at the Harvard Center
National Board
for European Studies
• Governor of the Ditchley Foundation
• President of the UK’s National Institute
of Economic and Social Research
Jacques de Vaucleroy was elected to the
Board of Directors of Swiss Re Ltd in 2017.
He chairs the Compensation Committee
and is a member of the Chairman’s and
Governance Committee, the Nomination
Committee and the Investment Committee.
He is also Chairman of Swiss Re Europe
S.A. and Swiss Re International SE.
Professional experience
Jacques de Vaucleroy was a member of the
Management Committee of AXA Group
from 2010 to 2016, serving as Chief
Executive Officer for North, Central and
Eastern Europe and Chief Executive Officer
of Global Life & Savings. He also held a
number of positions in boards of directors
and supervisory boards of AXA companies.
Before that, he spent 24 years at ING,
where he held senior roles in banking,
asset management and insurance. He was
a member of the Executive Board of
ING Group from 2006 to 2009, in charge
of insurance and asset management
in Europe.
Educational background
• Master’s degree in Law, Université
Catholique de Louvain, Belgium
• Master’s degree in Business Law,
Vrije Universiteit Brussel, Belgium
External mandates
• Chairman of Kazidomi SRL
• Board member of Colt Technology
Services Group plc, Fidelity International
Limited, Eight Roads Holdings Limited
and Zabka Polska SA
• Board member of the Simõn I. Patiño
Foundation and the TADA non-profit
organisation
92
Swiss Re | Financial Report 2020
Susan L. Wagner
Member, non-executive and independent
Born: 1961
Nationality: American
Larry Zimpleman
Member, non-executive and independent
Born: 1951
Nationality: American
Susan L. Wagner was elected to the Board
of Directors of Swiss Re Ltd in 2014. She
chairs the Investment Committee and is a
member of the Chairman’s and Governance
Committee, the Nomination Committee
and the Finance and Risk Committee.
Professional experience
Susan L. Wagner is a co-founder of
BlackRock, where she served as Vice
Chairman and a member of the Global
Executive and Operating Committees
before retiring in 2012. Previously,
Susan L. Wagner served as Chief Operating
Officer, Head of Strategy and Corporate
Development, and Head of the Alternative
Investment and International Client
Businesses. Prior to founding BlackRock,
Susan L. Wagner was a Vice President
at Lehman Brothers, supporting the
investment banking and capital markets
activities of mortgage and savings
institutions.
Educational background
• BA in English and Economics,
Wellesley College, USA
• MBA in Finance, University of Chicago,
USA
External mandates
• Board member of Apple Inc.*
• Board member of BlackRock, Inc.*
• Board member of Color Health, Inc.
• Board member of Samsara Networks, Inc.
• Member of the Board of Trustees of
Wellesley College, USA
Larry Zimpleman was elected to the Board
of Directors of Swiss Re Ltd in 2018. He is a
member of the Audit Committee and the
Finance and Risk Committee.
Professional experience
Larry Zimpleman started his career in 1971
as an actuarial intern at The Principal
Financial Group, an investment management
company that offers insurance solutions,
asset management and retirement services
to individual and institutional clients. From
1976 to 2006, he held various senior
management and leadership positions at
The Principal. He became President
and Chief Executive Officer in 2008 and
Chairman in 2009. In August 2015,
Larry Zimpleman stepped down as
President and CEO. His membership in the
Board of Directors ended in May 2016.
Educational background
• Bachelor of Science, Drake University,
USA
• MBA, Drake University, USA
• Fellow of the Society of Actuaries, USA
External mandates
• Member of the Board of Trustees of
the Drake University
• Member of the Board of Trustees of
the Iowa Clinic
Independence
At least three-quarters of the members of
the Board of Directors must be independent
members. Swiss Re Ltd defines
independence in line with best practice
corporate governance standards. To be
considered independent a Board member
may not be, and may not have been in the
past five years, employed as a member of
the Group EC, or by any subsidiary of the
Group, or may not have a material
relationship with any part of the Group
(either directly or as a partner, director or
shareholder of an organisation that has a
material relationship with the Group) other
than serving as an independent board
member in any subsidiary. In addition, the
Board agrees on other criteria that
disqualify a Board member from being
considered independent, taking into
consideration provisions of applicable law,
regulations and best practice. The Board
members annually need to confirm that
they meet additional criteria.
For an overview on all the independence
criteria that apply to our Board members
please refer to:
www.swissre.com/board-independence
All the members of the Board of Directors
meet our independence criteria, with
the exception of our Chairman. As a
full-time Chairman he is not considered
independent.
Conflicts of interest
The members of the Board of Directors
are also subject to procedures to avoid any
action, position or interest that conflicts
with an interest of Swiss Re Ltd or the
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 CLO,
or in his absence to the Group Chief
Compliance Officer (Group CCO). The
Group CLO (or in his absence the Group
CCO) ensures that such a reported conflict
of interest is dealt with accordingly.
* Listed company
Swiss Re | Financial Report 2020
93
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Sir Paul Tucker, Jacques de Vaucleroy,
Susan L. Wagner and Larry Zimpleman
were individually re-elected by the Annual
General Meeting 2020 for a further
one-year term of office as members of the
Board of Directors. The Board of Directors
now consists of 14 members, it consisted
of 13 members up to the Annual General
Meeting 2020. The Annual General
Meeting 2020 also re/elected
Renato Fassbind, Raymond K.F. Ch’ien,
Karen Gavan (new), Joerg Reinhardt and
Jacques de Vaucleroy as members of the
Compensation Committee for a one-year
term of office.
Election, succession planning,
qualifications, training and
term of office
Election procedure
Members of the Board of Directors and
the Chairman of the Board of Directors are
elected individually by the Annual General
Meeting for a term of office until completion
of the next Annual General Meeting.
Succession planning
Succession planning is of significant
importance to the Board of Directors. It
regularly analyses its composition to
confirm that its members’ qualifications,
skills and experience correspond to the
Board’s needs and requirements. The Board
of Directors initiates the evaluation of
potential new Board members in a timely
manner with the continued aim to ensure
its members have the desired qualifications
and experience as well as to further
diversify and renew its composition. The
Nomination Committee evaluates
candidates for Board membership and
makes recommendations to the Board of
Directors for election or re-election
proposals. The Board of Directors nominates
candidates for Board membership for
election at the Annual General Meeting,
ensuring that the Board retains an adequate
size and well-balanced composition and
that at least three-quarters of its members
are independent. With regard to its
succession planning, the Board of Directors
aims to safeguard the stability of its
composition while also renewing the
Board in a sensible way.
Qualifications
The Board of Directors needs to secure the
necessary qualifications, skills and diversity
to perform all required responsibilities. It
must assemble among its members the
balance of managerial expertise and
knowledge from different fields required for
the fulfilment of the oversight responsibility
as well as for sound, independent decision-
making in line with the needs of the business.
The Board of Directors defines the selection
criteria against which candidates for Board
membership are assessed. The requirements
that potential Board members have to meet
in terms of knowledge in various key areas
and the industry are constantly increasing.
Corporate governance
Board of Directors
Information about managerial positions
and significant business connections
of non-executive directors
Walter B. Kielholz, Chairman of the Board
of Directors since 1 May 2009, was
Swiss Re’s CEO from 1 January 1997 to
31 December 2002. In line with Swiss Re
Ltd’s independence criteria, Walter B.
Kielholz, being a full-time Chairman, is not
considered independent. No other director
has ever held a management position
within the Group. None of the members
of the Board of Directors has, or represents
a company or organisation that has,
any significant business connections
with Swiss Re Ltd or any of the Group
companies, other than as disclosed in Note
18 to the Group financial statements on
page 276 of this Financial Report.
Other mandates, activities and functions
Article 26 of the Articles of Association
governs the requirements regarding the
external mandates held by Board members.
The Articles of Association are availabe
under: www.swissre.com/
articlesofassociation
In addition, no member of the Board
of Directors may serve on the board of
directors of a listed company in which
another member of the Board of Directors
holds an executive function, or where a
member of the Board of Directors is able
to determine the compensation of another
member of the Board of Directors.
All Board members comply with the
requirements on external mandates set out
in the Articles of Association. Any activities
of Board members in governing and
supervisory bodies of important Swiss and
foreign organisations, institutions and
foundations, as well as permanent
management and consultancy functions for
important Swiss and foreign interest groups
and official functions and political posts, are
stated in each of the directors’ biographies,
which can be found on pages 89–93.
Changes in 2020
Sergio P. Ermotti, Joachim Oechslin and
Deanna Ong were elected as new members
to the Board of Directors by the share-
holders at the Annual General Meeting,
which took place in Zurich on 17 April
2020. Trevor Manuel and Eileen Rominger
did not stand for re-election. The Annual
General Meeting 2020 re-elected
Walter B. Kielholz for a one-year term of
office as a member and Chairman of the
Board of Directors. Renato Fassbind (Vice
Chairman and Lead Independent Director),
Raymond K.F. Ch’ien, Karen Gavan,
Jay Ralph, Joerg Reinhardt, Philip K. Ryan,
94
Swiss Re | Financial Report 2020
Membership on the Board of Directors
requires experience in key sectors such
as insurance and reinsurance, finance,
accounting, capital markets, risk
management and regulatory matters as
well as leadership and decision-making
experience in a large, complex financial
institution. Further details are provided on the
previous page. The mandate also demands
significant commitment, integrity and
intercultural communication competence.
The prevalence of these qualifications and
skills ensures that the Board of Directors
has the relevant expertise required for
active involvement and supervision of an
international listed company.
A Board member may not have any
management or executive function
within the Group.
Board members’ training
The Board of Directors has a unique role
in the company oversight. The company
therefore strives to build a strong and
effective Board culture, supported by
ongoing learning, which is an important
component to foster Board effectiveness.
Upon election new Board members
undergo a comprehensive onboarding
programme in order to gain a sound
understanding of the Group’s organisation,
business and environment. The programme
encompasses the study of detailed
pre-reading materials, as well as a total of
24 hours of sessions with key management
functions and topic experts over a period
of nine months. Additionally, the Board
members update and enhance their
knowledge of emerging business trends
and risks through regular meetings with
internal and external experts throughout
the year.
Board of Directors diversity
In addition to the skill sets and
competencies of the members of the
Board of Directors, the principles of
gender and age diversity, inclusion,
nationality, race, ethnicity, regional
representation, transparency and the
avoidance of conflicts of interest play
an important role in the composition
of the Board of Directors.
The Board of Directors proposes, based
on a recommendation by the Nomination
Committee, that Sergio P. Ermotti be
elected as new Chairman of the Board
of Directors to succeed Walter B. Kielholz.
As announced by Swiss Re on 3 March
2020, Walter B. Kielholz, Chairman of the
Board of Directors, will not stand for
re-election at the Annual General Meeting
2021. Sergio P. Ermotti’s biography is
available on page 90.
The Board of Directors furthermore
proposes, based on recommendations
by the Nomination Committee, that
Raymond K.F. Ch’ien, Renato Fassbind,
Karen Gavan, Joerg Reinhardt and
Jacques de Vaucleroy be re-elected as
members of the Compensation Committee.
In 2020 the Board members spent time
further educating themselves on natural
catastrophe (re)insurance risks and the
impact of climate change.
Additionally, one-to-one training sessions
are offered at any time through the year
with our top executives and experts.
Term of office
The members of the Board of Directors are
elected for a term of office until completion
of the next Annual General Meeting.
Members whose term has expired are
immediately eligible for re-election.
First election date
The initial election year of each member
is stated in the table on page 88.
Nominations for re-/election by the
Annual General Meeting of 16 April 2021
The shareholders annually elect the
members of the Board of Directors, the
Chairman of the Board of Directors and the
members of the Compensation Committee,
individually and separately, for one-year
terms, until completion of the next Annual
General Meeting. The Board of Directors
proposes, based on recommendations by
the Nomination Committee, that each of
the following Board members be re-elected
for a one-year term:
• Renato Fassbind
• Raymond K.F. Ch’ien
• Sergio P. Ermotti
• Karen Gavan
• Joachim Oechslin
• Deanna Ong
• Jay Ralph
• Joerg Reinhardt
• Philip K. Ryan
• Sir Paul Tucker
• Jacques de Vaucleroy
• Susan L. Wagner
• Larry Zimpleman
Gender diversity
11 Male
3 Female
Gender diversity
Gender diversity
Regional representation
Regional representation
11 Male
11 Male
3 Female
3 Female
5 US/Canada
4 Switzerland
2 Europe
2 Asia
1 UK
5 US/Canada
4 Switzerland
2 Europe
2 Asia
1 UK
Regional representation
Swiss Re | Financial Report 2020
95
5 US/Canada
4 Switzerland
2 Europe
2 Asia
1 UK
Corporate governance
Board of Directors
Swiss Re’s governance framework
Swiss Re Ltd
Shareholders
Board of Directors
Chairman’s and
Governance Committee
Nomination Committee
Audit Committee
Finance and Risk
Committee
Compensation
Committee
Investment Committee
Group Executive Committee
Swiss Reinsurance Company Ltd
(Business Unit Reinsurance)
Swiss Re Corporate Solutions Ltd
(Business Unit Corporate Solutions)
Swiss Re Life Capital Ltd
(Business Unit Life Capital)*
Board of Directors
Board of Directors
Board of Directors
Audit Committee
Finance and Risk
Committee
Audit Committee
Finance and Risk
Committee
Audit Committee**
Finance and Risk
Committee**
Reinsurance Executive Committee
Corporate Solutions Executive Committee
Life Capital Executive Committee***
* Disbandment of the BU Life Capital at the end of December 2020. For more details, please refer to page 83.
** Disbanded as of 31 December 2020.
*** The members of the Life Capital EC resigned as of 1 January 2021.
Organisational structure
of the Board of Directors
The Board of Directors constitutes itself
at the first meeting following the Annual
General Meeting. It is the Annual General
Meeting though, which elects the Chairman
and the members of the Compensation
Committee. The Board of Directors elects
from among its independent members a
Vice Chairman and a Lead Independent
Director. The same member may act in both
roles. The Board of Directors also elects the
chairpersons and members of the Board
committees (other than the members of the
Compensation Committee) as proposed
by the Chairman’s and Governance
Committee. The Board of Directors may
remove members from any such special
function at any time. The Board of Directors
also appoints its secretaries, who do not need
to be members of the Board of Directors.
Committees of the Board of Directors
As determined by the applicable
Swiss Corporate Law and the Articles
of Association, the Board of Directors
has inalienable and non-transferable
responsibilities and authorities. The
Board of Directors has established Board
committees that support the Board in
fulfilling its duties. The Board has delegated
certain responsibilities, including the
preparation and execution of its resolutions,
to the following six committees:
• Chairman’s and Governance Committee
• Nomination Committee
• Audit Committee
• Compensation Committee
• Finance and Risk Committee
• Investment Committee
Each committee consists of a chairperson
and at least three other members elected
from among the Board of Directors. The
members of the Compensation Committee
are elected annually by the Annual General
Meeting.
The term of office of a Board committee
member is one year, beginning with the
appointment at the constituting Board
meeting following an Annual General
Meeting and ending at the Board meeting
following the subsequent Annual General
Meeting. For Compensation Committee
members, the term of office begins with the
election at the Annual General Meeting
until completion of the next Annual General
Meeting.
Depending on the responsibility, the
Board committees have decision-making
powers or act in an advisory capacity.
Please refer to page 98 for an overview
of the key focus areas of the Board
committees in 2020. The Board members’
committee memberships are reflected
in their biographies, which can be found
on pages 89–93. For an overview
of the Board committees’ composition
and responsibilities, please refer to:
www.swissre.com/board-committees
Working methods of the Board of
Directors and its committees
Convening meetings and invitation
The entire Board of Directors and its
committees meet at the invitation of the
Chairman of the Board of Directors as often
as business requires or at least quarterly.
Any member of the Board of Directors or
the Group EC may, for a specific reason,
require the Chairman to call an extraordinary
Board of Directors or committee meeting.
The Chairman defines the agenda for each
meeting and therefore works closely with
the chairpersons of the committees and
the Group CEO.
96
Swiss Re | Financial Report 2020
The agenda, along with any supporting
documents, is delivered to the participants,
as a rule, at least ten calendar days in
advance of a meeting in order to allow
enough preparation time. The Chairman
may determine that a Board of Directors
meeting be held on an ad hoc basis, if
circumstances require.
Resolutions and quorum
A Board meeting has a quorum if at least
the Chairman, the Vice Chairman or the
Lead Independent Director and the majority
of the members of the Board of Directors
are present in person, by telephone or by
video conference. A Board committee
has a quorum if the majority of the Board
committee members are present or
participate by telephone or video conference.
Resolutions are adopted by majority vote.
In the event of a tie at Board meetings, 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
entire Board of Directors.
Board and committee meetings deal with
the items on the agenda incorporating
presentations by members of the Group EC
and, where needed, by subject matter
experts or external advisors. For every
meeting of the Board of Directors, it is
considered whether an executive session
should be 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.
The Board of Directors and its committees
can also adopt resolutions by written
agreement if no member of the Board of
Directors requests a discussion of the
motion. A decision may only be taken by
circular resolution if all the members sign
the circular resolution or respond to the
email, respectively. A circular resolution is
adopted if the majority of the total number
of Board members (or Board committee
members) express their agreement with
the resolution.
Each committee provides a report on its
activities and recommendations following a
committee meeting at the next Board of
Directors meeting. If any significant topic
arises, the committees contact the Board of
Directors immediately. It is the responsibility
of each committee to keep the full Board
of Directors informed on a timely basis, as
deemed appropriate.
Allocation of tasks within the Board of Directors
Chairman of the Board of Directors
The Chairman of the Board of Directors
leads the Board of Directors, convenes
the Board and committee meetings,
establishes the agendas and presides
over Board meetings. The Chairman
coordinates the work of the Board
committees together with the respective
Chairpersons and ensures that the Board
is kept informed about the committees’
activities and findings. He ensures
adequate reporting by the Group EC and
the Group CEO to the Board of Directors
and facilitates their communication with
the Board. The Chairman presides over
General Meetings of shareholders and
represents the Group towards its
shareholders, in industry associations and
in the interaction with other stakeholders
such as the media, political and regulatory
authorities, governmental officials and the
general public. Specifically, the Chairman
keeps regular contact with the Group’s
regulator FINMA.
Minutes are kept of the discussions and
resolutions taken at each meeting of the
Board of Directors and its committees.
The table on page 99 provides an overview
of the meetings of the Board of Directors
and its committees held in 2020.
Self-assessment
An open, transparent and critical board
room culture forms the basis for the
Board of Directors’ annual review of its own
performance and effectiveness. The
Board of Directors evaluates its work and
the performance of the Chairman. It
conducts the self-assessment on the basis
of questionnaires, which deal with the
Board’s composition, organisation and
processes, the Board’s responsibilities as
well as with the focus areas and goals of
the year under review. The topics are
discussed and take-aways defined to be
incorporated in the goals for the upcoming
year. In addition, each Board committee
annually reviews the adequacy of its
composition, organisation and processes
as well as the scope of its responsibilities,
assesses their accomplishments and
evaluates the achievement of the goals
set and its performance.
Vice Chairman
The Vice Chairman performs the duties of
the Chairman if the Chairman is prevented
from performing his duties or in a potential
conflict-of-interest situation. The Vice
Chairman may prepare and execute Board
resolutions at the request of the Board and
liaises between the Board and the Group
EC in matters not reserved to the Chairman.
Lead Independent Director
The Vice Chairman or another member
of the Board of Directors may also assume
the role of Lead Independent Director.
The Lead Independent Director acts as an
intermediary between the Group and its
shareholders and stakeholders in the
absence of the Chairman or, in particular,
when a senior independent member of the
Board is required. He may convene and
chair sessions where the Chairman is not
present. He will communicate the outcome
of these sessions to the Chairman.
For more information on the responsibilities
of the Chairman, the Vice Chairman and the
Lead Independent Director, please refer to:
www.swissre.com/board-lead
In addition, an independent external
consultant had been engaged in 2019 to
assess the effectiveness of the Board
through one-on-one interviews with the
Board members, with a focus on priority
setting, committee work, relationship
of the Board with senior management
and Board culture. The advisor’s report
served as a basis for the self-assessment
discussion of the Board at the end of the
year. The findings were considered for
the preparation of the self-assessment
conducted in 2020.
The self-assessments also form the basis for
the Board’s succession planning, comprising
the evaluation of the skills needed among
the members of the Board of Directors and
Board committees. Please refer to page 94
for an overview of the Board of Directors’
skills and competencies.
Swiss Re | Financial Report 2020
97
Corporate governance
Board of Directors
Board committees: 2020 key focus areas
Chairman’s and Governance Committee
• COVID-19 crisis: Oversaw detailed COVID-19 business and operational updates with the Group EC, including emergency scenarios
and increased the number of meetings of the Board of Directors and Board committees meeting frequency
• Sustainability: Oversaw the enhanced Group Sustainability Strategy, including the introduction of quantitative sustainability KPIs
and targets which will be embedded in the qualitative assessment for the purpose of the Group API pool funding process for 2021
• Proxy voting: Oversaw top investors’ feedback provided at the Chairman’s annual roadshow and during the AGM 2020 proxy
solicitation and steered further improvements to ESG-related disclosures
• Public Affairs: Led the launch of an effective global Public Affairs Strategy and organisation
• Performance and self-assessments: Led the annual performance assessment and the annual self-assessment processes for the
Board of Directors and the Group EC
Nomination Committee
• Succession planning: Steered the succession planning process for the Board members who are elected by the Annual General
Meeting, including the composition of the Compensation Committee
Audit Committee
• P&C Reserving Process: Jointly with the Finance and Risk Committee led the review and benchmarking of Swiss Re's P&C reserving
philosophy, process and governance and the implementation of the identified improvement measures
• Change in reporting basis: Oversaw the set-up of the IFRS project organisation to enable Swiss Re to adopt IFRS as of
1 January 2024 and to simplify its financial reporting landscape
• Transition of external audit: Oversaw audit transition procedures including independence of incoming auditor, governance model
and timeline of key activities
• Finance Transformation: Led the creation of the Global Finance Transformation (GFT) Programme by merging the three BU Finance
Transformation projects with one core platform for the target finance landscape to ensure harmonisation and IFRS delivery
• Recognition of COVID-19 impact in terms of complexity of losses, as well as successful adjustments to work policies, procedures and
sign-offs
Compensation Committee
• Compensation Framework and Compensation Plan design: 1. Monitored the effectiveness of the Compensation Framework and its
alignment with both shareholders’ interests and long-term business strategy addressing i) pay for performance principles at the
business and individual level, ii) performance differentiation and iii) gender pay equity
2. Reviewed and assessed the current Compensation Framework with a focus on the 2021 incentive compensation architecture
• Legal and regulatory developments: Monitored legal and regulatory developments, including continued compliance with the
Ordinance against Excessive Compensation at Public Corporations
• Extraordinary topic: Assessed the impact of COVID-19 on Compensation Plans and monitored developments (eg market practice,
shareholder expectations)
Finance and Risk Committee
• COVID-19: Closely monitored the impact of COVID-19 on the business, in particular with regards to claims management,
underwriting processes and operational resilience
• Underwriting risk and capital management: Focused on developing tool to improve allocation of risk and capital
• Social inflation: Monitored the impact of social inflation trends on the casualty business
• Cyber: Continued to oversee cyber risk preparedness and improve data security
Investment Committee
• Investment positioning: Reviewed SAA positioning, risk usage and performance in the context of financial markets and Business Unit
developments
• Reviewed ESG integration in investment process and choice of benchmarks, as well as the efforts to achieve net zero carbon
emissions in the investment portfolio by 2050
• Monitored operational resilience of investment activities in light of COVID-19
98
Swiss Re | Financial Report 2020
Board of Directors and Board committee meetings in 2020
Body
Board of Directors
Number and average
duration of meetings
13 meetings2
3¾ hours
Invitees in advisory capacity1, in addition to members
Group EC members3, Group Company Secretary
Chairman’s and Governance
Committee
6 meetings
2 hours
Group CEO, Group Company Secretary
Nomination Committee
Audit Committee
Compensation Committee
4 meetings
¾ hour
10 meetings
21/2 hours
7 meetings4
2¾ hours
Finance and Risk Committee 8 meetings
Investment Committee
3 hours
6 meetings7
2¾ hours
Chairman Board of Directors, Group Company Secretary
Group CEO, Group CFO, Group CLO, Group Chief Compliance Officer,
Head Group Internal Audit, Chief Accounting Officer, lead auditors of external auditor,
Group Company Secretary
Group CEO, Group Chief Human Resources Officer, Head Reward, advisors5
Group CEO, Group CFO, Group CRO, Group CUO, Group CIO, Group COO, Group CLO,
Group Treasurer, CEO Reinsurance, CEO Corporate Solutions, CEO Life Capital6,
Group Company Secretary
Group CEO, Group CFO, Group CRO, Group CIO, Head Financial Risk Management,
Group Treasurer, CFO Asset Management, Group Company Secretary
All invitees are requested to attend all meetings (please also see next page).
In addition, two decisions by circular resolution.
1
2
3 The Group EC members attend Board meetings as deemed appropriate by the Chairman and the other Board members.
4 In addition, eight decisions by circular resolution.
5 The law firm Niederer Kraft Frey Ltd (NKF) and the human resources consulting firm Mercer provided support and advice for compensation issues during the reporting year.
Representatives of NKF participated in six committee meetings in 2020, representatives of Mercer in three meetings. Mercer and NKF have further mandates with Swiss Re.
6 Until August 2020.
7
In addition, one decision by circular resolution.
Board of Directors and Group EC
Areas of responsibility
Non-transferable duties
The Board of Directors has the ultimate
responsibility for the success of Swiss Re
Ltd and the Group within a framework
of effective and prudent controls. It is
responsible for the overall direction,
supervision and control of Swiss Re Ltd
and the Group and the Group EC as
well as for supervising compliance with
applicable laws, rules and regulations.
Such responsibilities are non-transferable
and rest with the entire Board. For an
overview on the key responsibilities of
the Board of Directors, please refer to
www.swissre.com/board-
responsibilities
Delegation of management
The Board of Directors has delegated
the management of Swiss Re Ltd and the
Group to the Group EC (see section on
Executive Management, starting on page
102). Such delegated tasks are within the
responsibility of the entire Group EC. The
Board of Directors based the delegated
responsibilities on authority levels, including
monetary thresholds and limits.
Attendance rates1 of Board members:
Board of Directors and Board committee meetings in 2020
Body
Board of Directors
Chairman’s and Governance Committee
Nomination Committee
Audit Committee
Compensation Committee
Finance and Risk Committee
Investment Committee
Overall attendance rate
Attendance rate of Board members in %
99.5
100
100
100
100
97.7
100
99.5
Individual attendance rates1 of Board members:
Board of Directors and Board committee meetings in 2020
Attendance in %
100
95–99.9
90–94.9
Number of Board members
13
0
1
1 The attendance rates are calculated taking into account the duration of all meetings the Board members were required
to attend. The Board members are required to attend (i) all Board meetings as well as (ii) all the meetings of the Board
committees where they are a member.
Swiss Re | Financial Report 2020
99
Corporate governance
Board of Directors
Key responsibilities of the Group EC
Under the leadership of the Group CEO, the
Group EC has management responsibility
for matters concerning Swiss Re Ltd as a
legal entity. Additionally, the Group EC has
management and functional responsibility
for Group matters. In particular, the
Group EC focuses on (the control of) the
implementation of Swiss Re Group’s
Strategy, as promulgated and approved by
the Board of Directors. In particular, it
includes the responsibilities addressing
Group Strategy, including strategic and
financial targets for the Business Units;
decisions on Group-wide steering and
control; allocation of capital and resources
to business opportunities; asset and liability
management, treasury, Group funding
and capital management; finance and risk
management, governance, compliance,
legal and regulatory affairs; human
resources, talent management as well
as reputational issues and branding.
For further details on the Group EC’s
responsibilities please refer to:
www.swissre.com/management-
responsibilities
Board supervision of
Executive Management
The Board of Directors maintains effective
and consistent oversight and monitors the
execution of responsibilities it has delegated
to the Group EC through the following
control and information instruments.
Participation of Board members at
Executive Management meetings
The Chairman is invited to all meetings
of the Group EC and Business Unit
Executive Committees and receives the
corresponding documentation and minutes.
Special investigations
The Board committees are entitled to
conduct or authorise special investigations
at any time and at their full discretion into
any matters within their respective scope
of responsibilities, taking into consideration
relevant peer group practice and general
best practice. The committees are
empowered to retain independent counsel,
accountants or other experts if deemed
necessary. No special investigations were
conducted in the reporting year 2020.
Group Performance Management
Report (semi-annually)
The report tracks the actual performance
of the Group and the segments against
pre-defined financial targets, analyses the
impact of management actions and
provides information on current challenges.
Global Outlook for Insurance,
Reinsurance and Financial Markets
(quarterly)
The report describes trends and provides
forecasts regarding the economic
environment, the property & casualty/
life & health (re)insurance markets and the
financial markets. Two additional reports
have been provided during the reporting
year to address COVID-19 topics: The
Recession update as well as the
Global Outlook in times of COVID-19.
Swiss Solvency Test Report (annually)
The report provides the legally required
update on the assessment of solvency
according to the Swiss Solvency Test (SST)
of the Group, Swiss Reinsurance Company
Ltd, Swiss Re Corporate Solutions Ltd and
Swiss Re Life Capital Reinsurance Ltd1.
Swiss Re Liquidity Report (annually)
The report describes the liquidity position
of the Group in current and in stressed
market conditions.
In addition, reports are submitted to
the Board committees, such as:
• Regular updates on claims
• Regular updates on reserving/reserve
movements
• Group Legal Report (quarterly)
• Compliance Report (quarterly)
• Group Internal Audit Report (quarterly)
• Group Tax Report (annually)
• Group Risk Update (quarterly)
• Derivative Use Update (semi-annually)
• Report on Capital, Liquidity and
Treasury Activities (quarterly)
• Global Regulatory Risk Report (annually)
• Financial Risk Management Update
(quarterly)
• Own Risk and Solvency Assessment
Report (ORSA) (annually)
Involvement of the Group EC in
meetings of the Board of Directors
The Group EC members attend Board
meetings as deemed appropriate by the
Chairman and the other Board members.
The presence of the entire Group EC was
required for five Board meetings in 2020,
and selected members were invited to
eight further Board meetings. The Group EC
members do not attend the constituent
meeting of the Board of Directors following
the Annual General Meeting and the
Board self-assessment session.
Involvement of the Group EC in
Board committee meetings
As a matter of principle, selected members
of the Group EC as well as further senior
management members participate in Board
committee meetings as advisors. The
attendance rate of the Group EC members
at Board and Board committee meetings
was 97.6% in 2020 (the attendance rate
represents the total actual attendance time
of all members at all meetings in the year
under review, 2020, in relation to the
corresponding target attendance time).
A detailed summary of Group EC and
further senior management participation
in Board committee meetings is provided
on the previous page.
Periodic reports to Board of Directors
and its committees
The Group EC and further senior
management members regularly provide the
Board of Directors with different types of
reports, in particular the following reports:
Executive Report (quarterly)
This comprehensive report gives an
update on current business developments,
covering the Group Functions and
the Business Units, including major
business transactions, claims, corporate
development and key projects.
US GAAP Board Report (quarterly)
The report provides factual financial
highlights from an accounting perspective,
with a focus on historical development
of the business as an informational basis
before the publication of results.
EVM Board Report (annually)
The report provides factual financial
highlights from an economic perspective,
with a focus on historical value creation.
1 As of 24 November 2020, this entity was renamed to “Swiss Re Nexus Reinsurance Company Ltd.”
100
Swiss Re | Financial Report 2020
Duty to inform on extraordinary events
As soon as the Group CEO or other
members of the Group EC become aware
of any significant extraordinary business
development or event, they are obliged to
inform the Board of Directors immediately.
Right to obtain information
The Board of Directors has complete and
open access to the Group CEO and the
other members of the Group EC, the Chief
Compliance Officer and the Head of Group
Internal Audit (GIA). Any member of the
Board of Directors who wishes to have
access to any other officer or employee of
the Group will coordinate such access
through the Chairman. The Vice Chairman
and the chairpersons may approach the
Group EC members as well as further key
executives directly if they require
information to support their respective
(Board committee’s) duties. Any member
of the Board of Directors may request at
Board meetings to obtain information on
any aspect of the Group’s business. Outside
Board meetings, any member can direct
a request for the provision of information
and business records to the Chairman.
Risk management
Embedded throughout the business,
the Group Risk Management function
ensures an integrated approach to
managing current and emerging threats.
Risk Management plays a key role in the
business strategy and planning process,
where Swiss Re’s risk appetite framework
facilitates risk/return discussions and
sets boundaries to Group-wide risk-taking.
The Board of Directors keeps itself abreast
of key risk themes and receives the
following annual reports from Group Risk
Management: the Swiss Solvency Test
Report, the Swiss Re Liquidity Report, the
SONAR Report on emerging risks, the
Sustainability Report, as well as the Own
Risk and Solvency Assessment Report.
In addition, Group Risk Management
provides the Finance and Risk Committee
with regular group risk updates from the
Group CRO, semi-annual reports on derivate
use, as well as annual reports on global
regulatory risk. The Investment Committee
receives quarterly reports on financial
risk management.
These reports cover compliance with
the Group’s risk tolerance criteria, major
changes in risk and capital adequacy
measures and a description of the Group’s
main risk issues, including related risk
management actions. The Finance and Risk
Committee regularly reports to the entire
Board of Directors. For further information
on Swiss Re’s Risk Management, please see
the Risk and Capital Management Report
on pages 50–77 (for Risk Management in
particular pages 61–77).
Group Internal Audit
GIA is an independent assurance function,
assisting the Board of Directors and
Group EC to protect the assets, reputation
and sustainability of the organisation. GIA
assesses the adequacy and effectiveness
of the Group’s internal control system
and adds value by improving the Group’s
operations.
GIA applies a risk-based approach,
performing its own risk assessment
as well as making use of risk assessments
performed by the Group’s Risk Management
and other assurance functions (after
reviewing the quality of the assurance work
performed). Based on the results of the
risk assessment, GIA produces an annual
audit plan for review and approval by the
Audit Committee. The audit plan is updated
on a quarterly basis according to the
Group’s evolving needs. GIA provides
formal quarterly updates on its activities to
the Audit Committee, which include audit
results, the status of management actions
required, the appropriateness of the
resources and skills of GIA and any changes
in the tools and methodologies it uses.
The Head of GIA meets at least once per
quarter with the Audit Committee and
immediately reports any issue that could
have a potentially material impact on the
business of the Group to the Chair of the
Audit Committee.
GIA has unrestricted access to any of the
Group’s property and employees relevant to
any function under review. All employees
are required to assist GIA in fulfilling its duty.
GIA has no direct operational responsibility
or authority over any of the activities
it reviews.
GIA staff govern themselves by following
the Code of Ethics (Code) issued by the
Institute of Internal Auditors (IIA). The IIA’s
International Standards for the Professional
Practice of Internal Auditing constitute the
operating guidance for the department. The
Code is available at: https://na.theiia.org/
special-promotion/PublicDocuments/
Code%20of%20Ethics.pdf
External auditor For information regarding
the external auditors, please refer to
pages 110–111.
Swiss Re | Financial Report 2020
101
Corporate governance
Executive Management
Under the leadership of the Group CEO, the Group Executive Committee
is responsible for the management of Swiss Re Ltd and the Group.
Members of the Group Executive Committee
The Group Executive Committee (Group EC) consisted of the following 13 members as of 31 December 2020:
Name
Nationality
Christian Mumenthaler
Swiss
Urs Baertschi
Swiss, German
Andreas Berger
Anette Bronder
John R. Dacey
Nigel Fretwell
Guido Fürer
Hermann Geiger
Russell Higginbotham
Jonathan Isherwood
German
German
American
British
Swiss
German
British
British
Thierry Léger
French, Swiss
Moses Ojeisekhoba
Nigerian, British
Patrick Raaflaub
Swiss, Italian
Age
51
45
54
53
60
58
57
57
53
54
54
54
55
Function
Group Chief Executive Officer
CEO Reinsurance Europe, Middle East and Africa (EMEA)/
Regional President EMEA
CEO Corporate Solutions
Group Chief Operating Officer
Group Chief Financial Officer
Group Chief Human Resources Officer
Group Chief Investment Officer
Group Chief Legal Officer
CEO Reinsurance Asia/Regional President Asia
CEO Reinsurance Americas/Regional President Americas
Group Chief Underwriting Officer
CEO Reinsurance
Group Chief Risk Officer
Appointed in current role
July 20161
September 2019
March 2019
July 2019
April 20182
May 20133
November 2012
January 20094
July 20195
April 20206
September 20207
July 20168
September 2014
Member of the Group EC since: 1 January 2011, 2 November 2012, 3, 4 July 2019, 5 September 2018, 6 Jonathan Isherwood was appointed as Regional President Americas and a member of
the Group EC with effect from 14 August 2020, 7 January 2016, 8 March 2012.
The following two Group EC members stepped down during 2020:
Edouard Schmid
Swiss
J. Eric Smith
American
56
63
Chairman Swiss Re Institute & Group Chief Underwriting Officer
31 August 2020
CEO Reinsurance Americas/Regional President Americas
13 August 2020
For the biographies of former Group EC members, please refer to: www.swissre.com/formergroupecmembers
Stepped down
102
Swiss Re | Financial Report 2020
Christian Mumenthaler
Group Chief Executive Officer
Born: 1969
Nationality: Swiss
Urs Baertschi
Chief Executive Officer Reinsurance EMEA/
Regional President EMEA
Born: 1975
Nationality: Swiss and German
Andreas Berger
Chief Executive Officer Corporate Solutions
Born: 1966
Nationality: German
Professional experience
Urs Baertschi began his career at Swiss Re
Capital Partners and Securitas Capital
in a variety of private equity and corporate
development roles. In 2001, he joined
Cutlass Capital, a private equity firm
focused on the health care industry, where
he was appointed a Principal in 2006.
In 2008, Urs Baertschi rejoined Swiss Re
as the Head of US Direct Private Equity
and was appointed Head of Principal
Investments and Acquisitions Americas in
2010. In this role, he was responsible for
the financial and strategic direct investments
as well as corporate development
transactions in the Americas. In 2016
Urs Baertschi became the President of
Reinsurance, Latin America, with overall
responsibility for the business in the region.
In September 2019, he assumed the
role of Chief Executive Officer Reinsurance
EMEA and Regional President EMEA and
became a member of the Group Executive
Committee.
Educational background
• Bachelor’s degree in Economics,
University of Pennsylvania, USA
• Bachelor’s degree in International
Relations, University of Pennsylvania,
USA
Professional experience
Christian Mumenthaler started his career
in 1997 as an associate at Boston
Consulting Group. He joined Swiss Re in
1999 and was responsible for key company
projects. In 2002, he established and
headed the Group Retro and Syndication
unit. Christian Mumenthaler served as
Group Chief Risk Officer between 2005
and 2007 and was Head of Life & Health
between 2007 and 2010. In January 2011,
he was appointed Chief Marketing Officer
Reinsurance and member of the Group
Executive Committee and became Chief
Executive Officer Reinsurance in October
2011. In July 2016, Christian Mumenthaler
was appointed Group Chief Executive Officer.
Educational background
• PhD in Physics, Swiss Federal Institute of
Technology (ETH), Zurich, Switzerland
External mandates
• Chairman of Insurance Europe’s
Reinsurance Advisory Board
• Co-Chair of WEF Alliance of CEO Climate
Leaders
• Vice Chairman of the Geneva Association
• Board member of economiesuisse and
the Swiss American Chamber of
Commerce
• Member of the Pan-European Insurance
Forum, the IMD Foundation Board, the
Global Reinsurance Forum, the Steering
Board Insurance Development Forum,
the Board of Trustees of Avenir Suisse and
the Board of Trustees of the St. Gallen
Foundation for International Studies
Professional experience
Andreas Berger started his insurance career
in 1995 as a leadership trainee at Gerling
Group, followed by various leadership
positions at Boston Consulting Group. He
returned to Gerling in 2004 as Head of
Commercial Business and International
Programs and Affinity Business. When
Allianz Global Corporate & Specialty SE
(AGCS) was created in 2006, Andreas
Berger became its Global Head of Market
Management & Communication, where he
established an overall market management
function for the corporate client segment
and served as AGCS spokesperson. In
2009, he was appointed AGCS Chief
Executive Officer, Regional Unit London,
with responsibility for UK, Ireland, South
Africa, the Middle East and Benelux. In
2011 Andreas Berger joined the AGCS
Board of Management as Chief Regions &
Market Officer (Central & Eastern Europe,
Mediterranean, Africa and Asia). In addition,
he assumed responsibility for the Global
Broker Channel Distribution for the Allianz
Group. Andreas Berger joined Swiss Re
in March 2019 as Chief Executive Officer
Corporate Solutions and member of the
Group Executive Committee.
Educational background
• Master’s degree in Law, Justus Liebig
University Giessen, Germany
• Master’s degree in Business
Administration, Université de Paris-
Dauphine (IX), France/Justus Liebig
University Giessen, Germany
External mandates
• Member of the Executive Committee
of the International Insurance Society
• Honorary appointment as member
of the selection committee of the
Collège des Ingénieurs
• Board member of the Latin American
Chamber of Commerce in Switzerland
(subject to election by the Annual General
Meeting in 2021)
Swiss Re | Financial Report 2020
103
Corporate governance
Executive Management
Anette Bronder
Group Chief Operating Officer
Born: 1967
Nationality: German
John R. Dacey
Group Chief Financial Officer
Born: 1960
Nationality: American
Nigel Fretwell
Group Chief Human Resources Officer
Born: 1962
Nationality: British
Professional experience
Anette Bronder started her career at
Hewlett Packard GmbH, where she held
several senior management positions,
including Director Software Services for
Central & Eastern Europe and Director HP
Consulting Germany. In 2010, she was
appointed Director of Enterprise Technology
at Vodafone GmbH in Germany. In 2013,
she assumed worldwide responsibility for
the Enterprise Delivery and Operations
division of Vodafone Group and was based
in London. In 2015, Anette Bronder joined
T-Systems International as Managing
Director Digital Division, where she oversaw
the new growth areas Internet of Things,
Public Cloud and Healthcare for Deutsche
Telekom worldwide. In 2017, she took on
additional responsibility for Deutsche
Telekom’s global Security Portfolio and
Security Operations. Anette Bronder joined
Swiss Re in June 2019 and was appointed
Group Chief Operating Officer and a
member of the Group Executive Committee
effective July 2019.
Educational background
• Master’s degree in Economics and
Professional experience
John R. Dacey started his career in 1986
at the Federal Reserve Bank of New York.
From 1990 to 1998, he was a consultant
and subsequently Partner at McKinsey &
Company. He joined Winterthur Insurance
in 1998 and was its Chief Financial Officer
from 2000 to 2004 as well as a member
of its Group Executive Board until 2007.
From 2005 to 2007, he was Chief Strategy
Officer and a member of its risk and
investment committees. He joined AXA in
2007 as Group Regional Chief Executive
Officer and Group Vice Chairman for
Asia-Pacific as well as a member of their
Group Executive Committee. John R. Dacey
joined Swiss Re in October 2012 and was
appointed Group Chief Strategy Officer
and a member of the Group Executive
Committee in November 2012. He also
served as Chairman Admin Re® from
November 2012 to May 2015. He was
appointed Group Chief Financial Officer
with effect from April 2018.
Educational background
• Bachelor’s degree in Economics,
Washington University, St. Louis, USA
Social Sciences, University of Stuttgart,
Germany
• Master’s degree in Public Policy,
Harvard University, Cambridge, USA
External mandates
• Member of the Board of Directors
Air Liquide S.A.*
External mandates
• Member of the Board of Directors China
Pacific Insurance Co. Ltd.* (subject to
approval by the China Banking and
Insurance Regulatory Commission
(CBIRC))
Professional experience
Nigel Fretwell started his career at Barclays
PLC, where he held various management
roles over 25 years. His last role was as
Group Employee Relations Director, leading
the development and delivery of key
Group-wide People Strategy, Industrial
Relations and Employment Policy initiatives.
In 2005 he joined HSBC as Human
Resources Director for the worldwide
operations of HSBC Insurance Brokers
Limited. He then served from 2008 to 2011
as Regional Head of Human Resources,
Asia Pacific, and from 2009 concurrently
as Global Head of Human Resources,
Commercial Banking, and finally from 2011
to 2013 as Global Head of Human
Resources for Retail Banking and Wealth
Management, which included HSBC
Insurance and HSBC Asset Management.
Nigel Fretwell joined Swiss Re as Group
Chief Human Resources Officer in May
2013 and was appointed as a member of
the Group Executive Committee effective
July 2019.
Educational background
• Master’s degree in Strategic Human
Resource Management, Kingston
University, United Kingdom
• Associate of the Chartered Institute
of Bankers
* Listed company
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Swiss Re | Financial Report 2020
Guido Fürer
Group Chief Investment Officer
Born: 1963
Nationality: Swiss
Hermann Geiger
Group Chief Legal Officer
Born: 1963
Nationality: German
Professional experience
Guido Fürer commenced his career at Swiss
Bank Corporation/O’Connor & Associates in
1990, where he held leading positions in
option trading at its capital market division.
He joined Swiss Re in 1997 as Managing
Director at Swiss Re New Markets, and from
2001 to 2004 he worked for Swiss Re’s
Private Equity unit. In 2004, he joined Asset
Management with responsibility for tactical
asset allocation prior to assuming the role
of Head of Strategic Asset Allocation.
Guido Fürer has led Swiss Re Group Asset
Management since his appointment as
Group Chief Investment Officer and a
member of the Group Executive Committee
in November 2012. In 2019, he additionally
assumed the roles of Swiss Re Country
President Switzerland and Chairman of the
Swiss Re Strategic Council.
Educational background
• Master’s degree in Economics,
University of Zurich, Switzerland
• PhD in Financial Risk Management,
University of Zurich, Switzerland
• Executive MBA from INSEAD,
Fontainebleau, France
Professional experience
Hermann Geiger started his professional
career in 1990 as a law clerk and qualified
attorney at law, working with various major
law firms, specialising in financial services
transactions and regulation, capital markets,
corporate and litigation. In 1995, he joined
GE Insurance Solutions where he served
as General Counsel Europe & Asia in the
insurance business of General Electric.
Following the acquisition of GE Insurance
Solutions by Swiss Re in 2006, Hermann
Geiger joined Swiss Re as Regional General
Counsel Europe. In 2009, he assumed the
global position as Head Legal & Compliance
and Group Chief Legal Officer. As of
1 July 2019, Hermann Geiger was
appointed as a member of the Group
Executive Committee.
Educational background
• PhD in Law, University of Constance,
Germany
• PhD in Economics and Political Sciences,
University of the German Federal Armed
Forces Munich, Germany
• LL.M. (Master of Laws), University of
Birmingham, United Kingdom
External mandates
• Member of the Board of Directors
External mandates
• Board member of the European General
Russell Higginbotham
Chief Executive Officer Reinsurance Asia/
Regional President Asia
Born: 1967
Nationality: British
Professional experience
Russell Higginbotham started his career
in 1986 at a UK life insurer and, in 1991,
he joined Munich Re as a Senior marketing
Analyst. Russell Higginbotham joined
Swiss Re in 1994 and served in various
roles in the Life & Health Reinsurance
development and strategy teams. Between
2002 and 2005, he was Life & Health
Country Manager for Japan and
subsequently for South Korea. In 2006, he
moved to Sydney and served as Chief
Executive Officer of Swiss Re’s Australia
and New Zealand operations. From 2010
to 2015, he assumed the role of Chief
Executive Officer Reinsurance UK & Ireland,
based in London, and was named Head of
Life & Health Products Reinsurance in 2016.
He was appointed Chief Executive Officer
Reinsurance EMEA, Regional President
EMEA and a member of the Group
Executive Committee in September 2018.
With effect from July 2019, Russell
Higginbotham assumed the role of Chief
Executive Officer Reinsurance Asia and
Regional President Asia.
Educational background
• Bachelor’s degree (Hons) in Business,
University of Hertfordshire,
United Kingdom
• Master’s degree in Business
FWD Group Ltd
• Member of the Board of Directors
FWD Ltd
• Member of the Advisory Board of the
Department of Banking and Finance,
University of Zurich, Switzerland
• Member of the Board of Trustees of
G&B Schwyzer-Winiker Stiftung
Counsel Association
• Advisory Board member of ARIAS Europe
• Member of the Swiss-American Chamber
Administration, Henley Management
College, United Kingdom
of Commerce’s legal committee
Swiss Re | Financial Report 2020
105
Corporate governance
Executive Management
Jonathan Isherwood
Chief Executive Officer Reinsurance
Americas/Regional President Americas
Born: 1966
Nationality: British
Thierry Léger
Group Chief Underwriting Officer
Born: 1966
Nationality: French and Swiss
Moses Ojeisekhoba
Chief Executive Officer Reinsurance
Born: 1966
Nationality: Nigerian and British
Professional experience
Jonathan Isherwood started his career in
1991 with Ernst & Young, and moved to GE
Capital as an audit/consulting leader in
1994. In 2000, he joined GE Insurance
Solutions to build the Risk Management
team and thereafter led the Global Property
division. In 2005, he became CEO of GE
Frankona AG and Chairman of the Board of
ERC Copenhagen. In addition, he had
global responsibility as President of Product
Strategy of GE Insurance Solutions.
Following the acquisition of GE Insurance
Solutions by Swiss Re in 2006, Jonathan
Isherwood joined Swiss Re as Head of
Product Integration. From 2007 he led the
Claims, Accounting & Liability Management
division, and in 2013 assumed the role
of Head Globals Reinsurance. Jonathan
Isherwood was appointed as Chief
Executive Officer Reinsurance Americas
with effect from 1 April 2020, and Regional
President Americas and member of
the Group Executive Committee as of
14 August 2020.
Educational background
• Master’s degree in Economics,
Professional experience
Thierry Léger started his career in the civil
construction industry before joining
Swiss Re as an engineering underwriter in
1997. In 2001, he moved to Swiss Re New
Markets, providing non-traditional solutions
to insurance clients. Between 2003 and
2005, he was a member of the executive
team in France as leader of the sales team.
From 2006, Thierry Léger assumed
increasing responsibility for Swiss Re’s
largest clients, ultimately becoming the
Head of the newly created Globals Division
in 2010 and a member of the then existing
Group Management Board. In 2013,
Thierry Léger became Head of Life & Health
Products Reinsurance. As of January 2016,
he was appointed Chief Executive Officer
Life Capital and a member of the Group
Executive Committee. With effect from
1 September 2020, Thierry Léger assumed
the role of Group Chief Underwriting
Officer.
Educational background
• Master’s degree in Civil Engineering,
Swiss Federal Institute of Technology
(ETH), Zurich, Switzerland
Cambridge University, United Kingdom
• Executive MBA, University of St. Gallen,
Switzerland
Professional experience
Moses Ojeisekhoba started his career in
insurance as a registered representative
and agent of The Prudential Insurance
Company of America in 1990. From 1992
to 1996, he was a Risk and Underwriting
Manager at Unico American Corporation.
He then joined the Chubb Group of
Insurance Companies as regional
Underwriting Manager and, in 1999,
became Corporate Product Development
Manager in New Jersey and thereafter
moved to London as Strategic Marketing
Manager for Chubb Europe. In 2002,
he was appointed International Field
Operations Officer for Chubb Personal
Insurance before becoming Head Asia-
Pacific in 2009, a position he remained
in until he joined Swiss Re. Moses
Ojeisekhoba joined Swiss Re in February
2012 and was appointed Chief Executive
Officer Reinsurance Asia, Regional
President Asia and a member of the Group
Executive Committee in March 2012.
In July 2016, Moses Ojeisekhoba was
appointed as Chief Executive Officer
Reinsurance.
Educational background
• Master’s degree in Management, London
Business School, United Kingdom
• Bachelor of Science in Statistics,
University of Ibadan, Nigeria
106
Swiss Re | Financial Report 2020
Patrick Raaflaub
Group Chief Risk Officer
Born: 1965
Nationality: Swiss and Italian
Professional experience
Patrick Raaflaub began his career as an
economist at Credit Suisse. He then was a
founding member of a consulting start-up
and research fellow at the University of
St. Gallen. He joined Swiss Re in 1994 and
was appointed Chief Financial Officer of
Swiss Re Italia SpA in 1997, and then was
Divisional Controller Americas Division
from 2000. He worked as Head of Finance
Zurich from 2003, then Regional Chief
Financial Officer Europe and Asia from
2005. From 2006, he was Head of Group
Capital Management, where he was
responsible for capital management at
Group level and global regulatory affairs.
In 2008, he joined the Swiss Financial
Market Supervisory Authority FINMA as
Chief Executive Officer. Patrick Raaflaub
returned to Swiss Re as Group Chief Risk
Officer and a member of the Group
Executive Committee in September 2014.
Educational background
• PhD in Political Science, University
of St. Gallen, Switzerland
External mandates
• Member of the Board of Directors
CSS Holding AG
• Member of the Managing Board Swiss
Insurance Association (SIA)
Other mandates, activities
and vested interests
Article 26 of the Articles of Association
governs the requirements regarding
external mandates held by Group EC
members (please see: www.swissre.
com/articlesofassociation). All Group EC
members comply with these requirements.
Information on external mandates held by
the Group EC members is provided in their
biographies (pages 103–107).
Management contracts
Swiss Re Ltd has not entered into any
management contracts with any
third parties.
Changes in 2020
Jonathan Isherwood, previously Head of
Globals Reinsurance, was appointed
CEO Reinsurance Americas with effect
from 1 April 2020, and Regional President
Americas and a member of the
Group Executive Committee effective
14 August 2020. He succeeded J. Eric Smith,
who retired on 13 August 2020.
Thierry Léger, former Chief Executive
Officer Life Capital, was appointed Group
Chief Underwriting Officer with effect from
1 September 2020. He succeeded
Edouard Schmid, who decided to step
down from his role as Chairman Swiss Re
Institute & Group Chief Underwriting Officer
effective 31 August 2020.
The Group EC consists of 13 members
since 1 September 2020; prior to that,
it consisted of 14 members.
Key responsibilities of the Group
Executive Committee members
The Board of Directors has delegated
the management of Swiss Re Ltd and the
Group to the Group EC. Such delegated
tasks are within the responsibility
of the entire Group EC. The Group EC
discharges its responsibilities as a joint
body, except for responsibilities
delegated to the Group CEO and further
Group EC members. For an overview
of the individual Group EC members’
key responsibilities please refer to:
www.swissre.com/groupecmembers-
responsibilities
Swiss Re | Financial Report 2020
107
Corporate governance
Shareholders’
participation rights
The Annual General Meeting elects the Independent Proxy
who represents shareholders’ votes.
Voting right restrictions, statutory
group clauses and exception rules
Swiss Re Ltd does not have any voting right
restrictions or statutory group clauses
(other than the limitations on nominee
registrations set out on page 87) in place.
Therefore, there are no procedures or
conditions for cancelling restrictions and
no rules on making exceptions to them.
Accordingly, no such exceptions were
granted in 2020.
Statutory rules on participating in
the General Meeting of shareholders
Owners, usufructuaries or nominees
entered in the share register as having
voting rights on a specific qualifying day
determined by the Board of Directors
are entitled to one vote per share held at
the General Meeting of shareholders.
Swiss Re Ltd’s Articles of Association
allow any shareholder with voting rights to
have his or her shares represented at any
General Meeting of shareholders by another
person authorised in writing or by the
Independent Proxy.
The Independent Proxy is elected by the
Annual General Meeting for a term of
office until completion of the next ordinary
General Meeting of shareholders.
Please refer to article 11 of the Articles of
Association of Swiss Re Ltd for further
details on the right to vote and shareholder
proxies. The Articles of Association are
available at: www.swissre.com/
articlesofassociation
Statutory quorums
The General Meeting of shareholders
may pass resolutions without regard to the
number of shareholders present at the
meeting or shares represented by proxy.
Resolutions are passed by an absolute
majority of votes validly cast (excluding
blank and invalid ballots), except where
the law requires otherwise.
The Chairman of the General Meeting
of shareholders determines the voting
procedure. Provided that the voting is
not done electronically, voting shall take
place openly based on a show of hands
or by written ballot.
Convocation of the General Meeting
of shareholders
In accordance with Swiss Re Ltd’s Articles
of Association, the Board of Directors
convenes the General Meeting of
shareholders through a notice published
in the Swiss Official Gazette of Commerce
at least 20 days before the date of the
meeting. The notice must state the day,
time and place of the General Meeting
of shareholders, along with the agenda
and proposals, which will be submitted
by the Board of Directors.
Extraordinary General Meetings of
shareholders may be called by a resolution
of the General Meeting of shareholders
or the Board of Directors, or by one or more
shareholders with voting rights whose
combined holdings represent at least 10%
of the share capital.
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Swiss Re | Financial Report 2020
Agenda
The Board of Directors announces
the agenda items and the proposals for
the General Meeting of shareholders.
Shareholders with voting rights whose
combined holdings represent shares with a
nominal value of at least CHF 100 000 may,
no later than 45 days before the date
of the meeting, request in writing that a
particular item, together with the relevant
proposals, be included on the agenda.
Registrations in the share register
Any share whose owner, usufructuary
or nominee is entered in the share register
as having voting rights through said share
on a specific qualifying day (record date)
designated by the Board of Directors
entitles its holder to one vote at the
General Meeting of shareholders. In 2020,
Swiss Re Ltd recognised the voting rights
of shares registered no later than four
working days before the Annual General
Meeting of shareholders.
The 2020 Annual General Meeting
of Swiss Re Ltd took place pursuant to
the provisions of the Federal Council’s
Ordinance 2 on Measures to Combat
the Coronavirus (COVID-19-Ordinance-2).
As a result, shareholders could not
attend the Annual General Meeting
in person. Shareholders were able
to exercise their right to vote and to
participate in elections indirectly, via
representation by the Independent Proxy.
Changes of control
and defence measures
Swiss Re Ltd’s Articles of Association contain neither
an “opting out” nor an “opting up” provision.
Duty to make an offer
Swiss Re Ltd has not put in place any
specific measures to defend against
potential unfriendly takeover attempts.
The Board of Directors believes that the
company’s best protection is a fair valuation
of its shares and that the efficiency
of a free market is preferable to artificial
obstacles, which can have a negative
impact on the share price in the long term.
Clauses on changes of control
The mandates and employment contracts
of the members of the Board of Directors,
Group EC and further Executive Management
members do not contain any provisions
such as severance payments, notice periods
of more than 12 months, additional pension
fund contributions or the treatment of
deferred compensation that would benefit
them in a change of control situation.
In accordance with the Financial Markets
Infrastructure Act (FMIA), any party who
acquires Swiss Re Ltd shares which,
added to those already owned, exceed the
threshold of 33⅓% of Swiss Re Ltd shares,
either directly, indirectly or in concert with
third parties, and regardless of whether
these voting rights of such Swiss Re Ltd
shares are exercisable or not, triggers a
mandatory takeover offer for the
outstanding Swiss Re Ltd shares owned
by all other shareholders.
The FMIA allows companies to include
an “opting up” provision in their articles
of association, which raises the mandatory
takeover offer threshold up to 49%, or
an “opting out” provision, which waives
the mandatory offer. Swiss Re Ltd’s Articles
of Association contain neither of
these provisions.
Unvested deferred compensation may
vest and employee participation plan rules
may be amended upon a change of control
(if the Board of Directors so decides; see
below). In such an event, the rights of
members of the Board of Directors and the
Group EC, as well as of further Executive
Management members, are identical to
those of all other employees.
The Articles of Association provide that
the Board of Directors (or to the extent
delegated to it, the Compensation
Committee) may decide on the continuation,
acceleration, amendment or removal of
any vesting, blocking or exercise conditions
for the payment or grant of deferred
compensation. The Board of Directors may
also decide to replace the award with
shares of the entity assuming control. For
more information on the quantitative impact
of vested shares, please refer to page 87
of this Corporate Governance Report under
the paragraph entitled “Shares”.
Swiss Re | Financial Report 2020
109
Corporate governance
Auditors
The AGM 2020 elected KPMG as Swiss Re’s new external auditor –
effective for the financial year starting on 1 January 2021.
Duration of the mandate and term
of office of the lead auditors
PricewaterhouseCoopers Ltd (PwC)
was appointed as the external auditor of
Swiss Re Ltd when the company was
founded on 2 February 2011. PwC had
been elected as the external auditor of
the previous parent company of the Group,
Swiss Reinsurance Company Ltd, at its
Annual General Meeting 1991 and had
been re-elected annually since then. The
Annual General Meeting 2020, following
the proposal of the Board of Directors,
based on the recommendation by the Audit
Committee, re-elected PwC as external
auditor for the financial year 2020.
In line with the Swiss Code of Obligations
and to foster external auditor independence,
each of the two group audit engagement
leaders rotates out of his or her role after
seven years. Roy Clark has undertaken this
role since April 2018 and Jasmine Chang
since July 2020.
Information tools pertaining
to the external audit
Responsibilities
The external auditor is accountable to the
Audit Committee, the Board of Directors
and ultimately to the shareholders. The
Board of Directors reviews the external
auditor’s professional qualifications and
is assisted in its oversight by the
Audit Committee.
Cooperation and flow of
information between the auditor
and the Audit Committee
The Audit Committee liaises closely
with the external auditor. The lead
auditors participate as advisors at all
Audit Committee meetings. For more
information, see page 99.
PwC provided reports on selected topics
at each of the Audit Committee meetings
during the reporting year 2020: at the
30 January meeting, PwC provided the
External Auditor Update, which covered
the PwC Quality, Performance and 2019
Assurance Report as well as the audit-
related, tax and non-audit services. At the
18 February Audit Committee meeting, it
provided the Full-Year Audit Report and on
18 March, the PwC 2019 Final Board
Report as well as the EVM review findings.
At the meeting on 15 April, PwC provided
the 2019 US GAAP and EVM control
reports and the PwC Quality Assessment.
At the Audit Committee meeting on 29
April, it provided the Q1 2020 PwC Report
and at the 30 July meeting, the H1/Q2 2020
PwC Report. Furthermore, PwC provided
the 2020 Audit Plan PwC/Fees Report at
the 22 September meeting and the 9M/Q3
2020 PwC Report on 29 October.
The Audit Committee reviews and approves
all planned audit services and any non-audit
services provided by the external auditor.
It discusses the results of annual audits
with the external auditor, including reports
on the financial statements, necessary
changes to the audit plans and critical
accounting issues.
The external auditor shares with the Audit
Committee its findings on the adequacy
of the financial reporting process and the
efficacy of the internal controls.
Fees paid to the auditor
The fees (excluding value added taxes) for professional services provided by PwC
in 2020 were as follows:
USD millions
Audit fees
Non-audit fees
Audit-related assurance services
Services relating to corporate finance transactions
Tax related services
Other non-audit services
Total fees
2019
31.0
12.3
11.0
0.3
0.3
0.7
43.3
2020
30.7
3.5
0.9
0.3
0.3
2.0
34.2
In 2020, audit related assurance services included programme and control assessments
as well as assurance mandates required by Swiss Re's regulators. Services relating to
corporate finance transactions contained the arrangement and administration of a
financing programme, tax-related services included advice on a number of tax matters
and other non-audit services covered a variety of permitted advisory services primarily
related to the recently launched IFRS programme.
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Swiss Re | Financial Report 2020
It informs the Audit Committee about any
differences of opinion between the external
auditor and management encountered
during the audits or in connection with the
preparation of the financial statements.
Evaluation of the external auditor
It is the Audit Committee that is responsible
for recommending an audit firm to the
Board of Directors for election at the Annual
General Meeting. Unlike in the European
Union, there is no law in Switzerland that
provides for a mandatory rotation of the
external auditor after a certain number of
years. The Audit Committee closely monitors
regulatory developments in the EU and
elsewhere on this topic. In order to be able
to select and recommend an audit firm for
election by the shareholders and in line
with good corporate governance, the Audit
Committee thoroughly evaluates the
credentials of the current external auditor
annually based on the following main
criteria: Investment in the client relationship,
quality of delivery, quality of the people
and services and focus on client value. The
Audit Committee presents the findings of
the evaluation to the entire Board of Directors.
PwC has a proven record of professionalism
and efficiency and fully meets the high
demands made by Swiss Re as a global
re/insurance Group. The Audit Committee’s
assessment of the external auditor is
furthermore based on the external auditor’s
qualifications, independence and
performance. The Audit Committee also
evaluates annually the performance of
the lead auditors.
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.
Independence
At least once a year, the external auditor
provides a formal written statement
delineating all relationships with the company
that might affect its independence. Any
disclosed relationships or services that might
interfere with the external auditor’s
objectivity and independence are reviewed
by the Audit Committee, which then
recommends appropriate action to be taken
by the Board.
Performance
This assessment measures the external
auditor’s performance against a number
of criteria, including: understanding of
Swiss Re’s business; technical knowledge
and expertise; comprehensiveness of
the audit plans; quality of the working
relationship with management and clarity
of communication. It is compiled based
on the input of key people involved in
the financial reporting process and the
observations of the Audit Committee
members.
Auditor rotation 2021
Considering that PwC has carried out the
mandate as external auditor for the
Swiss Re Group since 1991, the Board of
Directors proposed to the shareholders at
the AGM 2020 the election of KPMG
as the Group’s new external auditor for the
financial year starting on 1 January 2021.
In September 2018, the Audit Committee
had decided to launch a tender process in
the first quarter of 2019 for a new external
auditor of the Group. After a thorough
tender process, the Board of Directors had
decided, as proposed by the Audit
Committee and in line with the main criteria
mentioned in the chapter on the evalution
of the external auditor (far left of this page),
to propose KPMG to the AGM 2020 for
election as the new external audit firm to
replace PwC for the financial year starting
on 1 January 2021. On 31 July 2019,
Swiss Re publicly announced the Board of
Director’s decision to nominate KPMG as
the new auditor as part of the news release
on the first-half 2019 US GAAP results.
For the news release, please refer to:
www.swissre.com/media/news-releases/
nr-20190731-hy-2019-news-release.html
The AGM 2020 elected KPMG as the new
external auditor for a one-year term of office
for the financial year starting on 1 January
2021. Following this election, KPMG
became fully independent as of 1 July 2020
and started their work. Activities included
the review of PwC’s US GAAP workpapers
for the 2019 audit in Switzerland and other
key regions, process walkthroughs, as well
as the shadowing of PwC’s 2020 audit
work. In parallel, KPMG conducted audit
planning sessions with key departments
and stakeholders within Swiss Re and
established regular updates with Swiss Re
management. Despite restrictions in travel
and face-to-face interactions due to
COVID-19, the audit transition has
proceeded according to plan and KPMG will
present its 2021 audit plan to the Audit
Committee during the second quarter of
2021.
Audit fees
The Audit Committee annually reviews
the audit fees as well as any fees paid
to the external auditor for non-audit
services based on recommendations
by the Group CFO.
Special Auditor
Swiss Re Ltd’s Articles of Association
foresee that the Annual General Meeting
may elect a Special Auditor for a term of
three years which would be responsible
for the special audit reports that are
required by Swiss law in connection with
changes in capital. Currently there is no
Special Auditor elected.
Swiss Re | Financial Report 2020
111
Corporate governance
Information policy
As a global company, Swiss Re strives to inform its stakeholders
openly, consistently and in a transparent manner – beyond the
minimum legal information requirements.
Swiss Re maintains open lines of
communication with stakeholders on
matters related to its financial and business
performance, strategy and business
activities through analyst and media
conferences and calls, road shows, news
releases and corporate reports. The latter
encompass the company’s Annual Report
and the Half-Year Report, which are
made available both in print and digitally.
Additionally, Swiss Re publishes
the Financial Condition Report, the
Sustainability Report, solvency reports
for the regulated entities and key quarterly
financial information online.
On the Group’s website (www.swissre.com),
visitors can find a host of news and research,
publications, videos and podcasts as well
as discussion and analysis related to
Swiss Re and the broader re/insurance
industry. The financial calendar displayed
below is also available online, and includes,
among other things, access details for
analyst conference calls as well as video
recordings of annual and half-year results’
presentations and Q1/Q3 key financial
figures.
At www.swissre.com/media/contacts,
interested parties – internal or external –
can subscribe to the Media Relations
mailing list to receive ad hoc disclosures
and relevant corporate news via email.
Contact details are provided on page 328.
The Swiss Official Gazette of Commerce
(Schweizerisches Handelsamtsblatt) is
Swiss Re’s official medium for prescribed
announcements and official information.
The Chairman conducts an annual
corporate governance roadshow to visit
and engage in an ongoing dialogue with
Swiss Re’s largest shareholders. Throughout
the year, our Investor Relations team, often
joined by our Executive Management,
holds regular meetings with institutional
investors and analysts, including roadshows,
conferences and calls. In 2020, due to
COVID-19, most of these interactions took
place virtually.
On 20 November 2020, Swiss Re held its
virtual Investors' Day. Group CEO, Christian
Mumenthaler, provided an update on the
Group strategy, John R. Dacey, the Group
CFO, on Swiss Re’s financial strength and
capital management, and the Group CIO,
Guido Fürer, on the Group’s asset
management. Thierry Léger, the Group
CUO, spoke about how underwriting
excellence is key to Swiss Re’s success.
Moses Ojeisekhoba and Andreas Berger,
the CEOs of the Business Units Reinsurance
and Corporate Solutions, then gave a
strategic update on their businesses. The
webcast was attended by a wide range of
external participants including portfolio
managers, buy-side and sell-side analysts.
The presentations as well as the conference
call recordings from these events are
available at:
www.swissre.com/investors/presentations
Swiss Re strictly observes close periods
around the publication of the Group’s
financial results. Close periods apply
through the preparation of results or key
financial data, and include a cooling-off
period after their release. During such close
periods, Swiss Re employees and members
of the Board of Directors are not allowed
to trade Swiss Re shares or financial
instruments related to such shares.
Important dates in 2021
19 February
Annual results 2020
18 March
Publication of Annual Report 2020 and 2020 EVM results as well as the AGM 2021 invitation
16 April
30 April
30 July
157th Annual General Meeting
Release of first quarter 2021 key financial data
Half-year 2021 results
29 October
Release of nine months 2021 key financial data
1 December
Investors’ Day, Zurich
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Swiss Re | Financial Report 2020
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Swiss Re | Financial Report 2020
113
Compensation
Swiss Re’s compensation
framework rewards sustainable
long-term performance and
aligns the interests of
employees and shareholders.
114
Swiss Re | Financial Report 2020
Contents
Report from the
Compensation Committee
Compensation highlights in 2020
Compensation framework
Compensation governance
Performance outcomes 2020
Compensation disclosure
and shareholdings 2020
Report of the statutory auditor
116
118
119
128
132
138
147
Swiss Re | Financial Report 2020
115
Compensation
Report from the
Compensation Committee
Jacques de Vaucleroy
Chair Compensation Committee
Swiss Re’s vision, we make the world
more resilient, has proven to be even more
relevant. The Compensation Committee
has worked to support this vision through
the lens of compensation.
116
Swiss Re | Financial Report 2020
Dear shareholders,
The year 2020 has been an extraordinary
year and Swiss Re’s vision “we make
the world more resilient” has proven to
be even more relevant. The Compensation
Committee has worked to support this
vision through the lens of compensation.
Against this background, I am pleased to
present the 2020 Compensation Report,
which informs you on the compensation
outcomes and key decisions taken in 2020.
Compensation Committee activities
During 2020, the Compensation Committee
met seven times (including one extraordinary
meeting) and passed eight decisions
by circular resolution. The Compensation
Committee assessed the impact of
COVID-19 on compensation and closely
monitored market developments, company
and employee needs as well as shareholder
and other external stakeholder expectations.
Further, the Compensation Committee:
• reviewed the compensation framework
and plan design to ensure continued fit
for purpose as well as alignment with
shareholders’ interests and long-term
business strategy: an outlook on the
changes that will come into effect as of
performance year 2021 is provided on
page 124 of this Financial Report;
• reviewed the Committee’s meeting
architecture: changes were made
to its working processes, tasks and
responsibilities starting in 2021 to
ascertain ongoing effectiveness, sound
governance and focus on key topics;
• monitored compensation decisions in
view of pay for performance, pay equity,
shareholder alignment and long-term
business strategy; and
• monitored legal and regulatory
developments and confirmed compliance.
Compensation framework changes
for performance year 2020
While Swiss Re’s compensation framework
remained stable overall, an additional
performance metric for the Leadership
Performance Plan (LPP) came into effect for
the first time in 2020 as a consequence of
a decision taken by the Group in 2019: as of
2020 grants, absolute economic net worth
growth complements the already existing
metrics return on equity (ROE) and relative
total shareholder return. This strengthens
the focus on growth in terms of operating
value as an incentive driver. Further details
on the LPP 2020 plan design are provided
on pages 123–124 of this Financial Report.
Group business performance 2020
Key factors for annual compensation
decisions covered a combination of US
GAAP and Economic Value Management
(EVM) based business results, qualitative
factors and Swiss Re’s pay-for-performance
approach. Compensation decisions were
made considering Swiss Re’s overall
performance for the reporting year in which
the Group’s US GAAP and economic
performance was significantly impacted
by the COVID-19 pandemic.
However, excluding COVID-19-related
losses, the Group’s business performance
was strong with an ROE of 7.3% and net
income of USD 2.2 billion. Property &
Casualty Reinsurance delivered significant
new business generation with 8% higher
premiums earned, supported by price
increases. The normalised combined ratio
was in line with the estimate of 97%
provided at the beginning of 2020.
Life & Health Reinsurance’s performance,
excluding COVID-19 losses, was solid with
an ROE within the target range of 10–12%.
This was supported by a strong investment
result and enabled a positive contribution
to the Group’s net result, despite COVID-19-
related losses. Corporate Solutions’
turnaround is ahead of plan; results excluding
COVID-19-related losses reflect the benefits
of portfolio repositioning, rate increases
achieved for new business and lower large
man-made losses compared to 2019.
Life Capital continued to invest into the
growth of the open books business and
achieved a strategic milestone with the
sale of ReAssure.
Pay for performance 2020
As a leading re/insurance provider,
Swiss Re is a shock absorber for society
and aims to improve the world’s resilience
to systemic risk. The Group’s compensation
framework is designed accordingly and
tailored to the long-tail business environment
of the re/insurance industry. As such,
Swiss Re aims for positive but not excessive
variable compensation payouts in relatively
benign environments while making lower
but proportionate payouts in adverse
environments.
For 2020, the Group Annual Performance
Incentive (API) pool is significantly below
target as a consequence of negative
financial results while at the same time
having performed above target across all six
qualitative assessment dimensions. Upon
careful consideration, the Board of Directors
has applied a degree of discretion and
made a limited upward adjustment to the
Group API pool. This decision took into
consideration that the Swiss Re Group
successfully navigated through the
COVID-19 pandemic and that the financial
results would have been well above the
prior year’s result when excluding the
COVID-19 impact. Further, business
continued as normal with all processes
running timely and without disruptions,
employees showed great personal resilience
and demonstrated extraordinary efforts,
and no salary cuts, furloughs nor layoffs or
government support were needed due
to COVID-19.
No in-flight changes to awards, metrics or
targets nor additional incentive awards
have been made to mitigate the impact of
COVID-19. As the 2020 LPP grants were
determined based on a share price of
CHF 104.20 on 21 February 2020
(ie largely unimpacted by any COVID-19-
related stock market developments), the
Compensation Committee concluded that
no windfall gains will occur. Details on the
2020 performance outcomes are provided
on pages 132–137, and information on
compensation disclosure and shareholdings
for 2020 is detailed on pages 138–145 of
this Financial Report.
Shareholder engagement and Annual
General Meeting
The Compensation Committee proactively
considers shareholders’ expectations on
Swiss Re’s compensation framework and
decisions. Shareholder support at the
AGM 2020 for Swiss Re’s compensation
framework remained strong. Swiss Re’s
shareholders approved all compensation-
related motions and the 2019
Compensation Report received a positive
outcome in the consultative vote.
The Group recognised opportunities to
further develop its disclosure practice
and a number of changes are incorporated
into this Compensation Report, including
further transparency on Swiss Re’s process
for determining the Group API pool and on
the use of and rationale for discretion as
part of this process. Shareholders
valued Swiss Re’s deep commitment to
sustainability/environment, social and
governance (ESG) matters, diversity and
inclusion. Additional details on how this
commitment is reflected in the compensation
framework are also included in this
Compensation Report.
Consistent with last year and in line with
Swiss Re Ltd’s Articles of Association,
shareholders will again be asked to approve
the following amounts at the AGM 2021:
• Maximum aggregate amount of
compensation for the members of the
Board of Directors for the term of office
from the AGM 2021 to the AGM 2022.
• Maximum aggregate amount of fixed
compensation and variable long-term
compensation for the members of the
Group EC for the financial year 2022.
• Aggregate amount of variable short-term
compensation for the members of the
Group EC for the financial year 2020.
Shareholders will also be asked to support
this Compensation Report in a consultative
vote. The Compensation Committee is
satisfied that this Compensation Report
complies with applicable laws, rules
and regulations.
Zurich, 18 March 2021
Jacques de Vaucleroy
Chair Compensation Committee
Swiss Re | Financial Report 2020
117
Compensation
Compensation
highlights in 2020
Pay for performance
The Compensation Committee ensures
that Group EC compensation is linked
to the business performance of Swiss Re
by delivering a substantial portion of
compensation in the form of performance-
related incentives.
The Compensation Committee monitors
how compensation is aligned with specific
business metrics, including US GAAP net
income and EVM profit.
All employees
Group EC
Group CEO
78% Base salary
17% Cash API1
2% VAI1
3% LPP1
31% Base salary
20% Cash API1
17% VAI1
32% LPP1
26% Base salary
20% Cash API1
20% VAI1
34% LPP1
1 Variable/performance-related, whereby VAI and LPP are deferred
Alle Mitarbeitenden
USD millions (unless otherwise stated)
US GAAP net income
EVM profit
Regular dividend payments (CHF)1
Financial Strength Rating
(Standard & Poor’s)
Total equity
Regular staff worldwide
Aggregate compensation for all
employees (CHF millions)2, 3
Group EC members4
78% Grundsalär
Aggregate Group EC compensation
17% Bar-API1
(CHF thousands)2, 4
2% VAI1
3% LPP1
2018
Mitglieder der Geschäftsleitung
421
–693
5.60
2019
727
–19
5.90
change
73%
–
5%
2020
Group CEO
–878
–3 590
5.90
AA–
28 727
14 943
AA–
31 037
15 401
2 001
14
31% Grundsalär
20% Bar-API1
44 253
17% VAI1
32% LPP1
2 086
16
47 002
8%
4%
6%
AA–
27 258
13 189
1 937
15
26% Grundsalär
20% Bar-API1
20% VAI1
34% LPP1
45 043
change
–
–
–
–12%
–7%
–4%
1 Dividend payments are made in April of the following year. For 2020, an ordinary dividend of CHF 5.90 is proposed to the
AGM 2021.
1 Variabel/leistungsabhängig, wobei VAI und LPP aufgeschoben sind.
2 Disclosure includes all awards for a reporting year, ie the 2020 aggregated compensation values include the fair value of the
Leadership Performance Plan (LPP) granted in April 2020. The total Annual Performance Incentive (API) for 2020 for
members of the Group EC is subject to approval by the shareholders at the AGM 2021. For individuals who left the Group EC
during or before the reporting period, disclosure also includes legally or contractually required payments for the period when
the individual was no longer in a Group EC position (eg base salary when on garden leave).
3 2018 and 2019 figures for aggregate compensation for all employees restated to conform to 2020 presentation.
4 Including the Group CEO as well as individuals holding a Group EC position at one point during a reporting year. In 2020,
15 individuals held a Group EC position at one point in 2020 (16 in 2019), of whom 12 were active on the Group EC for the
full year (nine in 2019).
Attribution of group income to key stakeholders
USD millions (unless otherwise stated)
Income before tax and variable compensation
Variable compensation
Income tax expense
US GAAP net income attributable to
shareholders
of which paid out as dividend2
of which share buyback
of which added to retained earnings within
shareholders’ equity
%
2018
2019
863 100% 1 215
3481
43%
373
140
8%
69
%
100%
29%
12%
2020
–797
347
–266
%
100%
–
–
421
1 659
1 020
727
192% 1 766
118% 1 010
–878
145% 1 925
–
83%
–2 258
– –2 049
– –2 803
–
–
–
1 Restated to reflect final approved figure.
2 FY 2020 is estimated based on the average monthly CHF/USD FX rate as of January 2021. The dividend is subject to AGM
approval and the amount depends on the final number of dividend eligible shares and FX rates upon dividend payout.
118
Swiss Re | Financial Report 2020 Compensation
framework
Guiding principles
Swiss Re’s compensation framework
is designed to add to the success of the
business by:
• Supporting a culture of sustainable
high performance with a focus on
risk-adjusted financial results.
• Ensuring alignment of compensation to
long-term business results and individual
contribution, and recognising both what
was achieved and how it was achieved.
• Supporting Swiss Re’s commitment to
attract, motivate and retain the qualified
talent the Group needs to succeed globally.
• Aligning the interests of employees with
those of Swiss Re’s shareholders and
society at large.
• Fostering compliance, supporting
appropriate and controlled risk-taking in
line with Swiss Re’s business and risk
strategy, and avoiding conflict of interest.
Swiss Re’s total compensation is well
balanced in terms of fixed versus variable
compensation and short-term versus
long-term incentives. This encourages
sustainable long-term performance and
supports shareholder alignment.
Complemented by pension plans and
benefits, the total reward package is
competitive in local labour markets.
As a leading re/insurance provider, Swiss Re
is a shock absorber for society and aims to
improve the world’s resilience to systemic
risk. Volatility is inherent in the nature of
Swiss Re’s business and to ensure that the
right decisions are taken for the company,
shareholders, clients and communities,
Swiss Re continues to underwrite risks even
when the circumstances are challenging.
To incentivise employees to do the right
thing for these stakeholders, it is important
that we smooth this volatility within the
Group’s compensation framework. This is
designed and tailored to reflect the nature
of the business. Consequently, volatility in
incentive plans, and in particular our Annual
Performance Incentive (API), requires some
limitations. This safeguards that awards
are capped in years without large events
when positive performance outcomes are
not entirely in the hands of the company
or employees. At the same time, in eventful
years where Swiss Re’s employees duly
perform according to the nature of the
business, the downside needs to be
proportionate (see page 121 of this
Financial Report for details on the Group
API pool funding process).
Compensation Policy
Building on the overarching compensation
principles included in Swiss Re Ltd‘s
Articles of Association, the compensation
framework is captured within the Swiss Re
Group Compensation Policy (Compensation
Policy). The Compensation Policy is
implemented globally to the extent possible.
Variations may apply at the regional and
Business Unit level to accommodate specific
requirements, eg talent management and
compliance with local regulations.
The Compensation Policy governs the
compensation structure and processes
and is regularly reviewed:
• The Human Resources function conducts
a regular self-assessment and assesses
the Compensation Policy against FINMA
requirements and other relevant
regulations as appropriate.
• The Compensation Committee reviews
the self-assessment and reports on the
effectiveness of the compensation
decisions, and identifies potential areas
for improvement.
• The Risk Management function annually
reviews risks related to the Compensation
Policy and reports its findings to the
Compensation Committee.
Any use of personal hedging strategies or
remuneration and liability-related insurance
that could undermine the risk alignment
effects and economic exposure embedded
in compensation arrangements
is prohibited.
The Board of Directors has approved an
authority matrix that defines the limits to
which each level of management can
authorise compensation payments. The
Group CEO, the Compensation Committee
or the Board of Directors, as applicable,
approves all compensation that exceeds the
preset limits. The Group CEO is not involved
in decision-making concerning his own
compensation.
Diversity, Equity & Inclusion
Swiss Re is committed to ensuring equal
pay for equal work regardless of gender,
race, ethnicity, sexual orientation or other
personal characteristics and has a non-
discriminatory approach to determining
compensation and benefits at all levels.
This approach includes, for example, having
compensation ranges defined by job family
or specialisation in the local market and
strict governance around compensation
decision-making and approvals. Every year,
individual salaries and target incentives are
reviewed to ensure and maintain internal
pay equity and pay for performance. For
large locations, regular statistical analysis
is carried out in collaboration with external
consultants to identify and address any
potential risks of bias in compensation
setting. In addition to equal pay analysis
through a gender lens, in countries where
the data is available, Swiss Re also
conducts equal pay analysis through an
ethnicity lens.
Swiss Re | Financial Report 2020
119
Compensation
Compensation framework
Overview of key compensation and benefits components for Group EC members and other employees
Fixed compensation
Variable compensation
Base salary
All employees All employees
Benefits
Attract and
retain
Risk protection, market
competitiveness,
connection to
Swiss Re values
(short-term)
Cash API
All employees
(long-term)
VAI (deferral from the API) LPP
Employees with an API
at or above USD 100 000
Group EC members and
other key employees
Pay for performance
Pay for sustained
performance
Alignment with future
performance and
shareholders
Alignment
with
shareholders
Participation
plan
(long-term)
GSPP
All employees
Role and
experience
Cash
(immediate)
Market practice
Pension, insurances,
cash
Business and
individual performance
Cash
3 years
Business performance
3 years
5 years for Group EC
members and other key
executives* (including a
2-year holding period);
3 years for remaining
participants
Business performance
Cash (deferred)
Shares
Shares
Business and
individual
performance
1 year
Measurement of the
economic impact of
profit/loss from previous
years’ business
3 years
Return on Equity (ROE)
Economic Net Worth
(ENW) growth
Relative TSR (rTSR)
3 years
0 to 2 × TAPI
(on total API granted)**
50% to 150% of deferred
API
Eligibility
Purpose
Plan
duration
Drivers
Settlement
Performance
KPIs
Performance
period
Payout range
Share price
impact
Forfeiture
rules
Clawback
rules
No
No
No
No
In certain plans
No
Yes
Yes
No
Yes
Yes
* Certain members of Business Unit Executive Committees (BU ECs) and all Group Managing Directors (GMDs).
** For Group EC members, the API payout range is additionally capped at 3 × annual base salary.
PSUs (ROE, ENW
growth): 0% to 100%
PSUs (rTSR): 0% to 200%
Yes
Yes
Yes
Yes
Yes
(on match)
Yes
(on match)
Swiss Re aims for total compensation
that is competitive in the market.
Swiss Re also seeks to ensure that
total compensation is well balanced
in terms of fixed versus variable
compensation and in terms of short-
term versus long-term incentives.
Base salary
Base salary is the fixed compensation paid to employees for carrying out their role and
is established based on the following factors:
• Scope and responsibilities of the role, and qualifications required to perform the role.
• Market value of the role in the location in which Swiss Re competes for talent.
• Skills and expertise of the individual in the role.
Benefits
Swiss Re aims to provide a competitive package of employee benefits. Benefits are
designed and implemented under a global framework, while appropriately reflecting
differing local employment market conditions.
The key objectives of Swiss Re’s benefits packages are to:
• Be competitive in the markets where Swiss Re competes for talent.
• Provide a degree of financial resilience for employees as it relates to pension,
health matters, disability and death.
• Connect with Swiss Re values and enhance engagement.
Additionally, forfeiture provisions apply in certain benefit plans.
120
Swiss Re | Financial Report 2020
Annual Performance Incentive
Purpose
The Annual Performance Incentive (API) is
a performance-based, variable component
of compensation. Combined with the base
salary, it provides competitive total cash
compensation for achievements against both
business and individual performance targets
and demonstration of desired behaviours.
Structure
Swiss Re operates a Target API (TAPI) system
along with a performance management
framework for all employees, whereby
results-oriented and behaviour-related
performance criteria are equally weighted.
A TAPI is set based on multiple factors, but
primarily on the role being performed, internal
calibration and market benchmarks. The
employee’s total compensation and pay mix
are taken into account when setting the TAPI.
The possible payout for the API ranges from
0 to 2 × TAPI. For Group EC members an
additional cap applies, which is 3 × annual
base salary. For details on the TAPI for the
Group CEO, the aggregate TAPIs of Group EC
members and API outcomes, please refer to
pages 140–141 of this Financial Report.
Funding
Swiss Re uses a three-step process to
assess business performance for the
purposes of determining the overall
Group API pool.
The starting point is the Group TAPI Pool, in
principle derived in a bottom-up approach
from the individual TAPIs (pro rata where
needed) for all eligible employees.
Group API pool funding process
The assessment process (as shown in
the chart below) comprises a financial, a
qualitative and an overall assessment.
The financial assessment covers four equally
weighted Key Performance Indicators (KPIs)
as approved by the Compensation
Committee of the Board of Directors, for
which targets are defined on an annual basis:
Return on Equity (ROE), net operating margin,
Economic Value Management (EVM) profit
(% of Economic Net Worth/ENW) and ENW
growth per share measured for both the
Group and each Business Unit individually.
Also, multi-year comparisons and an
assessment of the quality of earnings
are considered.
The qualitative assessment is based on six
dimensions, which are assessed for the
Group as well as for each Business Unit/
Group Function: client and service quality,
risk and control behaviour, franchise building,
human capital and talent management,
strategic initiatives, and sustainability/
environmental, social and governance (ESG)
considerations. Within the six dimensions,
Swiss Re considers a number of measures
including, for example, client satisfaction,
employee engagement survey results, risk
management and diversity & inclusion KPIs.
The financial and qualitative assessment
each result in a performance factor (Financial
Performance Factor/FPF and Qualitative
Performance Factor/QPF). The FPF is
floored at 0.7 and capped at 1.3, while the
QPF is floored at 0.8 and capped at 1.2.
The caps and floors in FPF and QPF serve
to avoid excessive upward or downward
volatility in the Group API Pool and build
upon the guiding principles of Swiss Re’s
compensation framework (see page 119 of
this Financial Report). As such, they are
reflective of the long-tail nature of Swiss Re’s
business and support the Group’s
longstanding practice of making positive but
not excessive variable compensation payouts
in relatively benign environments while
making lower but proportionate payouts in
adverse environments.
The FPF and QPF are multiplied and the result
can then be adjusted upward or downward
based on the overall assessment. In this step,
the result of the financial and qualitative
assessment is reviewed considering a
number of different perspectives, including
pay for performance linkage, reasonableness
in the market context, affordability and
proportionality of value-sharing among
employees and shareholders. Combined, the
three assessment steps allow for determining
a Group Business Performance Factor
(Group BPF) based on the following formula:
Group BPF = (FPF × QPF) +/– Assessment
Overall
Result
The Group API Pool is subsequently
determined by multiplying the Group TAPI
Pool with the Group BPF.
As part of the process, the Compensation
Committee can apply discretion to make
an upward or downward adjustment
to the Group BPF and Group API Pool
recommended for approval to the Board of
Directors. For information on the calculation
of the 2020 BPF and the discretion applied
in 2020, please refer to page 134 of this
Financial Report.
Step 1
Financial assessment
Step 2
Qualitative assessment
Step 3
Overall assessment
Group Target
API Pool
Six dimensions:
1. Client and service
quality
2. Risk and control
behaviour
3. Franchise building
4. Human capital and
talent management
5. Strategic initiatives
6. Sustainability/ESG
×
+ –
Four equally weighted
KPIs:
1. ROE
2. Net operating margin
3. EVM profit
(% of ENW)
4. ENW growth per
share
Includes assessment
of the financial
performance versus
targets, a multi-year
view and review of the
quality of earnings that
then impacts the overall
assessment.
Series of overarching
tests including pay for
performance linkage,
assessment of market
competitiveness and
affordability checks.
Overall Group
assessment and
proposal from
management to
the Compensation
Committee.
Approved
Group
API Pool
=
The Compensation
Committee reviews,
may request
adjustment to any
of the steps and
recommends the
final pool for approval
to the full Board
of Directors.
Results in Financial
Performance Factor
floored at 0.7 and
capped at 1.3
Results in Qualitative
Performance Factor
floored at 0.8 and
capped at 1.2
Allows for discretionary
upward or downward
adjustment based on all
information available
Based on Steps 1, 2
and 3, results in
Group Business
Performance Factor
Swiss Re | Financial Report 2020
121
Compensation
Compensation framework
Allocation
The approved Group API pool is further split
in pools for the Group EC, other senior
executives, and for different Business Units/
Group Functions. This allocation is
determined by the Group CEO based on
the assessment of financial and qualitative
performance of the respective Business
Unit/Group Function.
The API for each individual employee is
determined considering their TAPI, business
and individual performance. Individual
performance is assessed against the
individual’s established goals and
Swiss Re’s behaviour expectations and
corporate values.
Settlement
API is settled in cash. When the total API
level for an employee exceeds a pre-defined
amount, a portion is deferred into the Value
Alignment Incentive (VAI) and remains
subject to performance conditions over the
VAI plan duration of three years. The
non-deferred portion is settled in immediate
cash (cash API).
Forfeiture of unsettled awards and
clawback provisions for settled awards
apply in a range of events, enabling
Swiss Re to seek repayment where
appropriate. Examples of such events
are acts which can be considered as
malfeasance, fraud or misconduct.
Value Alignment Incentive
Value Alignment Incentive
Purpose
When the total API level for an employee
exceeds a pre-defined amount, a portion of
the API is mandatorily deferred into the VAI.
The VAI thereby introduces a time
component to the performance-based,
variable compensation. This supports the
Group’s business model by aligning a
portion of variable compensation with
sustainable long-term results. The aim is
to ensure that the ultimate value of the
deferred variable compensation is affected
by the longer-term performance of the
relevant Business Unit and the Group.
Plan duration
The VAI reflects a longer-term perspective
by linking awards to performance over a
three-year period.
Performance measurement
The performance measurement calculation
uses the three-year average of the
published EVM previous years’ business
profit margin.
EVM is Swiss Re’s proprietary integrated
economic valuation and steering framework,
consistently measuring performance
across all businesses (please refer to the
EVM section on pages 34–47 of this
Financial Report).
EVM previous years’ business profit
measures the economic performance of
existing contracts in comparison to the
valuation assumptions set in the past; ie
under-reserving (over-reserving) in the past
leads to a negative (positive) EVM previous
years’ business performance when reserves
are adjusted in the current year. The
performance factor is a linear function,
whereby payout ranges from 50% to 150%.
Portion of API that is deferred
Group CEO
Other Group EC members
Other key executives
All other employees
Deferral into VAI
50% of API
45% of API
40% of API
50% of the API amount exceeding USD 100 000 with a
minimum deferral amount of USD 5 000 at
USD 100 000 and up to a maximum of 40% of API
VAI
award
Measurement of the economic impact of profit/loss
from previous years’ business, over three years
Total API
Cash
API
payment
VAI vesting
and payout
150%
100%
50%
Payout
between
50% and
150% of
award
2021
2022
2023
2024
2029
Performance period/forfeiture conditions
Clawback conditions
122
Swiss Re | Financial Report 2020
Structure
The higher the API granted, the greater the
amount of compensation that remains at
risk through deferral into the VAI, as shown
on the previous page.
Funding
The VAI is not funded as a separate pool.
The Group API pool includes amounts paid
in cash and amounts to be deferred into
the VAI.
Leadership Performance Plan
Purpose
The purpose of the Leadership Performance
Plan (LPP) is to provide an incentive for
Swiss Re’s senior management (including
the members of the Group EC) to achieve
sustainable company performance over
the long term. The LPP is a forward-looking
instrument awarded to incentivise decision-
making that is also in the shareholders’
interest.
Settlement
At the end of the deferral period, the VAI
is settled in cash. For the full three-year
performance measurement period,
forfeiture conditions apply.
Additionally, clawback provisions apply in a
range of events as defined in the VAI plan
rules (please refer to page 125 of this
Financial Report for details on termination
and clawback provisions).
For VAI performance outcomes over past
years, please refer to page 135 of this
Financial Report.
The design of the LPP aims to:
• Focus participants’ energies on earnings,
capital efficiency and Swiss Re’s position
against peers, all of which are critical to
sustain shareholder value creation.
• Focus participants on long-term goals.
• Attract and retain individuals with
exceptional skill.
• Provide competitive compensation that
rewards long-term performance.
LPP 2020 changes
The LPP has been in operation for more
than eight years, supports Swiss Re’s strong
pay for performance culture and is aligned
to market practice. During 2019, the LPP
KPIs were reviewed to ensure that the
defined purpose as outlined above can
be fulfilled.
As a result of the review, a third metric,
absolute economic net worth (ENW)
growth, was added to complement the
already existing metrics return on equity
(ROE) and relative total shareholder return
(rTSR). Absolute ENW growth measures the
generation of new business, links capital
generation, regulatory capital and dividend
capacity, and neutralises the impact of
share buy-backs.
Outstanding awards (grants prior to 2020)
have not been affected by this change.
Grant
The amounts disclosed under LPP in the
section “Compensation disclosure and
shareholdings 2020” reflect the grants
made in April 2020. The LPP 2020
will be measured over the period from
1 January 2020 to 31 December 2022 and
vests in 2023. Grant levels are determined
based on multiple factors including the role
being performed and market benchmarks.
The individual grant level for each member
of the Group EC is based on a stable grant
amount which in any year cannot exceed
1.5 × annual base salary for each member
of the Group EC, excluding the Group CEO,
and 2 × annual base salary for the Group CEO.
Leadership Performance Plan
ROE Performance
Share Units
(1/3)
Performance condition:
ROE, annually measured,
vesting after three years
Total LPP
award
ENW Performance
Share Units
(1/3)
Performance condition: absolute
ENW growth, annually measured,
vesting after three years
rTSR Performance
Share Units
(1/3)
Performance condition:
rTSR, measured over three years,
vesting after three years
s
r
a
e
y
e
e
r
h
t
r
e
t
f
a
g
n
i
t
s
e
V
100%
0%
100%
0%
200%
0%
i
r
o
f
d
o
i
r
e
p
g
n
d
o
h
r
a
e
y
-
o
w
l
t
l
a
n
o
i
t
i
d
d
A
s
e
v
i
t
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c
e
x
e
y
e
k
r
e
h
t
o
d
n
a
C
E
p
u
o
r
G
2020
2021
2022
2023
2024‒2025
2028
Performance period/forfeiture conditions
Clawback conditions
Swiss Re | Financial Report 2020
123
Risk-free
rate*
Risk-free rate* +
700 basis points
ROE
Risikofreier
Risikofreier Zinssatz*
Zinssatz*
+ 700 Basispunkte
ROE
r
o
t
c
a
f
g
n
i
t
s
e
V
100%
75%
50%
25%
0%
r
o
t
c
a
f
g
n
i
t
s
e
V
200%
150%
100%
50%
0%
50th
percentile
75th
percentile
PSU vesting curve: ENW
rTSR
r
o
t
c
a
f
g
n
i
t
s
e
V
100%
75%
50%
25%
0%
0%
10%
absolute ENW growth
100%
75%
50%
Performance Share Units: rTSR
The third PSU performance condition is
r
o
rTSR measured over three years. The PSUs
t
c
a
vest within a range of 0% to 200%. Vesting
f
g
starts at the 50th percentile of TSR relative
n
i
t
s
to peers with 50% vesting and is capped
e
V
at the 75th percentile relative to peers with
200%** vesting. In case of a negative
Risk-free rate* +
TSR over three years, the Compensation
700 basis points
Committee retains the discretion to
trigger vesting at a lower level of TSR.
Risk-free
rate*
25%
ROE
0%
PSU vesting curve: rTSR
r
o
t
c
a
f
g
n
i
t
s
e
V
200%
150%
100%
50%
0%
100%
50th
percentile
75th
percentile
75%
rTSR
r
o
t
k
a
F
-
g
n
i
t
s
e
100%
V
50%
Risikofreier Zinssatz*
+ 700 Basispunkte
0%
ROE
25%
25%
75%
50%
Swiss Re’s three-year TSR performance
is assessed relative to the TSR of the
pre-defined peer group for the same period.
r
o
This peer group consists of companies
t
c
a
Risikofreier
that are similar in scale and have a global
f
g
Zinssatz*
n
footprint or a similar business mix to
i
t
s
Swiss Re. The peer group, which is set at
e
V
the beginning of the plan period, includes
Allianz SE, American International Group
Inc, Aviva PLC, AXA SA, Chubb Limited,
Everest Re Group Ltd, Hannover Rueck SE,
MetLife Inc, Muenchener Rueckversiche-
rungs-Gesellschaft AG, Prudential PLC,
QBE Insurance Group Ltd, Reinsurance
Group of America Inc, RenaissanceRe
Holdings Ltd, SCOR SE and Zurich
Insurance Group Ltd.
absolute ENW growth
r
o
t
k
a
F
-
g
n
i
t
s
e
V
200%
100%
150%
50%
10%
0%
0%
0%
50. Perzentil 75. Perzentil
rTSR
Compensation
Compensation framework
Plan duration
The vesting period, during which
performance is measured, is three years.
For LPP awards granted to Group EC
members and other key executives, the
duration of the LPP is five years, comprising
a three-year vesting and performance
measurement period and an additional
two-year holding period.
Structure
At the grant date, the award amount is split
equally into three underlying Performance
Share Unit (PSU) components. A valuation
by a third party is used to determine the
number of PSUs granted.
Performance Share Units: ROE
The performance condition for the first PSU
component is ROE with a linear vesting line.
Vesting is at 0% for an ROE at the risk-free
rate* and at 100% for an ROE at a pre-
defined premium above the risk-free rate.
The premium is set at the beginning of the
plan period. To align with external financial
targets, the premium for the LPP 2020 has
been set at 700 basis points above the
risk-free rate. At the end of each year, the
performance against the ROE condition is
assessed and one third of the PSUs are
locked in within a range of 0% to 100%.
Vesting occurs only at the end of the full
three-year plan period (capped at 100%**).
PSU vesting curve: ROE
r
o
t
c
a
f
g
n
i
t
s
e
V
100%
75%
50%
25%
0%
Risk-free
rate*
Risk-free rate* +
700 basis points
ROE
150%
200%
r
o
t
c
a
f
g
n
i
t
s
e
V
Performance Share Units: ENW
The performance condition for the second
PSU component is the growth of absolute
ENW (the difference between the market-
consistent value of assets and liabilities).
Vesting is at 0% for an ENW growth of 0%
and at 100% for an ENW growth of 10%. At
the end of each year, the performance on
absolute ENW growth is assessed and one
third of the PSUs are locked in within a
range of 0% to 100%. Vesting occurs only
50th
at the end of the full three-year plan period
percentile
(capped at 100%**).
75th
percentile
100%
50%
0%
rTSR
r
o
t
k
a
F
-
g
n
i
t
s
e
V
100%
75%
50%
25%
0%
r
o
t
k
a
F
-
g
n
i
t
s
e
V
200%
150%
100%
50%
0%
50. Perzentil 75. Perzentil
rTSR
r
o
t
k
a
F
-
g
n
i
t
s
e
V
50%
Funding
The LPP pool granted each year is reviewed
in the context of sustainable business
performance and affordability, and funded
as part of the Group’s total variable
compensation pool.
100%
75%
25%
Settlement
At the end of the three-year measurement
period, PSUs will be settled in shares,
unless there are legal or regulatory
0%
restrictions.
absolutes ENW-Wachstum
0%
10%
100%
Forfeiture and clawback provisions apply
in a range of events as defined in the LPP
plan rules (please see page 125 of this
Financial Report for termination and
clawback provisions in long-term plans).
75%
50%
r
o
t
k
a
F
-
g
n
i
t
s
e
V
25%
Swiss Re also makes it possible for
all LPP participants to have shares sold or
automatically settled on a net basis as
Risikofreier
Risikofreier Zinssatz*
applicable, to cover statutory tax and social
Zinssatz*
+ 700 Basispunkte
security liabilities that may arise at vesting.
0%
ROE
For LPP performance outcomes over past
years, please refer to page 136.
150%
200%
Outlook for 2021
During 2020, a thorough review of
Swiss Re’s compensation framework was
undertaken to ensure the Plan’s continued
effectiveness and pay-for-performance
alignment. As a result, the LPP will be
renamed to Leadership Share Plan (LSP).
r
o
t
k
a
F
-
g
n
i
t
s
e
V
100%
50%
0%
As a consequence of this change to the
global plan, the following key changes
apply to grants as of 2021:
• The vesting factors for all performance
50. Perzentil 75. Perzentil
rTSR
conditions will be harmonised
(0% to 150% for ENW, ROE and rTSR
PSUs).
100%
75%
• In case of negative absolute TSR, vesting
will be capped at maximum 100% even if
Swiss Re meets or exceeds the rTSR peer
50%
group performance.
25%
r
o
t
k
a
F
-
g
n
i
t
s
e
V
0%
0%
No other material changes have been made
to plan duration, structure and settlement
10%
for Group EC members compared to the
absolutes ENW-Wachstum
LPP and the above-mentioned changes
apply to all participants that are granted
PSUs under the LSP. Current unvested LPP
awards (grants prior to 2021) are
unaffected by this change.
More details on the LSP will be included in
the 2021 Compensation Report.
*
The annual risk-free rate is determined as the average of 12 monthly rates for ten-year US Treasury bonds of the corresponding performance year.
** Maximum vesting percentage refers to the maximum number of granted PSUs that can vest.
Swiss Re | Financial Report 2020
124
r
o
t
c
a
f
g
n
i
t
s
e
V
100%
75%
50%
25%
0%
r
o
t
k
a
F
-
g
n
i
t
s
e
V
100%
75%
50%
25%
0%
0%
10%
absolute ENW growth
0%
10%
absolutes ENW-Wachstum
Global Share Participation Plan
Swiss Re offers its employees an
opportunity to directly participate in the
long-term success of the Group by
purchasing shares (for up to a maximum of
CHF 7 000 per year of a plan cycle and
capped at 10% of base salary), through the
Global Share Participation Plan (GSPP).
Swiss Re provides a 30% match on the
number of shares held by employees at the
end of the three-year plan cycle. The match
is subject to forfeiture in case of termination
of employment before the end of the
plan cycle.
The GSPP has the same core design in
all locations.
Long-term compensation termination and clawback provisions
Termination reason
VAI
LPP
GSPP
Voluntary resignation
Unvested awards are forfeited pro rata
and the performance factor is capped
at 100% as of the date of termination
of the employment relationship.
Unvested awards are forfeited as
of the date of termination of the
employment relationship.
Matching Share awards are forfeited
as of the date of termination of the
employment relationship.
Redundancy
Retirement
Unvested awards shall vest on
the regular vesting date, subject
to performance.
Unvested awards shall vest on
the regular vesting date, subject
to performance.
Matching Share awards shall vest as of
the date of termination of the employment
relationship.
Unvested awards shall vest
on the regular vesting date, subject
to performance.
Unvested awards shall vest
on the regular vesting date, subject
to performance.
Matching Share awards shall vest as of
the date of termination of the employment
relationship.
Termination for cause
Unvested awards are forfeited as
of the date of termination of the
employment relationship.
Unvested awards are forfeited
as of the date of termination of the
employment relationship.
Matching Share awards are forfeited as of
the date of termination of the employment
relationship.
Health/disability
Death
Mutual agreement
Unvested awards shall vest on the
regular vesting date, subject to
performance.
Unvested awards shall vest on the
regular vesting date, subject to
performance.
Matching Share awards shall vest as of
the date of termination of the employment
relationship.
Unvested awards shall vest immediately
using the performance factor as
presented during the latest Compensation
Committee meeting.
Unvested awards shall vest immediately
using the performance factors as
presented during the latest Compensation
Committee meeting.
Matching Share awards shall vest
immediately.
Unvested awards may vest at Swiss Re’s
sole discretion. The final decision is
subject to the review and approval of
the Business Head, Head Reward, Group
Chief Human Resources Officer and, if
applicable, the Compensation Committee.
Unvested awards may vest at Swiss Re’s
sole discretion. The final decision is
subject to the review and approval of
the Business Head, Head Reward, Group
Chief Human Resources Officer and, if
applicable, the Compensation Committee.
Matching Share awards may vest
if stated in the agreement between
Swiss Re and the employee.
In events of malfeasance, fraud, misconduct, or as deemed appropriate by the Compensation Committee, awards are subject to clawback
rules where Swiss Re is entitled to seek repayment of all or part of any awards paid, vested, settled or released, for a period of five years
after settlement.
Swiss Re | Financial Report 2020
125
Compensation
Compensation framework
Supplementary information on
Group EC members
Performance assessment
The Compensation Committee assesses the
performance of the Group EC, including the
Group CEO, against a set of quantitative and
qualitative objectives. These objectives are
agreed at the beginning of the year and are
aligned with the Group’s strategy.
Compensation approval
The determination of compensation for
the Group EC, including the Group CEO, is
ultimately subject to AGM approval, as
outlined in the Articles of Association.
Benchmarking
The external compensation advisor to the
Compensation Committee conducts an
annual review of the compensation of the
Group EC relative to a group of reference
companies to ensure that market
competitiveness is maintained. The
reference companies are regularly reviewed
by the Compensation Committee to ensure
their relevance. The core peer group
consists of the following globally active
primary insurance and reinsurance firms:
AIA Group Ltd, Allianz SE, American
International Group Inc, Aviva PLC, AXA SA,
Chubb Limited, Hannover Rueck SE,
Insurance Australia Group Ltd, MetLife Inc,
Muenchener Rueckversicherungs-
Gesellschaft AG, Prudential PLC, QBE
Insurance Group Ltd, Reinsurance Group of
America Inc, SCOR SE and Zurich Insurance
Group Ltd.
126
Swiss Re | Financial Report 2020
Stock Ownership Guidelines
Swiss Re has stock ownership guidelines
which articulate the levels of stock
ownership expected of the Group EC
members, including the Group CEO.
The guidelines are designed to increase
the alignment of the interests of senior
management and shareholders.
The guidelines define target ownership by
role and the ownership levels required are:
• Group CEO – 3 × annual base salary.
• Other Group EC members – 2 × annual
base salary.
Stock ownership guidelines also apply to
the senior executives below the Group EC
members (1 × annual base salary).
Members have a five-year timeframe to
achieve these targets. In case of non-
compliance and because Swiss Re believes
that a meaningful stock ownership position
is essential for alignment with the interests
of shareholders, restrictions on the cash
portion of the API and/or the vested VAI
amounts will apply. These amounts may be
settled in shares, then bought against
market conditions.
All vested shares that are owned directly or
indirectly by the relevant Group EC member
and related parties will be included in the
assessment of whether the guidelines have
been met or not.
Employment conditions and change
of control provisions
The Group EC members, including the
Group CEO, have open-ended employment
agreements with notice periods of 12
months for termination either by the
company or the individual. Their
employment agreements do not contain
severance clauses (“golden parachutes”),
special provisions on the cancellation of
contractual arrangements, agreements
concerning special notice periods, waivers
of lock-up periods for options, shorter
vesting periods, additional contributions
to pension funds or any other provisions
protecting the individuals concerned
against changes of control.
With regard to deferred compensation,
in the event of a change of control, the
rights of members of the Group EC and
other members of senior management are
identical to those of all other employees.
Both the VAI and LPP Plan Rules include
provisions governing change of control
events.
Specifically, the Board of Directors
(or to the extent delegated to it, the
Compensation Committee) may decide
at its discretion on the continuation,
acceleration, amendment or removal of
any vesting, blocking or exercise conditions
for the payment or grant of deferred
compensation. It may also decide to replace
any LPP award with shares of the entity
assuming control. In addition, it may apply
any other measure which it considers
equitable and reasonable, provided this
does not constitute impermissible
compensation pursuant to the Ordinance
against Excessive Compensation at Public
Corporations. Should the Board of Directors
decide to accelerate vesting, performance
factors will generally be based on the latest
performance estimates available.
Information on “change of control” clauses
is also covered in the Corporate Governance
section on page 109 of this Financial Report.
For more information on the quantitative
impact of vested shares, please refer to
page 87 of this Financial Report and Note
16 to the Group financial statements on
page 273 of this Financial Report.
Group EC members are covered by the
Group’s standard defined contribution
pension plans.
Compensation framework for
the Board of Directors
The objective in compensating members
of the Board of Directors is to attract and
retain experienced individuals who are
highly motivated to perform a critical role
in the strategic oversight of Swiss Re and
to contribute their individual business
experience and expertise. The structure of
fees for members of the Board of Directors
takes account of the way their contribution
to the success of Swiss Re differs from that
of the members of the Group EC.
The fee components are structured to
achieve a strong alignment with the
interests of Swiss Re Ltd´s shareholders:
• Fees are delivered 60% in cash and 40%
in shares. The shares have a four-year
blocking period.
• The Board members do not receive
variable or performance-based
compensation.
• The fee level for each Board member,
subject to their re-election, is reviewed
annually.
• The maximum aggregate amount of
compensation for the members of the
Board of Directors is approved by the
Annual General Meeting (AGM) in
advance of the term of office for which
the Board members are (re-)elected.
Fee approval
In line with Swiss law, and as outlined
in the Articles of Association, the aggregate
compensation for the members of the
Board of Directors for the next term of office
is subject to shareholder approval at
the AGM.
Subsidiary boards of directors
The majority of the board members at
subsidiary level are Swiss Re executives
who do not receive any additional
compensation for their services in these
roles. The non-executive members of the
subsidiary boards receive their fees 100%
in cash. When a member of the Board of
Directors of Swiss Re Ltd also serves
on the board of a subsidiary, the aggregate
compensation of the Board of Directors
proposed to the AGM for approval also
includes any subsidiary board fees.
Outlook for 2021
As per 1 January 2021, a minimum Swiss
pension fund solution was set up for those
members of the Board of Directors who are
not exempted from mandatory occupational
benefit plans in Switzerland. This will be
offered by an established external provider
and applies only to a limited number
of members of the Board of Directors
depending on their personal situation due
to which local law imposes such pension
solution. The external provider was chosen
to ensure independence of the Board of
Directors from Swiss Re’s pension fund.
Pension contributions are split equally
between Swiss Re and the respective
members of the Board of Directors.
Contributions made by Swiss Re for the
period from 1 January 2021 until the
AGM 2021 are included in the table
“Individual Board compensation for the
period from the AGM 2020 to the
AGM 2021” (refer to page 144 of this
Financial Report).
Roles and time commitment
Swiss Re Ltd’s Board of Directors has a
special skill set including experience in key
areas such as insurance and reinsurance,
finance, accounting, capital markets, risk
management and regulatory matters, as
well as leadership and decision-making
experience in large, complex financial
institutions. The mandate also demands
significant commitment, high integrity and
intercultural communication competence.
The fees for the members of the Board of
Directors reflect different responsibilities
and committee memberships. The
individual level of pay therefore varies.
Certain committees, such as the Audit
Committee, meet more frequently or hold
longer meetings, and hence have higher
workloads reflected in their fees. The table
on page 99 of this Financial Report provides
an overview of the meetings of the Board of
Directors and its committees held in 2020.
The Chairman of the Board of Directors
devotes himself full-time to his role. In
defining the position of Chairman as a
full-time role, Swiss Re applies best practice
for regulated, complex financial institutions.
The Vice Chairman, who is also the Lead
Independent Director, acts as a deputy of
the Chairman if the Chairman is prevented
from performing his duties or in potential
conflict of interest situations. The Vice
Chairman may prepare and execute Board
resolutions on request of the Board and
liaises between the Board and the Group EC
in matters not reserved to the Chairman.
The Lead Independent Director acts as an
intermediary between the Group and its
shareholders and stakeholders in the
absence of the Chairman or, in particular,
when a senior independent member of the
Board is required. He may convene and
chair sessions where the Chairman is not
present. He will communicate the outcome
of these sessions to the Chairman.
For further details on the duties and
required expertise of the members of the
Board of Directors (including the Chairman
and Vice Chairman), please refer to pages
94–95 in the Corporate Governance
chapter of this Financial Report.
Swiss Re | Financial Report 2020
127
Compensation
Compensation governance
Authority for decisions related to
compensation at the Board and Group
EC level is governed by the Articles
of Association and the Bylaws of
Swiss Re Ltd, including the Charter of
the Compensation Committee. The main
responsibilities of the Compensation
Committee are summarised in the table
on the right.
Roles and responsibilities in respect of compensation
Function
Description of roles and responsibilities
Board of
Directors
• Establishes and periodically reviews Swiss Re’s compensation
framework, including guidelines and performance criteria.
• Prepares the proposals to the AGM regarding Board of Directors
and Group EC compensation.
• Further details can be found in the Corporate Governance section
on pages 78–112 of this Financial Report.
Compensation
Committee
• Consists of at least four independent members of the Board of
Directors. Each member of the Compensation Committee is elected
individually at the AGM for a term of office until completion of the
next AGM.
• Is governed by a Charter approved by the Board of Directors, which
defines the purpose, composition and procedural rules of the
Compensation Committee, including its responsibilities and authorities
for making proposals and decisions related to compensation of the
members of the Board of Directors and the Group EC.
• Assesses the individual performance of the members of the
Group EC, including the Group CEO, and periodically reviews the
effectiveness of the performance management process.
• Is responsible for making recommendations to the Board of
Directors and overseeing the design and implementation of
compensation principles, policies, framework, plans and disclosure.
• Reviews compensation principles, policies and share-based plans
annually to ensure that these remain in line with Swiss Re’s
objectives and strategy, shareholders’ interests and legal and
regulatory requirements.
• Further details can be found in the Corporate Governance section
on pages 82 and 98 of this Financial Report.
Management
• The Group CEO and the Group Chief Human Resources Officer
Secretary
External
Advisors
participate in the Compensation Committee meetings.
• Other members of senior management may attend as deemed
appropriate by the Compensation Committee and upon invitation
by the Chair of the Compensation Committee.
• No individual may attend any part of a meeting where their own
compensation is discussed.
• The Head Reward serves as the Secretary to the Compensation
Committee and attends its meetings (excluding the executive
sessions).
• Mercer provides information about remuneration trends, market
benchmarking and advice on executive compensation issues.
• Niederer Kraft Frey Ltd provides legal advice, mainly about specific
aspects of compliance, plan rules and disclosure matters regarding
compensation.
• These advisors are retained by the Compensation Committee and
provide the Compensation Committee with an external perspective.
They may also have other mandates with Swiss Re.
The Articles of Association of
Swiss Re Ltd include rules on
• The annual and binding approval by
the AGM of the maximum aggregate
amounts of compensation of members
of the Board of Directors and of the
Group EC (Article 22).
• The supplementary amount for
changes in the Group EC (Article 23)
if the maximum aggregate amount
of compensation approved by the
AGM is not sufficient to also cover
compensation of a new Group EC
member.
• The compensation principles for both
the members of the Board of Directors
and of the Group EC covering short-
term and long-term elements,
performance-related pay, payment in
shares, financial instruments or units,
compensation in kind or other types
of benefits (Article 24).
• The agreements with members of the
Board of Directors and the Group EC,
external mandates and credits and
loans (Articles 25 to 27).
The Articles of Association are available
on the Swiss Re website at:
www.swissre.com/articlesofassociation
Download the PDF to
your mobile by scanning
the QR code with your
smartphone camera.
128
Swiss Re | Financial Report 2020
Compensation approvals
The table below shows the approval processes for key compensation decisions:
Compensation item
Maximum aggregate amount of compensation
for the members of the Board of Directors for
the next term of office
Maximum aggregate amount of fixed compensation
and long-term variable compensation for the
members of the Group EC
Aggregate amount of variable short-term
compensation for the members of the Group EC
Compensation for the Chairman of
the Board of Directors
Individual compensation for the members of
the Board of Directors (excl. Chairman of the Board
of Directors)
Variable short-term compensation pools and
long-term incentive pools for the Group
and Group EC
Compensation for Group CEO
Variable short-term compensation pools for
the Control Functions
Individual compensation for the
Heads of the Control Functions
Individual compensation for the members of the
Group EC (excl. Group CEO)
Proposed
Compensation Committee
Endorsed
Chairman of the Board of Directors,
Board of Directors
Approved
AGM
Group CEO
Group CEO
Chairman of the Board of Directors,
Board of Directors,
Compensation Committee
Chairman of the Board of Directors,
Board of Directors,
Compensation Committee
AGM
AGM
Compensation Committee
Board of Directors1
Compensation Committee
Chairman of the Board of Directors
Board of Directors1
Group CEO
Chairman of the Board of Directors,
Compensation Committee
Board of Directors1
Chairman of the Board
of Directors
Group CEO
Group CEO
Group CEO
Compensation Committee
Board of Directors2
Compensation Committee,
Chairs of the Audit Committee and the
Finance and Risk Committee
Compensation Committee,
Chairs of the Audit Committee and the
Finance and Risk Committee
Chairman of the Board of Directors,
Compensation Committee
Board of Directors
Board of Directors
Board of Directors2
1 Within the maximum aggregate amount of compensation approved by the AGM.
2 Within the maximum aggregate amount of compensation approved by the AGM and the additional amount available for changes in the Group EC after the AGM as per the Articles of
Association, respectively.
Compensation Committee’s time
allocation to key topics in 2020
28% Review of compensation framework
28% Pay for performance
for the Group
8% Pay for performance
for Group EC members
12% Compliance and regulatory
13% Executive sessions
11% Other topics
Compensation Committee activities
The Compensation Committee operates
as the Group’s compensation committee
and oversees the compensation framework
applied at all entities of the Swiss Re Group.
The Compensation Committee has an
annual agenda to ensure that important
reviews take place at the right times
throughout the year. The Compensation
Committee also commits time to executive
sessions and conducts a periodic
self-evaluation to preserve its high level
of effectiveness. During 2020, the
Compensation Committee architecture
(ie Compensation Committee governance
processes, tasks and responsibilities) was
reviewed to ensure that the Compensation
Committee is entrusted with appropriate
responsibilities, material topics and has
sufficient capacity to dedicate to their tasks.
The Compensation Committee held six
regular meetings during 2020 and provided
updates to the Board of Directors on topics
discussed, decisions made and items for
approval after each of these meetings.
In addition, the Compensation Committee
held one extraordinary meeting and passed
eight decisions by circular resolution
during 2020.
A high-level overview of topics dealt with
during the year is shown on page 130 of
this Financial Report.
Swiss Re | Financial Report 2020
129
Compensation
Compensation governance
High-level overview of topics discussed by the Compensation Committee
At Swiss Re, the compensation cycle begins in December and runs through to April of the following year. The Compensation Committee
oversees each stage of the process, starting with deciding on the variable compensation pool for the prior performance year, reviewing
this decision and setting targets for the upcoming year.
Outlined below is an overview of the main topics discussed during the seven Compensation Committee meetings held in 2020:
January
February
April
June
September
November
December
Performance assessment process
and variable compensation pool
Review of decisions of prior
compensation cycle
Performance factors for deferred
compensation awards
LPP pool for upcoming year
Performance
targets for
upcoming year
Group EC performance assessment
Group EC compensation
benchmarking
Group EC
individual
compensation
proposals
Investor and
Proxy Advisor
feedback
Upcoming
performance
cycle discussion
Upcoming
performance
cycle discussion
Board fees for
upcoming
compensation
period
Review of
subsidiary board
compensation
Board
compensation
benchmarking
and policy
Annual Benefits
Review; Stock
Ownership
Guidelines
Compensation
Policy
Compensation framework review
(API, VAI and LPP design,
API pool funding)
Pay equity
approach
Integration of
sustainability
performance
target
COVID-19 impact
Compensation
Report and AGM
feedback
Role and mandate
of external
advisors
Review of
CC goals
CC architecture
Compliance and regulatory developments
Compensation
approval authority
matrix
Integration of
sustainability
performance
target
Compensation
Report
CC self-evaluation
and review
of CC goals
CC architecture
Past
performance
cycle
Upcoming
performance
cycle
Group EC
compensation
and
performance
Board
compensation
Compensation
plans &
principles
Compensation Report
Compliance,
regulatory &
other
governance
topics
Compensation
Committee (CC)
goals
130
Swiss Re | Financial Report 2020
The role of the Control Functions
in compensation
The role of Swiss Re’s Control Functions
(defined as Group Risk Management,
Compliance and Group Internal Audit) in
compensation matters is well established.
Independence of the Control Functions
In order to ensure the continued
independence of Control Functions, their
compensation approval processes differ
in that key annual compensation decisions
for these functions are approved at the
Board level. This includes the approval of
the aggregate API pools of the Control
Functions and the approval of the
individual compensation for the Head
of each Control Function.
Risk and control-related behaviour
assessment
Swiss Re bears risks in the course of its
business activities, including market, credit
and liquidity, underwriting, operational
(including legal and compliance) and
reputational risk. The Control Functions
annually perform an independent
assessment of risk and control-related
behaviours of the Group and each of the
business functions, and of Swiss Re’s
Key Risk Takers individually.
These reports are delivered to key
executives including the Group Chief Risk
Officer and the Group Chief Human
Resources Officer on an annual basis.
Key Risk Takers
Swiss Re’s Key Risk Takers are executives
in core risk-taking positions who decide on
business and people strategies, approve
budgets and can materially influence
financial results or expose Swiss Re to
significant operational or reputational risks.
As per 31 December 2020, Swiss Re
identified 168 individuals (including the
13 members of the Group EC as per
31 December 2020), who qualify as Key
Risk Takers. In addition to the members
of the Group EC, this group consists of
Business Unit EC members, other key
executives and roles with core risk-taking
authority. The list of Key Risk Takers is
reviewed on a regular basis by Group Risk
Management and Human Resources.
Influence of the behavioural
assessment on compensation
The risk and control-related behaviour
assessment of Group and Business Units/
Group Functions provides additional input
to determine the Group API pool and its
allocation to each Business Unit/Group
Function. The assessment of each Key Risk
Taker serves as additional input when
considering individual performance and
compensation outcomes.
Desired behaviours
Swiss Re’s performance management
approach supports a high-performance
culture. Individual and team goals, as well
as behaviours, are aligned to Swiss Re’s
purpose and business strategy. Swiss Re’s
“leadership from every seat” philosophy, as
part of which desired behaviours are clearly
articulated, is embedded in the continuous
performance management and feedback
discussions. This allows for forward-looking
conversations that foster real-time
improvement and faster adaptation to
business needs and in doing so, arrive at
a robust performance differentiation and
transparent pay for performance.
Influence of sustainability on
compensation
Since 2020, sustainability-related
performance targets are defined for the
Group as well as for each Business Unit and
Group Function. Targets are grouped
around several sustainability-related themes
such as sustainability-related indices,
climate change, sustainable business, and
stakeholder engagement. The KPIs and
targets are aligned to Swiss Re’s Group
Sustainability Strategy and take into account
Swiss Re’s sustainability ambitions and
identified risks (see pages 16–21 in the
Sustainability Report 2020 for details on
sustainability performance targets and pages
36–43 for details on sustainability risks).
At the end of the year, the Group, Business
Units and Group Functions report on their
performance against such performance
targets. The outcome of this reporting is
considered as one of the six qualitative
assessment dimensions in the Group API
pool funding process (see page 121 of
this Financial Report for details on the
Group API pool funding process and
pages 132–134 of this Financial Report
for performance outcomes 2020).
Swiss Re | Financial Report 2020
131
Compensation
Performance
outcomes 2020
Key considerations for Swiss Re’s
annual compensation decisions cover
US GAAP and EVM based business
results, qualitative factors and
Swiss Re’s pay for performance
approach.
132
Swiss Re | Financial Report 2020
The outcomes of the financial, qualitative
and overall assessment, all part of
Swiss Re’s three-step funding process
(as described on page 121 of this Financial
Report), determined the Group API pool for
2020. In line with Swiss Re’s established
processes, key performance indicators
(KPIs) and targets for the Group API pool
were approved by the Compensation
Committee at the beginning of 2020 and
have not been modified in the wake of
the COVID-19 pandemic.
Financial assessment (step 1)
Swiss Re Group and Business Units
In 2020, the Group’s US GAAP and
Economic Value Management (EVM) results
were significantly impacted by COVID-19-
related losses, affecting the performance of
all Business Units in the Group. The vast
majority of the Group’s COVID-19 losses
was driven by affirmative non-damage
business interruption, higher mortality
claims as well as cancelled or postponed
events. Throughout 2020, Swiss Re
showed a strong underlying performance
across the Group. Property & Casualty
Reinsurance delivered strong new business
generation with higher premiums earned
and price increases and a strong investment
result supported Life & Health Reinsurance’s
solid performance. Corporate Solutions’
turnaround is ahead of plan and Life Capital
successfully closed the ReAssure sale.
US GAAP financial performance
Property & Casualty Reinsurance’s
performance was heavily driven by COVID-
19-related losses as well as large natural
catastrophe events and man-made losses,
partially offset by strong new business
generation with increased premiums earned,
supported by increased prices. Life & Health
Reinsurance’s performance benefited from
realised gains on fixed income securities and
solid underwriting results due to active
portfolio management, while still significantly
impacted by COVID-19 losses.
The strong improvement of Corporate
Solutions’ ex-COVID-19 result reflected the
strict execution of management actions
announced in 2019, including 85% of the
planned portfolio pruning and a substantial
expense ratio reduction. Pricing momentum
combined with lower than expected large
man-made losses and a favourable claims
development from prior accident years
contributed further to the technical result.
Life Capital’s result was driven by the
continued investment into growth of the
open book businesses. Gross premiums
written in the open book businesses
increased by 22% during 2020 when
measured at constant exchange rates.
The completion of the ReAssure sale and
successful deconsolidation of the business
marks a key achievement for Life Capital.
For further details on the US GAAP financial
performance, refer to pages 182–293 of
this Financial Report.
EVM financial performance
The underwriting result of Property &
Casualty Reinsurance was primarily driven
by COVID-19-related impacts, US liability
experience and assumption updates, large
natural catastrophe and man-made losses.
This was partially offset by strong renewals
from property natural catastrophe and
specialty as well as reserve releases for
natural catastrophe losses. The Life & Health
Reinsurance underwriting result was driven
by COVID-19-related claims and reserves
as well as by capital costs updates, partially
offset by new business transactional
business growth in EMEA and the Americas.
The investment profit was mainly driven by
favourable interest rate impacts on the net
duration position.
Corporate Solutions’ underwriting loss was
primarily driven by COVID-19-related losses
more than offsetting otherwise good
underwriting results reflecting the benefits of
the management actions taken to improve
profitability and low large man-made claims
activity across all lines of business.
The unfavourable underwriting result of
Life Capital was primarily driven by
expenses to grow the open book businesses
as well as a true-up to the gain on the sale
of ReAssure, underperformance in elipsLife
and unfavourable persistency in the closed
book US business. For further details on
the EVM financial performance, refer to the
EVM chapter on pages 34–47 of this
Financial Report.
Since the performance across all four
financial KPIs was more than 30% below
target, the FPF was set at 0.7 (floor)
in line with Swiss Re’s Group API pool
funding process.
Qualitative assessment (step 2)
The year 2020 was heavily marked by the
COVID-19 pandemic for Swiss Re and its
employees. Despite this unprecedented
situation, the Group performed above
expectations across the six qualitative
assessment dimensions and related
goals considered in the Group API pool
funding process.
Strategic initiatives
Business Units and Group Functions jointly
delivered on key strategic initiatives, including
the completion of the sale of ReAssure to
Phoenix Group and the establishment of a
roadmap for streamlining the Group’s legal
entity structure. Swiss Re has further
expanded its risk-sharing platform, eg
through a private sidecar transaction with
Dutch pension investor PGGM and through
a newly created standalone fund offering
investors an efficient way to participate in
Swiss Re’s natural catastrophe business. In
Corporate Solutions, achievements focusing
on the unit’s unique value proposition
as a corporate insurer stood out.
Franchise building
Having joined forces with public and private
partners to deploy innovative solutions
and strengthen its franchise, Swiss Re is
proud of its collaborative achievements,
for example:
• Acting as a thought leader to foster
learnings from the COVID-19 pandemic:
the Group’s client webinars, dedicated
web and social media content reached
above-benchmark engagement and
made Swiss Re the most visible reinsurer
on COVID-19 response.
• Putting its pioneering Risk Resilience
Centre platform, which provides access
to the world’s richest data on COVID-19,
at the service of global health by opening
it to participants of The Trinity Challenge
(a coalition of universities, foundations
and leading companies with the aim of
better protecting the world against health
emergencies).
• Establishing many other new solutions and
partnerships, such as Movinx together
with Daimler and the Granular Insurance
Company together with Verily, an Alphabet
company; Movinx develops fully digital
automotive and mobility insurance
products and the Granular Insurance
Company combines innovative health
technology solutions with novel insurance
and payment models.
Client & service quality
Swiss Re’s client and service quality is
assessed on an annual basis through
leading external benchmarks. Both clients
and non-clients perceived Swiss Re as a
leading brand in property and casualty, and
life and health reinsurance. Client
satisfaction remained strong and clients
commended the uninterrupted service and
availability of their Swiss Re contacts during
the pandemic.
Human capital & talent management
The Group’s employee engagement survey
results were above the financial services
benchmark and at their highest level since
the start of measurement in 2015, with
notable increases on agility and the
perception of having an inclusive work
environment. Swiss Re did note early signs
of a decrease in employees’ personal
resilience and has quickly taken mitigation
actions, eg by establishing a new initiative
with mental health champions and a
programme leveraging learnings from the
COVID-19 pandemic. Considering a diverse
and inclusive workforce as integral to its
success, the Group has further increased
female representation in senior management
and launched a new network to promote
awareness and inclusion of people of colour
in the workplace.
Risk and control behaviour
Reinsurance and risk are intrinsically linked.
Assessment scores based on the continuous
assessment by Swiss Re’s Control Functions,
including Group Internal Audit as an
independent assurance function, have
gone up compared to the prior year,
demonstrating a robust risk governance
framework with a defined risk appetite and
accountability for managing risk. A clear
tone from the top encouraged an effective
and open risk culture.
Sustainability
2020 was the first year for which
sustainability was considered as a separate
assessment dimension in the Group API pool
funding process. Sustainability-related
performance targets focused on the Group’s
ranking in the Dow Jones Sustainability
Index (DJSI), the alignment of its business
goals with the Paris Agreement and the
increase in the share of sustainable business
volume and services. Swiss Re has
accomplished notable achievements, for
example reaching a leading score in the
DJSI, which makes it the only reinsurer
represented in the top 10 in this index. The
Group also continued to co-lead the Net-Zero
Asset Owner Alliance and established an
internal triple-digit carbon levy to support the
transition to net-zero emissions in operations
by 2030. For further details on sustainability
governance and sustainability performance
targets, please refer to pages 82 and 16–21
of the Sustainability Report.
Considering the Group’s performance across
all six defined dimensions and established
qualitative performance goals, the Board of
Directors agreed a Qualitative Performance
Factor of 1.05.
Overall assessment (step 3)
In line with Swiss Re’s Group API pool
funding process, the overall assessment
allows for considering additional factors on
top of the established KPIs and dimensions
in the financial and qualitative assessments.
Both the Compensation Committee and the
full Board of Directors assessed in depth the
2020 performance of Swiss Re Group and
recognised its successful navigation of
the COVID-19 pandemic. Excluding the
COVID-19 impact, the Group’s 2020
financial results would have been well
above the prior year’s results. Swiss Re’s
incident management teams around the
globe ensured the health and safety of all
employees, which enabled business to
continue as normal. All processes ran timely
and without disruptions, and employees
showed great personal resilience. Swiss Re
did not impose any salary cuts or furloughs,
nor did it lay off any employees or request
government support due to COVID-19.
Swiss Re | Financial Report 2020
133
Compensation
Performance outcomes 2020
134
Swiss Re | Financial Report 2020
In view of the elements outlined on the previous pages, recognising employees’
extraordinary efforts in the wake of the pandemic and considering aspects such as pay
positioning and key talent retention risk, the Board of Directors has applied positive
discretion in the overall assessment and adjusted the outcome of financial and qualitative
assessments upwards by 0.105.
The Board of Directors considers this limited use of discretion appropriate in the context of
2020. It keeps the Group API pool significantly below target and as such, is in line with the
majority of re/insurance organisations, which have projected incentive pools below target
levels for 2020. It is also a continuation of Swiss Re’s long-standing practice of having
positive but not excessive variable compensation payouts in relatively benign environments
and conversely, lower but proportionate variable compensation payouts in adverse
environments. This practice is based on Swiss Re considering its role as that of a shock
absorber for society, which mitigates excessive volatility and does its part to improve
resilience to future systemic risks.
In line with Swiss Re’s established Group API pool funding process, a Group Business
Performance Factor (Group BPF) is calculated by multiplying FPF and QPF, and
subsequently adding or subtracting any adjustment from the overall assessment. For 2020,
this results in a Group BPF of 0.84 (0.7 x 1.05 + 0.105). The Group API pool is in principle
derived by multiplying the Group Target API (TAPI) pool with the Group BPF. The resulting
Group API pool for 2020 is significantly below target but still proportionate.
Performance targets used for the financial assessment are considered to be commercially
sensitive and disclosure of such may provide an unfair advantage to Swiss Re’s competitors.
However, to further increase transparency on the Group API pool funding process, results
for each of the financial KPIs are disclosed.
Group API pool outcome 2020
Key performance indicator
Weighting
Achievement
versus target
l
a
i
c
n
a
n
F
i
t
n
e
m
s
s
e
s
s
a
) ROE
1
p
e
t
s
(
Net operating margin
EVM profit (% of ENW)
ENW growth per share
25%
25%
25%
25%
Resulting Financial Performance Factor (FPF):
e
v
i
t
a
t
i
l
a
u
Q
t
n
e
m
s
s
e
s
s
a
)
2
p
e
t
s
(
Client and service quality
Risk and control behaviour
Franchise building
Human capital and talent management
Strategic initiatives
Sustainability
Resulting Qualitative Performance Factor (QPF):
FPF*QPF:
l
l
a
r
e
v
O
t
n
e
m
s
s
e
s
s
a
)
3
p
e
t
s
(
Overall assessment of Group API Pool from
a number of different perspectives, eg
normalised results, labour market, capital
market, compensation competitiveness and
retention
Result
–3.1%
–1.1%
–10.4%
–0.1%
0.70
Overall
slightly above
target (see
commentary
on page 133)
1.05
0.735
+0.105
Resulting Group Business Performance Factor (BPF)1:
0.84
Group API Pool approved by
the Board of Directors
1 Based on (FPF 0.70 x QPF 1.05) + overall assessment 0.105 = Group BPF 0.84.
Value Alignment Incentive
VAI performance is measured for the Group and each underlying business area. The
performance factor for each participant is determined based on the business area that the
participant worked for on 31 December of the year preceding the award (see pages
122–123 of this Financial Report for a detailed description of the VAI). The VAI 2017
(awarded 2018) performance factor of 94.0% for the Swiss Re Group is based on the
three-year average previous years’ business performance for years 2018, 2019 and 2020.
The main drivers were previous years’ business losses, mainly driven by reserve increases,
especially for losses related to COVID-19 for Reinsurance and Corporate Solutions in 2020,
and US casualty in Corporate Solutions and Property & Casualty Reinsurance. Business
area performance factors for the VAI 2017 (awarded 2018) ranged from 62.6% to 99.8%.
VAI plan year
2011 (awarded 2012)
2012 (awarded 2013)
2013 (awarded 2014)
2014 (awarded 2015)
2015 (awarded 2016)
2016 (awarded 2017)
2017 (awarded 2018)
2018 (awarded 2019)
2019 (awarded 2020)
Performance period remaining
as of 31 December 2020
Closed
Closed
Closed
Closed
Closed
Closed
–
1 year
2 years
Swiss Re Group performance factor
103.0%
101.5%
100.3%
99.9%
100.0%
97.4%
94.0%
to be determined in 2022
to be determined in 2023
Illustrative example of realised performance for the VAI 2017 (awarded 2018)
Granted and realised VAI are shown below for a grant of CHF 100 000 on the VAI 2017
(awarded 2018). For illustrative purposes, this example considers only the Group
performance factor. For disclosure of actual realised compensation 2020 for the
Group CEO, please refer to page 142 of this Financial Report.
Performance achievement
VAI awarded in
April 2018
CHF 100 000
Three-year average
of the EVM previous
years’ business profit
margin: –8.9%
Performance
factor:
VAI realised in
March 2021
94.0%
CHF 94 000
Swiss Re | Financial Report 2020
135
Compensation
Performance outcomes 2020
Leadership Performance Plan
The LPP award is consistently linked to the Group’s future achievement of multi-year
performance conditions (ROE, ENW and rTSR), keeping the focus on the long-term success
of the Group. Swiss Re made LPP grants in 2020 consistent with this rationale. The LPP is
generally part of total compensation (see pages 123–124 for a detailed description of the LPP).
In line with Swiss Re’s existing methodology, the 2020 LPP grant was based on a share
price of CHF 104.20 on the date after publication of the 2019 annual results
(21 February 2020, ie prior to the stock market downturn in the wake of the COVID-19
pandemic) to determine the 2020 LPP grant allocation values. As such, the Compensation
Committee concluded that no windfall gains will occur.
Awards prior to 2020 are split equally into Restricted Share Units (RSUs) and PSUs. The
RSU component for such in-flight plan cycles (ie granted in 2018 and 2019) is measured
against an ROE performance condition. At the end of each year, the performance is
assessed and one third of the RSUs is locked in within a range of 0% to 100%. At the end
of the three-year period, the total number of units locked may vest. For the LPP 2018, the
average performance factor for the RSUs was 1.67% for the three-year period. The PSU
component is based on rTSR, measured against a pre-defined basket of peers, and vests
within a range of 0% to 200%. For the LPP 2018, the performance factor for the PSUs was
146% for the three-year period. The table below gives an overview of the RSU and PSU
performance achievement for the previous LPP plan years:
LPP plan year
2012
2013
2014
2015
2016
2017
2018
2019
2020
Performance period remaining
as of 31 December 2020
Closed
Closed
Closed
Closed
Closed
Closed
–
1 year
2 years
RSU average performance factor
for the three-year period
99.7%
99.7%
99.7%
66.7%
32.3%
1.67%
1.67%
to be determined in 2022
to be determined in 2023
PSU performance factor
for the three-year period
200.0%
60.0%
81.0%
0.0%
0.0%
0.0%
146.0%
to be determined in 2022
to be determined in 2023
2018 RSU performance outcomes
2018
2019
2020
11.9%
11.1%
9.8%
1.4%
2.5%
–3.1%
Average performance factor:
2018
Target ROE
11,9%
Realised ROE
1,4%
1.67%
2018 PSU performance outcomes
Swiss Re TSR 2018–2020: 9.1%
72nd percentile
0% TSR positioning relative to peers 100%
Performance factor 146.0%
2019
2020
11,1%
9,8%
2,5%
–3,1%
136
Swiss Re | Financial Report 2020
Illustrative example of realised performance for the LPP 2018–2021
Granted and realised LPP 2018–2021 are shown below for a sample grant of
CHF 100 000 of the LPP 2018. This is a simplified representation for illustrative purposes
only. The number of RSUs and PSUs has been rounded up to the nearest full number. For
the disclosure of actual realised compensation for the Group CEO, please refer to page 142
of this Financial Report.
LPP granted in April 2018
(fair value)
Units
granted
Performance
achievement
Units
vesting
Share price
performance
LPP realised in March 2021
(estimated2 market value)
RSU:
CHF 50 000
Fair value per
unit: CHF 70.18
RSUs:
713
Performance
factor:
1.67%
RSUs:
12
–15.2%
Share
price
at grant
valuation
date1:
Share
price at
year-end
20202:
RSU:
CHF 1 000
CHF 71 339
CHF 100 000
PSU:
CHF 50 000
Fair value per
unit: CHF 86.62
PSUs:
578
Performance
factor:
146.0%
PSUs:
844
CHF
98.22
CHF
83.34
PSU:
CHF 70 339
1 The LPP 2018 grant was based on a grant valuation share price of CHF 98.22 (as of 26 February 2018, ie the next trading day after publication of the 2017 annual results).
2 Since vesting of LPP 2018 will occur after the publication of this report, the closing share price at year-end 2020 was used to estimate the realised value.
Swiss Re | Financial Report 2020
137
Compensation
Compensation disclosure
and shareholdings 2020
Aggregate compensation of the Swiss Re Group
The aggregate compensation for the performance years 2019 and 2020 for all employees was as follows:
Category
Base salaries
Pensions and benefits
Cash Annual Performance Incentive3
Value Alignment Incentive3
Long-term variable compensation
– Granted in units subject to performance conditions4
– Granted in units not subject to performance conditions
Other payments
– Severance payments5
– Sign-on payments
Total6
Performance year 20191, 2
Performance year 20201, 2
Number of employees
15 401
15 401
14 395
524
Values (in CHF millions)
1 378
284
306
36
Number of employees
13 189
13 189
11 941
598
Values (in CHF millions)
1 289
257
274
33
453
1
387
127
52
1
24
5
2 086
469
43
401
150
50
2
27
5
1 937
1 Regular employees (excludes contractors) per 31 December, compensation on actual FTE basis; 2019 reporting adjusted to conform to 2020 presentation. ReAssure employees are included
for 2019 but not for 2020 as the sale of ReAssure to Phoenix Group was completed during 2020.
2 Foreign currency conversions calculated using December 2020 year-to-date FX rates for 2020 figures and December 2019 year-to-date FX rates for 2019 figures (where relevant).
3 For 2019, includes separate variable short-term compensation and deferral schemes for ReAssure; for 2020, includes separate cash variable compensation scheme for one line of business.
4 Includes LPP; for 2019, also includes separate variable long-term compensation scheme for ReAssure.
5 Severance payments in the table above include (i) payments under standard severance packages, (ii) other payments that are over and above what is contractually or legally required, and
(iii) voluntary supplementary departure payments, but exclude similar legally permitted payments or garden leave which are aligned with local market practice for comparable positions in
respect of amount, nature or duration. No severance payments were made to members of the Group EC.
6 Amounts are gross before deduction of employee social security contributions. Additional and not included are company contributions to social security systems paid by Swiss Re in line with
applicable laws, which amounted to CHF 225m in 2019 and CHF 190m in 2020.
As of 31 December 2020, the Group had 13 189 regular employees worldwide, compared to 15 401 regular employees at the end of 2019.
The total compensation of the Group for 2020 amounted to CHF 1937 million (compared to CHF 2086 million in 2019), whereof
CHF 1885 million has been or will be paid in cash (compared to CHF 2033 million in 2019) and CHF 52 million has been granted in
share-based awards (compared to CHF 53 million in 2019). The 2019 figures have been adjusted to conform to the 2020 presentation.
The value of all outstanding deferred compensation for all employees at 31 December 2020 amounted to CHF 228 million (compared to
CHF 239 million in 2019), whereof CHF 90 million will be payable in cash (compared to CHF 103 million in 2019) and CHF 138 million in
shares (compared to CHF 136 million in 2019). The figure for outstanding deferred compensation is determined based on the value at
grant for both cash-based and share-based compensation.
In 2020 and 2019, a reduction of expenses amounting to CHF 6 million and CHF 1 million respectively, was recognised for compensation
in previous financial years.
138
Swiss Re | Financial Report 2020
Aggregate compensation for Key Risk Takers
The aggregate compensation of the individuals that held a key risk-taking position as of 31 December of the performance years 2019 and
2020 was as follows (this table excludes members of the Group EC; members of the Group EC also qualify as Key Risk Takers and their
compensation is disclosed separately in the table on page 140 of this Financial Report):
Category
Base salaries
Pensions and benefits
Cash Annual Performance Incentive3
Value Alignment Incentive3
Long-term variable compensation
– Granted in units subject to performance conditions4
– Granted in units not subject to performance conditions
Other payments
– Severance payments5
– Sign-on payments
Total6
Performance year 20191, 2
Performance year 20201, 2
Number of employees
148
148
144
135
Values (in CHF millions)
48
14
29
15
Number of employees
155
155
151
144
Values (in CHF millions)
53
16
30
15
139
1
0
12
22
1
0
3
132
146
0
5
13
23
0
1
1
139
1 Disclosure excludes members of the Group EC who were in office as of 31 December of the reporting year; 2019 reporting adjusted to conform to current presentation. Group EC
compensation is disclosed separately in the table on page 140. Disclosure includes Key Risk Takers in ReAssure for 2019 but not for 2020 as the sale of ReAssure to Phoenix Group was
completed during 2020.
2 Foreign currency conversions calculated using December 2020 year-to-date FX rates for 2020 figures and December 2019 year-to-date FX rates for 2019 figures (where relevant). Reported
figures include Key Risk Takers who were in office as of 31 December of the reporting year and are full-year amounts, except for individuals hired during the year, for whom partial-year figures
are reported.
3 For 2019, includes separate variable short-term compensation and deferral schemes for ReAssure; for 2020, includes separate cash variable compensation scheme for one line of business.
4 Includes LPP; for 2019, also includes separate variable long-term compensation scheme for ReAssure.
5 Severance payments in the table above include (i) payments under standard severance packages, (ii) other payments that are over and above what is contractually or legally required, and
(iii) voluntary supplementary departure payments, but exclude similar legally permitted payments or garden leave which are aligned with local market practice for comparable positions in
respect of amount, nature or duration.
6 Amounts are gross before deduction of employee social security contributions. Additional and not included are company contributions to social security systems paid by Swiss Re in line with
applicable laws, which amounted to CHF 6m in 2019 and CHF 6m in 2020.
Swiss Re | Financial Report 2020
139
Compensation
Compensation disclosure and shareholdings 2020
Compensation decisions for members of governing bodies
The section below is in line with Swiss law and specifically with Articles 14 to 16 of the Ordinance against Excessive Compensation at
Public Corporations (the Ordinance), which require disclosure of compensation granted to members of the Board of Directors and the
Group EC. Compensation to members of the Board of Directors and the highest-paid member of the Group EC is shown separately. At the
AGM 2019 and the AGM 2020, the shareholders approved the maximum aggregate compensation amounts for the Board of Directors
and Group EC for the prospective periods. For the reconciliation of these aggregate amounts to what was awarded, please refer to
page 146 of this Financial Report.
Compensation decisions for the Group EC
The number of Group EC positions decreased during 2020 from 14 to 13 (the position of CEO Life Capital was discontinued per
1 September 2020 due to the disbanding of the Business Unit Life Capital following the completion of the sale of ReAssure to Phoenix
Group). The 2020 figures in the following table cover payments to 15 individuals who held a Group EC position at one point in 2020 (of
whom 12 were active on the Group EC for the full year). The 2019 figures cover payments to 16 individuals who held a Group EC position
at one point in 2019 (of whom nine were active on the Group EC for the full year) and legally or contractually required payments made in
2019 to an individual who stepped down from the Group EC in 2018.
For 2020, the total of the aggregate TAPIs for the members of the Group EC (pro-rata amount in relation to the active period on the Group
EC) amounted to CHF 16.3 million (CHF 15.02 million in 2019), including the Group CEO. The increase in aggregate TAPIs is primarily due
to the higher number of Group EC members who were active for the full year in 2020 (ie for individuals who joined the Group EC in 2019,
only a pro-rata amount was included for 2019). For the Group CEO, the TAPI was CHF 2.5 million (no change compared to 2019).
140
Swiss Re | Financial Report 2020
16 members15 membersCHF thousands120192020Base salaries12 27912 848Allowances2812734Funding of pension benefits33 0982 808Total fixed compensation416 18916 390Cash Annual Performance Incentive4, 57 6718 187Value Alignment Incentive4, 56 4746 908Leadership Performance Plan613 52513 250Total variable compensation27 67028 345Total fixed and variable compensation43 85944 735Compensation due to members leaving73 143308Total compensation847 00245 0431 Foreign currency conversions calculated using December 2020 year-to-date FX rates for 2020 figures and December 2019 year-to-date FX rates for 2019 figures (where relevant).2 Benefits or allowances, eg housing, schooling, lump sum expenses, relocation expenses and taxes, child and similar allowances. Also included is an amount of CHF 21 421 for 276 matching shares received by Group EC members participating in Swiss Re’s Global Share Participation Plan in 2020 (2019: CHF 24 045 for 242 matching shares).3 Swiss Re’s Pension Fund has amended its regulations with effect from 1 January 2019, including some adjustments to the benefits provided to insureds in Switzerland. In consideration of those amendments (which apply both to Group EC members insured in Switzerland and all other employees insured in Switzerland), the figures disclosed for 2019 and 2020 include higher employer pension contributions and contributions to mitigate the effects of lower conversion rates. 4 Covers payments reflecting the time in the role as Group EC member.5 For 2020, subject to shareholder approval at the AGM 2021. For 2019, based on shareholders’ approval at the AGM 2020 of the aggregate amount of short-term variable compensation. Disclosure includes pro-rata payments in relation to the active period on the Group EC for individuals who joined or left the Group EC.6 Disclosure reflects all awards for a reporting year, ie the 2019 value reflects the fair value of LPP awards granted in April 2019 and the 2020 value reflects the fair value of LPP awards granted in April 2020. Any awards granted in 2020 and then forfeited at a later point in the same year are not included. The LPP for 2019 is split equally into two underlying components (50% RSUs and 50% PSUs). The award for 2020 is split equally into three underlying PSU components.7 For individuals leaving the Group EC during or before the reporting period, this only covers legally or contractually required payments for the period when the individual was no longer in the Group EC position (eg base salary when on garden leave).8 Amounts are gross before deduction of employee social security contributions. Additional and not included are company contributions to social security systems paid by Swiss Re in line with applicable laws, which amounted to CHF 1 971 899 in 2019 and CHF 1 953 251 in 2020 (for the individuals who joined the Group EC during the reporting year, the figure excludes employer social security contributions made during the period prior to joining the Group EC). Overall, total variable compensation for individual members of the Group EC (including the Group CEO) who were active on the Group EC
for the full year 2020 ranged from 138% to 246% of total fixed compensation.
The proposed total API (including VAI) amount for 2020 for the Group EC (including the Group CEO) is CHF 15.1 million and includes pro-rata
payments in relation to the active period on the Group EC for individuals who joined or left the Group EC in 2020.
After carefully considering the performance of the Group EC in 2020, the Compensation Committee and the Board of Directors concluded
that the proposed amount of CHF 15.1 million is proportionate given the overall business environment for the Swiss Re Group and the
qualitative achievements. This amount still remains significantly below target levels (see page 140 for further information). It represents an
increase of CHF 1 million compared to the approved total API (including VAI) amount for 2019 for the Group EC (including the Group CEO),
which was CHF 14.1 million. This increase is primarily driven by the increase in aggregate TAPIs (which, as explained on the previous page,
is due to the higher number of Group EC members who were active for the full year in 2020 compared to 2019), and partially offset by the
effect of lower business performance (ie lower Group BPF).
Compensation decisions for the highest-paid member of the Group EC
The table below shows the compensation paid to Christian Mumenthaler, Group CEO (in the role since 1 July 2016):
CHF thousands
Base salary
Allowances1
Funding of pension benefits2
Total fixed compensation
Cash Annual Performance Incentive3
Value Alignment Incentive3
Leadership Performance Plan4
Total variable compensation
Total compensation5
2019
1 500
35
221
1 756
1 088
1 088
2 000
4 176
5 932
2020
1 500
34
222
1 756
1 155
1 155
2 000
4 310
6 066
1 Benefits or allowances paid in cash. Includes healthcare and accident insurance benefits, lump sum expenses, transportation, and child and similar allowances.
2 Swiss Re’s Pension Fund has amended its regulations with effect from 1 January 2019, including some adjustments to the benefits provided to insureds in Switzerland. In consideration of
those amendments (which apply to the Group CEO and Group EC members insured in Switzerland as well as all other employees insured in Switzerland), the figures disclosed for 2019 and
2020 include higher employer pension contributions and contributions to mitigate the effects of lower conversion rates.
3 For 2020, subject to shareholder approval at the AGM 2021. For 2019, as part of the aggregate amount of short-term variable compensation approved by the shareholders at the AGM 2020.
4 Disclosure reflects all awards for a reporting year, ie the 2019 value reflects the fair value of the LPP award granted in April 2019 and the 2020 value reflects the fair value of the LPP award
granted in April 2020. The LPP for 2019 is split equally into two underlying components (50% RSUs and 50% PSUs). The award for 2020 is split equally into three underlying PSU
components.
5 Amounts are gross before deduction of employee social security contributions. Additional and not included are company contributions to social security systems paid by Swiss Re in line with
applicable laws, which amounted to CHF 264 515 in 2019 and to CHF 246 040 in 2020.
Swiss Re | Financial Report 2020
141
Compensation
Compensation disclosure and shareholdings 2020
Realised compensation for the highest-paid member of the Group EC
The chart below shows the compensation granted to and realised by Christian Mumenthaler, Group CEO (in the role since
1 July 2016) during 2020.
CHF thousands
Granted
1 756
Fixed compensation
2020
1155
Cash API1
2020
1 155
VAI 2020
(awarded 2021)1
2 000
LPP 2020
Realised
1 756
Fixed compensation
2020
1155
Cash API1
2020
761
VAI 2017
(awarded 2018)
1 425
LPP 20182
1 For 2020, subject to shareholder approval at the AGM 2021.
2 The LPP 2018 grant took place on 1 April 2018 and was based on a share price of CHF 98.22 (at the grant valuation date of 26 February 2018). Since vesting of the LPP 2018
will occur after the publication of this report, the closing share price at year-end 2020 of CHF 83.34 was used to estimate the realised value.
The performance of the Group CEO is evaluated against both quantitative targets (as defined in the Group Plan approved by the Board of
Directors) and qualitative goals agreed between the Board of Directors and the Group CEO, designed to support the long-term business
strategy and drive sustainable performance across the Swiss Re Group.
While the Group’s financial performance in 2020 was below target, the Board of Directors saw Swiss Re’s performance as broadly in line
with peers. It also recognised the encouraging underlying result excluding the COVID-19 impact, the outstanding investment result and
the successful completion of the sale of ReAssure to Phoenix Group in a challenging business environment.
The Board of Directors was satisfied with the Group CEO’s decisive leadership of the Group during the COVID-19 pandemic, an impressive
turnaround in Corporate Solutions and Swiss Re’s initiatives and external visibility on Sustainability and Environmental, Social and
Governance (ESG) topics. In addition, it recognised that the Group CEO has built a very strong leadership team, which lays the ground for
future success.
Overall, the Board of Directors was pleased with the Group CEO’s effective management of the Group despite challenging conditions in the
wake of the COVID-19 pandemic.
Additional information on compensation decisions
For US GAAP and statutory reporting purposes, VAI and LPP awards are accrued over the period during which they are earned. For the
purpose of the disclosure required in this Compensation Report, the value of awards granted is included as compensation in the year of
performance for the years 2019 and 2020, respectively.
Each member of the Group EC, including the Group CEO, participates in a defined contribution pension scheme. The funding of pension
benefits shown in the previous two tables reflects the actual employer contributions.
Other payments to members of the Group EC
During 2020, no payments (or waivers of claims) other than those set out in the section “Compensation disclosure and shareholdings in
2020” were made to current members of the Group EC or persons closely related.
142
Swiss Re | Financial Report 2020
Shares held by members of the Group EC
The following table reflects Swiss Re share ownership by members of the Group EC as of 31 December:
Members of the Group EC
Christian Mumenthaler, Group Chief Executive Officer
Urs Baertschi, CEO Reinsurance EMEA /Regional President EMEA
Andreas Berger, CEO Corporate Solutions
Anette Bronder, Group Chief Operating Officer
John R. Dacey, Group Chief Financial Officer
Nigel Fretwell, Group Chief Human Resources Officer
Guido Fürer, Group Chief Investment Officer
Hermann Geiger, Group Chief Legal Officer
Russell Higginbotham, CEO Reinsurance Asia/Regional President Asia
Jonathan Isherwood, CEO Reinsurance Americas/Regional President Americas
Thierry Léger, Group Chief Underwriting Officer
Moses Ojeisekhoba, CEO Reinsurance
Patrick Raaflaub, Group Chief Risk Officer
Edouard Schmid, former Chairman Swiss Re Institute & Group Chief Underwriting Officer1
J. Eric Smith, former CEO Reinsurance Americas/Regional President Americas2
Total
1 The number of shares held on 31 August 2020 when Edouard Schmid stepped down from the Group EC was 31 935.
2 The number of shares held on 13 August 2020 when J. Eric Smith stepped down from the Group EC was 25 355.
2019
75 305
546
34
0
29 809
12 272
53 983
49 318
4 662
n/a
56 167
40 704
16 590
31 794
25 262
396 446
Leadership Performance Plan units held by members of the Group EC
The following table reflects total unvested LPP units (RSUs and PSUs) held by members of the Group EC as of 31 December:
Members of the Group EC
Christian Mumenthaler, Group Chief Executive Officer
Urs Baertschi, CEO Reinsurance EMEA /Regional President EMEA
Andreas Berger, CEO Corporate Solutions
Anette Bronder, Group Chief Operating Officer
John R. Dacey, Group Chief Financial Officer
Nigel Fretwell, Group Chief Human Resources Officer
Guido Fürer, Group Chief Investment Officer
Hermann Geiger, Group Chief Legal Officer
Russell Higginbotham, CEO Reinsurance Asia/Regional President Asia
Jonathan Isherwood, CEO Reinsurance Americas/Regional President Americas
Thierry Léger, Group Chief Underwriting Officer
Moses Ojeisekhoba, CEO Reinsurance
Patrick Raaflaub, Group Chief Risk Officer
Edouard Schmid, former Chairman Swiss Re Institute & Group Chief Underwriting Officer
J. Eric Smith, former CEO Reinsurance Americas/Regional President Americas
Total
2019
100 734
10 076
11 293
11 293
50 369
30 222
62 960
31 476
31 808
n/a
50 369
50 369
50 369
44 095
40 295
575 728
2020
83 157
1 371
125
135
30 346
12 436
54 203
49 756
8 546
51 196
56 343
40 831
24 063
n/a
n/a
412 508
2020
81 031
14 134
24 858
24 858
40 517
24 689
50 645
27 072
31 402
28 740
41 647
43 531
40 517
n/a
n/a
473 641
Loans to members of the Group EC
As per Article 27 of the Articles of Association, credits and loans to members of the Group EC may be granted at employee conditions
applicable for the Swiss Re Group, with a cap on the total amount of such credits and loans outstanding per member (currently
CHF 3 million per member of the Group EC). During 2019, any outstanding loans and mortgages to current and former Group EC members
were transferred to an external party. No loans or mortgages were granted to current or former members of the Group EC in 2020.
Swiss Re | Financial Report 2020
143
Compensation
Compensation disclosure and shareholdings 2020
Compensation for members of the Board of Directors
The following two tables illustrate (1) the individual compensation for the members of the Board of Directors for the reported financial
years 2019 and 2020 and (2) the individual compensation for the members of the Board of Directors paid or payable for the term of office
from AGM 2020 to AGM 2021. Figures are in CHF thousands and foreign currency conversions are calculated using December 2020
year-to-date FX rates for 2020 and 2021 figures, and December 2019 year-to-date FX rates for 2019 figures, where relevant.
(1) Individual Board compensation for the reported financial years 2019 and 2020
Members of the Board of Directors
Walter B. Kielholz, Chairman
Renato Fassbind, Vice Chairman, Lead Independent Director, Chair
Audit and Nomination Committees
Raymond K.F. Ch’ien, member1
Sergio P. Ermotti, member2
Karen Gavan, member3
Trevor Manuel, former member4
Joachim Oechslin, member2
Deanna Ong, member1, 2
Jay Ralph, member
Joerg Reinhardt, member
Eileen Rominger, former member4
Philip K. Ryan, member, Chair Finance and Risk Committee3
Sir Paul Tucker, member
Jacques de Vaucleroy, member, Chair Compensation Committee5
Susan L. Wagner, member, Chair Investment Committee
Larry Zimpleman, member6
Total compensation for the reported financial years7, 8
Total 2019 Fees and allowances in cash
2 288
3 808
Fees in blocked shares
1 520
Total 2020
3 808
826
441
n/a
433
351
n/a
n/a
276
296
275
898
325
718
595
296
9 538
496
305
91
332
70
131
213
186
184
55
642
195
517
363
258
6 326
330
130
60
133
47
87
80
123
122
37
240
130
202
242
130
3 613
826
435
151
465
117
218
293
309
306
92
882
325
719
605
388
9 939
1 Includes fees for duties on the board of Singapore Group companies.
2 Elected to Swiss Re’s Board of Directors at the AGM of 17 April 2020.
3 Includes fees received for duties on the board of US Group companies.
4 Term of office expired after the completion of the AGM of 17 April 2020 and did not stand for re-election.
5 Includes fees for duties on the board of Luxembourg Group companies.
6 Includes fees for duties on the board of ReAssure Group companies from January to July 2020.
7 Compensation for the members of the Board of Directors includes fixed fees (cash and shares) and minimal allowances. No sign-on or severance payments have been made.
8 Amounts are gross and include social security contributions of the Board member. Additionally and not included are company contributions to social security systems paid by Swiss Re in line
with applicable laws which amounted to CHF 392 690 in 2019 and CHF 418 024 in 2020. For Board members domiciled outside of Switzerland, company social security contributions are
refunded, if bilateral social security agreements between Switzerland and the country of domicile apply and provide for such refund.
(2) Individual Board compensation for the term of office between AGM 2020 and AGM 2021
The table below provides more detailed information on the compensation paid or payable to each Board member against the maximum
aggregate amount of CHF 10.3 million, as approved by the AGM 2020:
Base
fees
Audit
Committee
fees
Compensation
Committee
fees
50
50
50
425
225
225
225
225
225
225
225
225
Members of the Board of Directors
Walter B. Kielholz, Chairman
Renato Fassbind, Vice Chairman, Lead
Independent Director, Chair Audit and
Nomination Committees
Raymond K.F. Ch’ien, member
Sergio P. Ermotti, member
Karen Gavan, member
Joachim Oechslin, member
Deanna Ong, member
Jay Ralph, member
Joerg Reinhardt, member
Philip K. Ryan, member, Chair Finance
and Risk Committee
Sir Paul Tucker, member
Jacques de Vaucleroy, member, Chair
Compensation Committee
Susan L. Wagner, member, Chair
Investment Committee
Larry Zimpleman, member
Total compensation for the term of office from AGM 2020 to AGM 20213
225
225
225
225
225
75
75
75
75
50
200
Finance and
Risk Committee
fees
Investment
Committee
fees
Nomination
Committee fees
Additional
fees1
50
50
50
50
50
300
50
50
300
50
50
50
30
30
30
125
108
132
122
282
214
47
Total2
3 800
825
433
225
482
325
422
325
305
882
325
719
605
397
10 092
1 Including Vice Chairman or subsidiary fees (converted at 2020 average exchange rates where applicable).
2 Excluding company contributions to social security systems paid by Swiss Re in line with applicable laws.
3 Including an amount of approximately CHF 17 000 for minimal benefits and CHF 4 500 for estimated employer pension contributions (as of 1 January 2021) as mandatory under Swiss law.
144
Swiss Re | Financial Report 2020
Shares held by members of the Board of Directors
The number of shares held by members of the Board of Directors as of 31 December were:
Members of the Board of Directors
Walter B. Kielholz, Chairman1
Renato Fassbind, Vice Chairman, Lead Independent Director, Chair Audit and Nomination Committees
Raymond K.F. Ch’ien, member
Sergio P. Ermotti, member2
Karen Gavan, member3
Trevor Manuel, former member4
Joachim Oechslin, member2
Deanna Ong, member2
Jay Ralph, member
Joerg Reinhardt, member
Eileen Rominger, former member4
Philip K. Ryan, member, Chair Finance and Risk Committee
Sir Paul Tucker, member
Jacques de Vaucleroy, member, Chair Compensation Committee
Susan L. Wagner, member, Chair Investment Committee
Larry Zimpleman, member
Total
2 019
423 878
31 143
21 345
n/a
2 803
7 065
n/a
n/a
3 299
25 684
1 997
15 693
5 403
4 835
13 920
1 997
559 062
2 020
399 005
35 513
18 067
874
4 587
n/a
1 263
1 166
4 950
27 300
n/a
18 871
7 125
7 511
17 125
3 745
547 102
1 Walter B. Kielholz reported in the reporting period the purchase of 300 call options for a total of 30 000 shares, if exercised. For further details, please refer to:
www.swissre.com/investors/shares/management-transactions
2 Elected to Swiss Re’s Board of Directors at the AGM of 17 April 2020.
3 Shareholdings include 2 500 American Depository Receipts (ADRs), equivalent to 625 shares.
4 Term of office expired after the completion of the AGM of 17 April 2020 and did not stand for re-election.
Loans to members of the Board of Directors
No loans were granted to current or former members of the Board in 2020 and no loans were outstanding as of 31 December 2020.
Related parties transactions
Disclosure on compensation decisions in 2020 covers members of the Board of Directors and the Group EC as indicated, and for both
includes related parties to the extent applicable. Such related parties cover spouses, partners, children and other dependents or closely
linked persons. In 2020, no compensation was paid to any related party.
Compensation for former members of governing bodies
During 2020, payments in the total amount of CHF 0.22 million were made to nine former members of the Group EC. This amount is made
up of company contributions payable by Swiss Re to governmental social security systems in line with applicable laws, matching shares
awarded in the context of outstanding Global Share Participation Plan cycles, risk benefits, pension contributions and company
commitments for tax-related services in line with contractual obligations.
Swiss Re | Financial Report 2020
145
Compensation
Compensation disclosure and shareholdings 2020
Reconciliation of AGM resolutions
Group EC compensation
Financial year 2020
CHF millions
34.0
29.9
Maximum aggregate amount approved for
fixed compensation and variable long-term
compensation
34,0
34.0
29,9
29.9
Amount paid/granted
34,0
34.0
10.3
10.1
29,9
29.9
34.0
29.9
34,0
Board of Directors
Term of office: AGM 2020–AGM 2021
34,0
CHF millions
10,3
10.3
10,1
10.1
29,9
29,9
10,3
10.3
Maximum aggregate amount approved
10,1
10.1
10.3
10.1
10,3
Amount paid/granted
10,1
10,3
10,1
Shareholder compensation resolutions and awarded compensation
The following explanations give an overview of the applicable framework of Swiss Re Ltd’s
Articles of Association based on the Ordinance, the approvals by the shareholders at
the AGM 2020 of the respective motions proposed by the Board of Directors and the
reconciliation of the shareholders’ resolutions with the compensation awarded in the
reporting year 2020.
Framework of the Articles of Association
In accordance with Article 22 of the Articles of Association, the Shareholders’ Meeting shall
approve annually and with binding effect the proposals of the Board of Directors in relation to:
a) The maximum aggregate amount of compensation of the Board of Directors for the next
term of office.
b) The maximum aggregate amount of fixed compensation and variable long-term
compensation of the Group EC for the following financial year.
c) The aggregate amount of short-term compensation of the Group EC for the preceding
completed financial year.
AGM 2020 voting results
At the AGM on 17 April 2020, shareholders approved the maximum aggregate prospective
compensation of the members of the Board of Directors (84.7% approval). Shareholders
also approved for the Group EC (i) the maximum aggregate prospective fixed
compensation and variable long-term compensation and (ii) the aggregate retrospective
variable short-term compensation. The outcomes were 85.5% and 86.4% approval,
respectively. As in previous years, the 2019 Compensation Report was subject to a
consultative vote and was approved by 87.7% of the shareholder votes.
Reconciliation of AGM 2019 resolutions for Group EC compensation1
At the AGM 2019, shareholders approved a prospective maximum aggregate amount of
CHF 34.0 million for fixed compensation and variable long-term compensation for the
financial year 2020 for the members of the Group EC expected at the time of the AGM
2019 to hold such position in 2020.
The amount of fixed compensation and variable long-term compensation effectively
granted to the 15 individuals who held a Group EC position at one point during the
financial year 2020 amounts to CHF 29.9 million and includes compensation and
associated costs in relation to the period in a Group EC position for one individual who
joined the Group EC during the year (this appointment was not known at the time of
the AGM 2019).
Reconciliation of AGM 2020 resolution for Board of Directors’ compensation1
At the AGM 2020, the shareholders approved a maximum aggregate amount of
compensation of CHF 10.3 million for the members of the Board of Directors for the
term of office from the AGM 2020 to the AGM 2021.
As shown on page 144 of this Financial Report, the compensation paid to the 14 members
of the Board of Directors for their term of office from the AGM 2020 to the AGM 2021 is
CHF 10.1 million and therefore within the approved amount.
AGM 2021 motion for variable short-term compensation for the Group EC for the
financial year 2020
At the AGM 2021, the Board of Directors will propose to the shareholders to approve an
aggregate amount of CHF 15 094 666 for variable short-term compensation in relation
to the completed financial year 2020 for the 15 individuals who were members of the
Group EC at one point during the financial year 2020. This amount has been included in
the items “Cash Annual Performance Incentive” and “Value Alignment Incentive” in the
table for Group EC compensation on page 140 of this Financial Report. It includes pro-rata
payments in relation to the active period on the Group EC for individuals who joined or left
the Group EC in 2020.
146
Swiss Re | Financial Report 2020
1 Reconciliations calculated using December 2020 year-to-date FX rates where applicable.
Report of the statutory auditor
to the General Meeting of Swiss Re Ltd
Zurich
Report of the statutory auditor on the Compensation Report
We have audited the accompanying Compensation Report included in this 2020 Financial Report of Swiss Re Ltd (the ‘Com-
pany’) for the year ended 31 December 2020. The audit was limited to the information according to Articles 14-16 of the Or-
dinance against Excessive Compensation at Public Corporations (the ‘Ordinance’) contained in the tables on pages 140 to
146 of the Compensation Report.
Board of Directors’ responsibility
The Board of Directors is responsible for the preparation and overall fair presentation of the Compensation Report in accord-
ance with Swiss law and the Ordinance. The Board of Directors is also responsible for designing the compensation frame-
work and defining individual compensation packages.
Auditor’s responsibility
Our responsibility is to express an opinion on the accompanying Compensation Report. We conducted our audit in accord-
ance with Swiss Auditing Standards. Those standards require that we comply with ethical requirements and plan and per-
form the audit to obtain reasonable assurance about whether the Compensation Report complies with Swiss law and articles
14–16 of the Ordinance.
An audit involves performing procedures to obtain audit evidence on the disclosures made in the Compensation Report with
regard to compensation, loans and credits in accordance with articles 14–16 of the Ordinance. The procedures selected
depend on the auditor’s judgment, including the assessment of the risks of material misstatements in the Compensation Re-
port, whether due to fraud or error. This audit also includes evaluating the reasonableness of the methods applied to value
components of compensation, as well as assessing the overall presentation of the Compensation Report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Opinion
In our opinion, the Compensation Report included in the 2020 Financial Report of the Company for the year ended 31 De-
cember 2020 complies with Swiss law and articles 14–16 of the Ordinance.
PricewaterhouseCoopers Ltd
Roy Clark
Audit expert
Auditor in charge
Zurich, 17 March 2021
Michael Staempfli
Audit expert
PricewaterhouseCoopers Ltd, Birchstrasse 160, Postfach, CH-8050 Zurich, Switzerland
Telefon: +41 58 792 44 00, Telefax: +41 58 792 44 10, www.pwc.ch
PricewaterhouseCoopers Ltd is a member of the global PricewaterhouseCoopers network of firms, each of which is a separate and independent legal entity.
Swiss Re | Financial Report 2020
147
Climate-related financial disclosures
Our climate-related financial
disclosures summarise the
steps we have taken to manage
climate-related risks and
opportunities, and achieve our
commitments towards
net-zero carbon emissions.
148
Swiss Re | Financial Report 2020
Contents
Overview
Climate governance
Climate strategy
Climate risk management
Climate metrics and targets
150
151
152
168
172
Swiss Re | Financial Report 2020
149
Climate-related financial disclosures
Overview
The climate-related financial disclosures provide a foundation to
improve investors’ and other stakeholders’ ability to appropriately
assess and price climate-related risk and opportunities.
Swiss Re has a long-standing commitment to
sustainable, long-term value creation.
Through our Group Sustainability Strategy,
we have sharpened this commitment and
have clearly defined sustainability as a
strategic, long-term value driver.
We apply this approach throughout our
re/insurance value chain, comprising both
the liability and the asset sides of our
balance sheet, our own operations and
dialogue with our stakeholders.
Mitigating climate risk and advancing
the energy transition: one of our
top priorities
Climate change is an essential element in
our Group Sustainability Strategy.
“Mitigating climate risk and advancing the
energy transition” is one of our three
overarching 2030 Sustainability Ambitions.
The 2030 Sustainability Ambitions cover
three focus areas where we can have a
significant positive impact in terms of
supporting sustainability and strengthening
resilience.
Swiss Re first detected the potential
long-term challenges posed by climate
change some 30 years ago, and this topic is
now at the centre of our sustainability
efforts. As a re/insurer, climate change is a
key issue because it leads to an increase in
the severity and a change in the patterns of
natural catastrophes such as windstorms,
floods, excessive rainfall, heatwaves and
drought. In combination with growing asset
concentrations in exposed areas and more
widespread insurance protection, climate
change will cause a steady rise in losses. For
this reason, we have developed a Climate
Action Plan (see Climate strategy, page
152).
Climate-related financial disclosures
(TCFD)
Starting from the premise that climate
change creates physical, liability and
transition risks, the Task Force on Climate-
related Financial Disclosures (TCFD) aims to
offer consistent and effective financial
disclosures that allow investors and other
stakeholders to assess the climate risks faced
by companies and to take appropriate action.
We have played an active role in the TCFD
since its creation by the Financial Stability
Board, and began to implement the TCFD
recommendations in our 2016 Financial
Report. Since then, we have continued to
expand our climate-related disclosures.
Tackling climate change and advancing the
energy transition is challenging. In line with
the Paris Agreement, we have committed to
achieving net-zero CO2 emissions (see box).
Climate-related financial disclosures of the Financial Stability Board
Our climate-related financial disclosures
summarise the steps we have taken to
achieve our commitments to net-zero CO2
emissions. This chapter follows the structure
of the TCFD recommendations (see table
below). In each section, we focus on
physical risks in our re/insurance business,
transition risks in our re/insurance business,
and transition risks in our investments.
Achieving net-zero CO2 emissions1
Swiss Re has committed to achieving
net-zero CO2 emissions:
• Across the Group by 2050, by signing
the UN Global Compact “Business
Ambition for 1.5°C”2
• In our investment portfolio by 2050,
as a founding member of the UN-
convened Net-Zero Asset Owner
Alliance
• In our operations by as early as 2030
You can read more about our Group
Sustainability Strategy and our climate-
related activities in our Sustainability Report
2020 at: https://reports.swissre.com/
sustainability-report/2020
Governance
Strategy
Risk management
Metrics and targets
A) Board oversight
A) Climate-related risks and
opportunities
A) Processes for identifying
and assessing climate-
related risks
A) Metrics to assess
climate- related risks
and opportunities
B) Management’s role
B) Impact of climate-related
risks and opportunities
B) Process for managing
climate-related risks
B) Scope 1, 2 and 3 green-
house gas emissions
Source: TCFD
C) Resilience of strategy and
climate-related scenarios
C) Integration into overall risk
C) Targets
management
1
Net-zero emissions means that for every tonne of CO2 that cannot be reduced, a tonne needs to be removed from the atmosphere and permanently removed through
so-called carbon removal approaches.
2 This includes a commitment to setting science-based targets through the Science Based Targets initiative (SBTi).
150
Swiss Re | Financial Report 2020
Climate governance
Swiss Re’s governance around climate-related
risks and opportunities
At Swiss Re’s highest governance level, four
Board of Directors committees are charged
with overseeing the implementation and
execution of Swiss Re’s Group Sustainability
Strategy and Climate Action Plan.
The Chairman’s and Governance Committee,
presided over by the Chairman, has the
overall responsibility for monitoring and
reviewing the Group’s strategic priorities on
enabling sustainable progress, including
initiatives and actions specifically addressing
climate change.
The Compensation Committee establishes
and reviews the compensation framework,
guidelines and performance criteria.
Performance criteria include sustainability
and climate change-related topics.
The Finance and Risk Committee defines
the Group Risk Policy, reviews risk capacity
limits, monitors adherence to risk tolerance,
and reviews all key risk issues and
exposures, including those with a specific
climate dimension.
The Investment Committee reviews
Swiss Re’s asset management-related
activities and, as part of this, receives regular
updates on Group Asset Management’s
Responsible Investing Strategy and
implementation, including in the area of
climate change.
The Board of Directors oversees the
development and adoption of sustainability
policies and Swiss Re’s climate strategies,
while the Group Executive Committee
(Group EC) ensures their implementation.
To optimise coordination and alignment
at the Group level and to monitor progress
on the implementation of the Group
Sustainability Strategy, the Group EC has
established the Group Sustainability Council
(GSC), chaired by the Group Chief Risk
Officer. The GSC is an advisory body to the
Group EC. It is composed of Group EC
members and other senior management
representatives.
Group Functions also have specific
responsibilities relating to climate change:
a team located within Group Risk
Swiss Re’s sustainability and climate-related governance
Group level
Business level2
Board of
Directors
Board committees1
Chairman’s &
Governance Committee
Compensation
Committee
Finance & Risk
Committee
Investment
Committee
Group Executive Committee
Group
Finance
Group Risk
Management
Group Functions2
Group Asset
Management
Swiss Re
Institute
Group
Operations
Group Human
Resources
Group Sustainability Council
Reinsurance
Corporate Solutions
iptiQ3
Public Sector Solutions
1 Only Board committees with allocated responsibilities related to sustainability and climate change are listed.
2 Dedicated sustainability and climate change roles, networks and/or committees in all Group Functions and on
Business level.
3 The iptiQ Division has been in place since 1 January 2021. The Business Unit Life Capital was disbanded at the
end of December 2020.
Management is responsible for coordinating
sustainability-related activities across the
Group. Group Risk Management is
responsible for maintaining a suitable risk
policy framework, including sustainability
and climate-related risks. Swiss Re Institute,
which is headed by our Group Chief
Underwriting Officer, provides the basis for
pricing and, more specifically, all weather-
related physical risks, eg through a
dedicated natural catastrophes team and
proprietary natural catastrophe models.
Group Asset Management is responsible for
developing and implementing the Group’s
Responsible Investing Strategy, which
includes a dedicated approach to climate
change. Group Operations implements the
net-zero strategy to manage the firm’s
operational carbon footprint.
At the business level, the Business Units
Reinsurance and Corporate Solutions, the
iptiQ Division and Public Sector Solutions
implement the Group Sustainability
Strategy, including the Climate Action Plan.
Sustainability and climate change-
related KPIs linked to compensation
We have introduced sustainability as an
additional assessment dimension for
determining our Group Annual
Performance Incentive (API) pool. This
establishes a clear connection between
sustainability and climate change-related
targets and compensation for all
employees, including Group EC members.
The sustainability assessment in 2020
is primarily based on qualitative key
performance indicators (KPIs) and
targets. In 2021, the assessment will be
expanded to include quantitative KPIs
and targets. Our KPIs and targets are
aligned with our 2030 Sustainability
Ambitions and net-zero commitments.
Please see pages 120‒121 of this
Financial Report for details on the API
pool funding process, and pages
133‒134 for details on performance
outcomes of the qualitative assessment.
You can read more about our sustainability
governance in our Sustainability Report
2020, page 82.
Swiss Re | Financial Report 2020
151
Climate-related financial disclosures
Climate strategy
We regularly assess the actual and potential impacts of
climate-related risks and opportunities on our business, strategy
and financial planning.
There is clear empirical evidence that the
global climate has been changing and a
far-reaching scientific consensus that this
change has been due to human activity,
primarily from the burning of fossil fuels
and agriculture. Swiss Re recognises that
climate change, if not mitigated, will
potentially have disastrous effects on
society and the global economy. In view of
this, we are committed to playing an active
role in the transition to a net-zero emissions
economy and to supporting our private and
public-sector clients in this transition and
adaptation to unavoidable climate change.
Natural catastrophes are a key risk in our
re/insurance business. The damage caused
by storms, floods, droughts and other
natural catastrophe perils (including wildfires)
can affect millions of lives and the economies
of entire countries. In 2020, our clients
paid USD 4.1 billion of premiums3 for
natural catastrophe covers exceeding
losses of USD 20 million. This represents
approximately 10% of total premiums,
which shows the importance our clients
place on obtaining re/insurance protection
against natural catastrophe risks.
On average, insured losses due to natural
catastrophes have increased steadily over
the past 20 years. The key reasons have
been economic development, population
growth, urbanisation and a higher
concentration of assets in exposed areas.
At the same time, the protection gap,
ie the difference between insured and total
economic losses, has remained substantial
in all regions (see graph on page 173).
In view of the significance of climate change
for our business, we have developed a
Climate Action Plan as part of our Group
Sustainability Strategy.
Our Climate Action Plan
Building on our Group Sustainability
Strategy and our commitments and
initiatives of recent years, our Climate
Action Plan combines three objectives:
1. We aim to become the leading re/
insurance company on physical
climate risk.
2. We aim to become a leading provider
of re/insurance solutions for low-
carbon transition opportunities.
3. We build partnerships to develop
scalable solutions to mitigate and
adapt to climate change.
As our Climate Action Plan indicates,
understanding the risks posed by climate
change as well as identifying the
potential to create and adapt suitable
products and services for our clients
continue to be priorities for Swiss Re.
Our Climate Action Plan serves as
Swiss Re’s climate strategy.
Climate-related risks
Physical risks
Physical risks posed by climate change
could potentially affect four areas of our
business. They can:
• Influence modelling and pricing of
weather-related natural perils
• Impact the economic viability of re/
insurance for risks exposed to extreme
weather events
• Impact real assets exposed to weather-
related natural perils
• Reduce/disrupt our operations
Modelling and pricing of weather-
related perils
Climate change will impact the frequency
and severity of losses and consequently, our
modelling and pricing of insurance risks
need to be adjusted on a regular basis. By
constantly assessing the climate-related
physical and transition risks, the insurance
industry plays an important role in keeping
such risks insurable and affordable wherever
possible. Reducing emissions as much as
possible (by managing transition risks and
accelerating related solutions) and adapting
to unavoidable climate change (through,
eg risk transfer solutions and other means)
is essential.
We assess the near-term materiality of
potential climatic changes to our
underwriting risk based on our proprietary
loss modelling framework, with which we
calculate the annual expected losses (AEL)
and loss-frequency distributions of major
natural catastrophes. The weather-related
perils with the largest AEL for property
insurance at present are disclosed on page
172 (North Atlantic hurricane, US tornado,
European windstorm, Japanese cyclone,
and European flood). Furthermore, the
geographic distribution and peril split of
Swiss Re’s annual expected natural
catastrophe losses for property insurance
are shown in the figure on page 153. The
largest contribution to Swiss Re’s AEL for
the most material weather-related perils
comes from the North America region
(46%), mainly dominated by hurricane risk,
while Asia accounts for 19% of the AEL,
with a significant contribution from typhoon
risk. EMEA, where the major driver is
European winter storms, and Latin America
contribute with 17%, and 10%, respectively.
Please refer to page 172 (Climate metrics
and targets) for additional natural
catastrophe risk metrics.
3
In previous years, we reported natural catastrophe premiums for our Property & Casualty (P&C) Reinsurance business only, but have now switched to Group-wide figures to
provide a more complete picture.
152
Swiss Re | Financial Report 2020
Annual expected loss (AEL) for weather-related natural catastrophes
As a percentage of most material perils in North America, Latin America, Europe, Asia and Oceania (all numbers have been rounded).
17%
EMEA
USD 360m
(2019: 330m)
46%
North America
USD 1 005m
(2019: 890m)
10%
Latin America
USD 215m
(2019: 180m)
19%
Asia
USD 415m
(2019: 330m)
8%
Oceania
USD 175m
(2019: 240m)
North America
Latin America
EMEA
Asia
Oceania
Source: Swiss Re
28% Tropical cyclone
11% Convective storms
4% Flood
2% Windstorm
1% All other perils
8% Tropical cyclone
1% Flood
<1% All other perils
8% Windstorm
5% Flood
2% Convective storms
1% All other perils
14% Tropical cyclone
4% Flood
<1% Convective storms
<1% All other perils
2% Convective storms
2% Tropical cyclone
2% Flood
2% All other perils
46%
Nordamerika
1005 Mio.USD
(2019: 890 Mio.)
10%
Lateinamerika
215 Mio. USD
(2019: 180 Mio.)
Swiss Re | Financial Report 2020
153
17%
EMEA
360 Mio. USD
(2019: 330 Mio.)
19%
Asien
415 Mio. USD
(2019: 330 Mio.)
8%
Ozeanien
175 Mio. USD
(2019: 240 Mio.)
Nordamerika
Lateinamerika
EMEA
Asien
Ozeanien
28% Tropischer Wirbelsturm
11% Konvektive Stürme 4% Überschwemmung
2% Windsturm
1% Alle anderen
Gefahren
8% Tropischer Wirbelsturm
1% Überschwemmung
<1% Alle anderen Gefahren
8% Windsturm
5% Überschwemmung
2% Konvektive Stürme
1% Alle anderen Gefahren
14% Tropischer Wirbelsturm
4% Überschwemmung
<1% Konvektive Stürme
<1% Alle anderen Gefahren
2% Konvektive Stürme
2% Tropischer Wirbelsturm
2% Überschwemmung
2% Alle anderen Gefahren
Climate-related financial disclosures
Climate strategy
In addition to property insurance, physical
climate risks play an important role in a
number of other areas. Agriculture insurance
is one of those areas where perils like
drought, excess rainfall, frost and hail play
an important role.
For both property and agriculture lines of
business, our models show that with the
current climate, the dominant factor for
Swiss Re’s weather-related risk exposure
remains natural variability, affecting both the
frequency and severity of extreme events in
all regions. We expect this to remain the case
both in the short and medium term (ie 2025
and 2030), in line with the most recent
scientific findings from the Intergovernmental
Panel on Climate Change (IPCC).4
Swiss Re closely monitors climatic trends
and other macro risk factors that are
potentially material for the insurance
industry over various time horizons.
Physical climate change risks that affect
our assessment and management of
weather-related risks are summarised
in the table below.
Classification of climate-change effects and their relevance for the re/insurance industry
Driver for
change
Effects/
perils
Time
horizon
Insurance impact, focus
on property catastrophe
t
c
e
r
i
D
t
c
e
r
i
d
n
I
e
s
n
o
p
s
e
r
g
n
m
r
a
w
i
l
a
b
o
G
l
High confidence
Increasing mean
temperature
Increasing temperature
variability
Increased moisture
capacity in atmosphere
due to higher temperatures
Melting of glaciers and ice
caps, thermal expansion:
sea level rise/storm surge
Reduced permafrost/slope
stability: landslides
Longer/more frequent heat
waves, droughts, water
scarcity, wildfires, health
issues, increased mortality,
potential political conflicts
More frequent extreme
rainfall and river floods
Slow but steady increase
over coming decades
Heat waves/droughts:
already observable and
increasing trends over
coming decades
Increasing regional trends
already observable and
medium-severe impact
likely by mid/end of century
Impact on climate cycles
(eg ENSO, AMO, NAO)
More frequent severe
tropical cyclones
Severe impact likely by
mid/end of century
Confidence barrier
Increased convection
Change of frequency/
severity of winter storms
Increased hail and tornado
risk
Reduced confidence
Low-medium property
insurance impact: no
sudden/unprecedented
events (adaptation!).
Localised effects in coastal
and flooding zones
Frequency perils, mostly
affecting primary insurance,
quota share and stop-loss
reinsurance. Impact on
insurance earnings, rather
than capital. Impact strongly
varies due to heterogeneous
original covers, with
considerable protection gap
in flood insurance
Limited insurance impact
as of today where climate
risk is managed actively.
Mid/end of century
significant impact on
re/insurance covers, both for
severity (affecting capital)
and frequency (affecting
earnings), in particular where
associated flood risk is
covered in full
Source: Swiss Re sigma 2/2020
4 See IPCC Fifth Assessment Report, chapter 11, and the IPCC Special Report on the impacts of global warming of 1.5°C.
154
Swiss Re | Financial Report 2020
Confidence about observed and future
climate trends is highest for risks related
to the increase in global temperatures.
For example, the melting of glaciers and ice
caps, and thermal expansion of water in
warmer temperatures are leading to rising
sea levels. These can directly increase the
magnitude of storm surges, a long-term risk
for coastal regions. To date, the rise in sea
levels has been relatively slow and will likely
remain so in the near future, allowing time
for measures to mitigate the risk of coastal
flooding. The insurance impact today is
limited to the property line of business, and
is mostly localised in coastal and flooding
zones (see the case study on sea level rise
on page 156).
There is lower confidence in the
understanding of trends for atmospheric
and oceanographic circulation changes.
These affect, for example, the frequency
and intensity of tropical cyclones or
European winter storms. While warmer sea
surface temperatures will increase the
probability of tropical cyclone formation and
intensification, higher wind shear can offset
this. These complex interactions introduce
a “confidence barrier” that renders any
insurance-related quantification of climate-
change effects on high-severity perils
like hurricanes very uncertain. Given their
material impact, Swiss Re performs internal
research and collaborates with leading
scientists to tackle this challenge.
Another outcome of climate change for
which there is high confidence is increased
temperature extremes, which have brought
longer and/or more frequent heat waves,
droughts and periods of water scarcity.
Heat waves affect agriculture, workforce
productivity, infrastructure, water resources,
health and mortality. In addition, hot and
dry conditions exacerbate drought and
wildfire risk, as seen in different regions in
recent years (eg California, Portugal and
Australia), with severe consequences for
exposures in the wildland-urban interface.
As losses from frequency perils often
remain below the retention rates of
reinsurance programmes, wildfire risk
mostly affects primary insurers. The impact
of wildfire risk and other frequency perils on
a reinsurer is mostly through proportional
covers such as quota shares and/or
non-proportional aggregate covers.
Furthermore, rising temperatures allow
the atmosphere to hold more water vapour,
thus (on average) increasing the risk of
extreme rainfall (including tropical cyclone-
induced rainfall). However, there is less
confidence in estimating the impact of
rising temperatures on river flood risk,
which is also impacted by other factors.
Regional trends are already observable,
but the insurance impact for flood-related
losses is limited due to still-large protection
gaps for this peril.
While several climate-change factors are
beginning to affect the natural catastrophe
risk landscape, we expect weather risks to
remain assessable by scientific methods.
This means we can continue to update our
loss models now and in the future to assure
adequate costing of extreme weather
events. The in-house development of risk
models for weather-related perils ensures
full modelling transparency and the ability
to efficiently assess and update models
if new scientific evidence becomes
available (see also page 168, Climate
risk management).
Furthermore, since most of the re/insurance
contracts with our clients have a duration
of one year, updated risk views are quickly
reflected in the costing of natural catastrophe
risks.
Regarding the long-term time horizon
(20505), we expect a need for substantial
adjustments to some of our weather risk
models, based on evolving scientific
knowledge. We are confident, however,
that future research will continue to give us
sufficient guidance on the magnitude and
direction of these adjustments.
Impact on the economic viability
of re/insurance protection
An increase in the frequency and severity
of extreme weather events can restrict
the affordability of re/insurance in certain
regions, especially in coastal areas, by
requiring a rise in premiums.
While there is significant uncertainty
associated with climate projections,
especially when it comes to storms making
landfall, increases in the frequency and
severity of tropical storms are likely. Natural
variability is expected to remain the
dominant factor in the short and medium
term (2025 and 2030). In the longer term
(2050), a rise in sea levels will lead to
non-linear increases in storm surge risk for
coastal areas. Additionally, warmer
temperatures will lead to more extreme
rainfall events that may increase flood risk.
If rises in re/insurance premiums
necessitated by increasing extreme
weather risks remain modest, ie re/
insurance protection remains economically
viable for our clients, the overall premium
volume will potentially grow. Larger
increases, however, will eventually reverse
this effect by pushing re/insurance prices
for certain exposed risks beyond the limits
of economic viability. This is particularly
relevant for areas with inadequate
construction planning and development.
In addition, timing is of crucial importance:
if measures to exclude a particular risk are
taken too early, we may offer our clients less
insurance protection; if measures are taken
too late, we may end up with higher claims.
Finally, the overall size of the re/insurance
market will depend on future economic
growth rates.
In line with independent external studies,
we have shown through a series of scenario
assessments (Economics of Climate
Adaptation studies, ECA) that in many
regions, climate adaptation measures need
to be taken to limit expected increases in
natural catastrophe damage and thus to
ensure the economic viability of re/insurance
in the future. This is one of the key reasons
why Swiss Re actively engages with the
United Nations, the public sector, clients,
industry peers and employees to advocate
cost-effective adaptation to climate change.
5
In climate science, long-term often refers to a time horizon until 2100. However, to align with our net-zero commitments and the Paris Agreement, we chose to use
“long-term” to mean until 2050.
Swiss Re | Financial Report 2020
155
Climate-related financial disclosures
Climate strategy
Case Study: Sea level rise
Sea level rise is a direct consequence of a warming climate: caused by thermal expansion of water and the melting of glaciers and ice
caps, sea level rise will directly increase the magnitude of storm surges and pose a long-term chronic risk for low-lying coastal regions.
The relatively slow rise of sea levels allows time for the adaptation and implementation of flood-protection infrastructure that can
reduce the risk of catastrophic coastal flooding. Up to 2050, the uncertainty range for climate change-driven sea level rise is relatively
small with an expected rise of approximately 0.25 metres for a warming scenario that is aligned with the goals of the Paris Agreement
(RCP2.6) and approximately 0.3 metres in a scenario where greenhouse gas emissions continue to rise throughout this century
(RCP8.5).1 Sea level rise is expected to accelerate significantly during the second half of the 21st century, especially if no adequate
mitigation measures are implemented to limit global warming. For the re/insurance industry, the impact of sea level rise on resource-
rich coastal cities and large agriculture deltas is of particular relevance. Adequate adaptation measures will be important to protect
coastal exposures.2 Such adaptation measures, including climate-resilient infrastructure, will help to ensure the availability and
affordability of insurance in exposed coastal areas.
Largest population centres at risk of storm surge today and expected population growth by 2060
Amsterdam – Rotterdam
5.1m
New York – Newark
1.5m
Miami
2.3m
Alexandria
1.5m
Osaka – Kobe
3.1m
Nagoya
3.0m
Tokyo –
Yokohama
2.7m
Pearl River
Delta
12.3m
Shanghai
8.6m
Expected regional population growth by 2060*
>100%
61–80%
41–60%
21–40%
1–20%
–10–0%
* Aggregated population growth is shown for the following regions: Europe, North America,
Sub-Saharan Africa, North Africa and West Asia, Central and Southern Asia, East and Southeast Asia,
Latin America and the Caribbean, Australia and New Zealand, Oceania.
Urban population at risk
in millions (today)
7–12m
4–6m
1–3m
<–1m
Source: Swiss Re; United Nations Population Division, Department of Economic and Social Affairs, World Population Prospects 2019
From a re/insurance perspective, the most material risk associated with sea level rise is storm surge in large coastal cities. Today,
approximately 230 million people, roughly 3% of the world’s population, are exposed to storm surge risk. Storm surges cause, on
average, more than USD 10 billion of losses per year, of which the majority remains uninsured today. The largest urban areas that are
currently exposed to significant storm surge risk are shown on the map above.
1 RCP: Representative Concentration Pathway. RCP scenarios represent possible future concentration trajectories of greenhouse gases. The scenarios are named after
the resulting radiative forcing at the end of the 21st century, eg 8.5W/m2 for RCP8.5, where no mitigation measures nor technical innovation will limit temperature
increases.
2 For more details, see also IPCC Special Report on the Ocean and Cryosphere in a Changing Climate, Sea Level Rise and Implications for Low-Lying Islands, Coasts and
Communities (2019), Figure 4.3.
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According to the IPCC Special Report on the Ocean and Cryosphere in a Changing Climate (2019), population growth, urbanisation and
a further rise in global mean sea levels of 21cm by 2060 would increase the global population living below the hundred-year extreme
sea level (ESL) from about 190 million in 2000 to between 316 and 411 million in 2060. The largest absolute changes are in South and
Southeast Asia, while the largest relative changes are expected in Africa, as shown on the map on page 156.
Swiss Re manages its exposure to sea level rise by developing up-to-date risk models and by managing its risk accumulation in the
most exposed areas to ensure a well-diversified underwriting portfolio. Swiss Re’s Global Storm Surge Zones help us and our clients to
pinpoint storm surge risks globally in a quantitative way thanks to high-resolution data.
Estimate of insured property exposure in coastal storm-surge zones (as percentage of total insured property exposure)
50-year zone
100-year zone
250-year zone
500-year zone
1000-year zone
0.68%
0.60%
0.79%
0.73%
0.55%
0.50%
0.47%
0.42%
2020
2019
Modelled without flood protection measures.
Source: Swiss Re
50-Jahres-Zone
100-Jahres-Zone
250-Jahres-Zone
500-Jahres-Zone
1000-Jahres-Zone
0,68%
0,60%
0,79%
0,73%
0,55%
0,50%
0,47%
0,42%
2020
2019
3.23%
3.85%
3,23%
3,85%
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Climate-related financial disclosures
Climate strategy
Impact on real assets exposed to
weather-related perils
Real assets such as real estate or
infrastructure are exposed to natural perils,
such as hurricanes, tropical cyclones and
floods. In addition to considering physical
risks when acquiring new properties,
we analyse these exposures across the
investment portfolio based on our
proprietary modelling capabilities used
for our re/insurance underwriting. In the
reporting year, we have extended this
analysis to our private debt investments,
including infrastructure loans and
commercial mortgage lending, as well as
commercial mortgage-backed securities.
The results of both analyses suggest a
very low exposure of our real asset holdings
to natural perils in general and to climate-
related perils in particular.
Our own operations
According to our in-house catastrophe
loss models, severe weather risks are
potentially of importance for some of our
operations, mainly in Florida and on the
northeastern coast of the US. However,
even assuming an extreme climate change
scenario, we do not expect any of these
office locations to be exposed to risk levels
that would undermine their economic
viability. Additionally, robust and regularly
tested business continuity plans are in place
to mitigate the risk of climate-related
disruptions. Strategies include transferring
work and/or employees to unaffected
Swiss Re locations, and providing temporary
alternative office space. Working from
home can also be a viable and effective
alternative, as has been demonstrated
during the COVID-19 pandemic, during
which the majority of employees worked
from home for many months.
Physical risks conclusion:
Although the physical risks arising from
climate change can have significant
economic consequences over time,
especially from a wider societal
perspective, they represent a limited
and manageable risk for Swiss Re.
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Transition risks in our re/insurance
business
Transition risks may arise as a result of the
extensive policy, legal, technology and
market changes that are required to make
the transition to a low-carbon and
ultimately, a net-zero economy. We have
assessed the most relevant transition risks
that may potentially affect our business:
• Policy and legal risks
• Technology risks
• Market and reputational risks
majority of the cases remain in favour of the
defendants, suggest that this trend may
continue. However, this warrants ongoing
monitoring, especially as the analytical
capabilities for allocation of responsibility
for greenhouse gas emitters could further
develop with potential regulatory changes.
Technology risks
The re/insurance sector is likely to
experience the technological transition in
two ways.
For a re/insurer, financial risks arising from
the transition to a low-carbon economy are
mainly linked to the potential re-pricing of
carbon-intensive financial assets, and the
speed at which any such re-pricing might
occur. To a lesser extent, re/insurers may
also need to adapt to potential impacts on
the liability side resulting from reductions
in insurance premiums in carbon-intensive
sectors.
Firstly, new technologies by definition do
not have loss histories and thus may be
challenging to cost accurately. Research
and development is thus required to
develop possible loss scenarios and the
related expenses. Once these are
developed and tested, new technologies
are likely to present the sector with an
opportunity for growth (see Climate-related
opportunities, pages 161–162).
Policy and legal risks
As the move towards achieving a net-zero
emissions economy by mid-century or
earlier gains momentum in both the public
and private sector, material policy-triggered
changes are expected for the real economy
(eg power and energy, materials and
processes, logistics and transportation, and
agroforestry and land-use practices). Such
policy changes may include regulations
to increase energy and material efficiency,
mandates to rapidly scale up renewable
energy and clean mobility, the removal of
fossil fuel subsidies, the introduction of
carbon pricing, policies addressing land-use
change and agricultural practices, as
well as the scaling up of carbon removal
technologies. This requires a solid
understanding of the related policy and legal
risks as well as the proactive management
of related risks and opportunities. Certain
policy risks might also influence the risk
quality of some underlying assets in the
mid- to long-term (eg due to increased cost
pressure and reduced asset maintenance).
Climate-related litigation risks
We identified potential climate-related
litigation risks as an emerging risk over a
decade ago and assessed its potential
relevance through our own research.
Climate change litigation activities against
large greenhouse gas emitters have
increased in recent years without any
significant impact on insurance. As a result,
we have not faced any new claims from
climate-related litigation in recent years and
the results of the litigation, which in the
Secondly, new low-carbon technologies are
likely to gradually displace traditional, fossil
fuel-based ones. This will alter the market
and, as a result, gradually change the nature
of re/insured assets.
This transition does not, however,
automatically translate into a financial risk
for us. For example, motor insurance is one
of the most important business lines of the
primary insurance sector globally.
According to Swiss Re’s sigma database, in
2020 it represented approximately 21% of
global non-life direct premiums written, but
for the reinsurance sector the share is much
lower at 14%.
Driven by intensifying efforts to curb climate
change, the global motor vehicle inventory
will shift from combustion to electric engines.
In a Swiss Re study on the casualty risk trends
in the automotive industry, we noted that the
move from conventional (pure combustion
engine) cars to more electrically-based
mobility is a transition that is likely to intensify
in the coming years. This development will
entail the implementation of a variety of new
technologies, from new lightweight materials
to advanced battery systems.
Consequently, while the automotive
industry as a whole is undergoing
significant change, the impact on insurance
portfolios is expected to be gradual. As
motor insurance contracts are renewed
annually, re/insurers will be able to develop
the appropriate underwriting experience,
loss adjustment and claims handling.
To address the residual risk, we have
started to develop a carbon risk steering
mechanism. Its key component will be a
carbon risk model designed to measure our
carbon intensity and the associated risks
embedded in our re/insurance business.
For further information about the mechanism
and related policies, see page 168,
Climate risk management, and page 172,
Climate metrics and targets.
Market and reputational risks
With policy, legal and technological
changes as a backdrop, consumer and
investment preferences will further shift
toward less carbon-intensive products
and services over time. Changes in market
volumes will be reflected in the demand
for insurance. In addition, to support
their decision-making, investors and other
stakeholders will expect greater
transparency and more information
regarding re/insurers’ exposure to
emission-intensive sectors as well as their
contribution to low emissions-related risk
transfer solutions. Finally, particularly in
fossil fuel-dependent societies, a late and
sudden transition without appropriate
mitigation measures may result in setbacks
such as social unrest leading to an overall
market decline.
Non-investment transition risks for the real economy and their relevance for the re/insurance industry
Transition risks
Financial impacts on real economy
Impacts on insurance liabilities
Policy and legal
• Removal of fossil fuel subsidies and
introduction of CO2 taxes
• CO2 regulation and mandates
• Exposure to litigation for historical and
current CO2 emissions
• Emission disclosure requirements
• Write-offs, asset impairment, and early
retirement of existing assets due to policy
changes (ie stranded assets)
• Climate policy-induced economic effects
may lead to higher claims for certain lines
of business (eg credit insurance)
• Increased operating costs (eg higher
compliance costs, increased insurance
premium)
• Increased costs and/or reduced demand
for products and services resulting from
fines and judgments against CO2-intensive
sectors
• Increased regulatory pressure for
disclosure
• Increased operating risk and lower risk
quality for impaired assets may impact
property insurance (eg due to increased
cost pressure and reduced asset
maintenance)
• Increased litigation risks may become
relevant for casualty insurance (eg
general liability, D&O insurance)
• Requirements to disclose climate-related
impacts of insurance business activities
Technology
• Substitution of existing products and
services with lower emissions options
• Costs to transition to lower emissions
technology
• Write-offs, early retirement of existing
• Shift in predominant energy technologies
assets
• Research and development (R&D)
expenditures in new and alternative
technologies
could lead to a change in the liability
structure and diversification for insurers
• New technologies without established
loss histories may increase uncertainties in
property and engineering lines of business
Market and reputation
• Uncertainty in market signals and in
client behaviour
• Increased stakeholder concern
Source: Swiss Re, adapted from TCFD
• Reduced demand for goods and services
due to shift in consumer preferences
• Change in revenue mix and sources,
resulting in decreased revenues
• Reduction in capital availability
• Increased reputational risk for high-
emission sectors
• Premium volume in engineering and
property insurance will shift from
CO2-intensive assets and activities
to CO2-efficient ones
• Reputational risk for insurers via insured
emissions (eg insurance of thermal coal)
may further intensify
• Potential societal backlash due to
transition in fossil fuel-dependent
societies causing market decline
(eg due to political unrest)
Transition risks in our re/insurance business conclusion:
Overall, it is our view that the transition to a low-carbon economy is not likely to present
a significant financial risk for Swiss Re’s re/insurance business. We expect that the
associated risks can be managed effectively, primarily due to the annual renewal of
contracts.
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159
emissions economy may be challenging
and costly, we consider the developments
as identified to be encouraging.
Since 2015, Swiss Re has taken decisive
action to actively manage our climate-
related risks and take advantage of related
opportunities, such as the avoidance of
coal-related investments or investing into
green, social and sustainability bonds.
Actions taken are described in detail in the
chapters on Climate risk management
(pages 170–171) and Climate metrics and
targets (pages 174–175).
Transition risks in our investments
conclusion:
While regulators and governments
have started implementing policy and
legal adjustments, we do not consider
the transition to a net-zero emissions
economy to pose a significant financial
risk for Swiss Re’s investment portfolio.
This view is based on having proactively
implemented a strong mitigation
strategy, which is regularly reviewed
and adjusted, as well as the constant
monitoring of our portfolio.
Climate-related financial disclosures
Climate strategy
Transition risks in our investments
Climate-related risks can impact the value
of our investments and are therefore
considered an important part of our
Responsible Investing strategy. One of the
key risks faced by asset owners is that a
changing regulatory environment may
result in a specific company or a particularly
exposed industry becoming a stranded
asset in investment portfolios, ie the
devaluation of investments driven by
unfavourable changes, such as increased
taxes or new regulations.
The market environment is expected to shift
to address climate change mitigation and
adaptation requirements to limit the global
rise in temperature to well below 2°C above
pre-industrial levels and to pursue efforts to
limit the temperature increase even further
to 1.5°C. Governments and regulators have
accelerated the development of proposals
to steer and transition climate change-
related market activities towards more
sustainable alternatives. Japan and China’s
net-zero emissions pledges and the
UK’s Ten Point Plan for a Green Industrial
Revolution, which aims to make the UK the
number one centre for green technology
and finance, are just three recent examples.
We continue to focus on policy and legal
risks, as well as technology risks, as we
mainly expect changes within these two
dimensions to potentially impact asset values.
Hence, we aim to identify those industries
and groups of companies that are most
exposed to these risks and may thus require
adjustments in the near to medium term.
Industries and companies that are
particularly exposed to policy and legal
changes, as well as technological
developments, have elevated risk exposures
either in their production process, their
raw materials, their transportation/logistics
or distribution and store operations due
to high carbon footprints in these areas.
Furthermore, industries may face increased
compliance costs in the production and
distribution process, as well as costs arising
from product demand substitution. All of
these changes may cause increased price
volatility of the underlying assets.
At Swiss Re, we have been measuring the
weighted average carbon intensity of our
corporate bond and listed equity portfolio
since the end of 2015, and of our government
bond portfolio since 2020.6 Detailed
measurement results are presented in the
Climate metrics and targets section (pages
176–177). Consistent with reaching
net-zero greenhouse gas (GHG) emissions
by 2050, the Intergovernmental Panel on
Climate Change (IPCC)7 developed model
emission pathways and corresponding
development ranges for CO2 emissions and
related indicators. The reduction of the
carbon intensities of our corporate bond
and listed equity portfolio achieved since
2015 is well aligned with the CO2 emission
reduction required according to IPCC in
order to limit global warming to 1.5°C.
To enhance how we assess the alignment
of our portfolio with the 1.5°C target, we
have further strengthened our approach,
taking additional forward-looking indicators
into account. Companies may mitigate
exposure to climate risk by adapting to
market forces or adhering to new and
evolving requirements. The forward-looking
indicators allow us to analyse climate
risk-exposed industries down to the issuer
level. They inform us about the preparedness
of companies for a transition to a net-zero
emissions economy and identify potential
leaders and laggards in such a transition.
Although aware of the limitations related
to data quality and coverage, we assess
the sectoral temperature alignment of our
corporate bond and listed equity portfolio.
The evaluation of the companies’ alignment
is based on the pre-defined 1.5°C carbon
budget considering their reported as well as
modelled future emissions. This informs us
about the sectoral trajectory related to the
transition to a net-zero emissions economy
and hence the alignment with the 1.5°C
target. While many issuers have set carbon
reduction targets, are actively working
towards lowering their energy consumption
or are already on a pathway consistent with
the targeted temperature trajectory, others
continue to contribute substantially to
excess emissions not consistent with the
1.5°C target. Even though our analyses
show that a transition to a net-zero
6 Corporate bond and listed equities: weighted average carbon intensity = (company CO2e emissions/company revenue) * (investment/portfolio); government bonds:
7
weighted average carbon intensity = (country CO2e emissions /country GDP PPP-adjusted) * (investment/portfolio).
IPCC (2018) "Global Warming of 1.5°C: An IPCC Special Report on the impacts of global warming of 1.5°C above pre-industrial levels and related global greenhouse gas
emission pathways, in the context of strengthening the global response to the threat of climate change, sustainable development, and efforts
to eradicate poverty": https://www.ipcc.ch/sr15/chapter/spm/
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Business solutions that tackle
physical climate risk
Examples of recent transactions that tackle
physical climate risk include:
Climate-related opportunities
Climate change does not just create risks,
but also presents new opportunities.
Developing corresponding products and
services is a core part of our Group
Sustainability Strategy, 2030 Sustainability
Ambitions and Climate Action Plan. With
our offerings, we pursue two different but
complementary objectives: adapting to the
effects of climate change and supporting
the transition to a low-carbon economy.
Opportunities related to physical risks
in our re/insurance business
Since most of our re/insurance contracts
are renewed on an annual basis, we
can offer our clients effective natural
catastrophe protection that can help them
cope with current climate risks. The same
applies to our weather insurance solutions.
In addition, we undertake special efforts
to help expand re/insurance protection
by focusing on non-traditional clients
(in particular from the public sector),
underdeveloped markets and innovative
risk transfer instruments.
Protecting the Netherlands from
storm surge: Swiss Re is insuring the
refurbishment, required for climate
adaptation, of the almost 90-year-old,
32-kilometre Afsluitdijk dam in the
Netherlands, which protects large parts of
the country against sea level rise and storm
surge. In addition, the Afsluitdijk will serve
as a test centre for renewable tidal energy
where water emptied from Lake Ijssel
meets the Wadden Sea.
Making India’s Nagaland state resilient
to excess rainfall: Swiss Re provided
India’s Nagaland State Disaster
Management Authority (NSDMA) with
parametric reinsurance protection during
the 2020 monsoon season. Using rainfall
intensity data derived from satellite
observations, payouts are made to regions
in proportion to the amount of recorded
rainfall, which mirrors the anticipated
levels of loss.
Providing flood protection in Germany:
In 2020, iptiQ, Swiss Re’s B2B2C business,
entered into a partnership with one of
Germany’s leading broker pool providers
specialising in homeowner’s insurance
to provide flood protection for properties
located in the country’s highest flood risk
zone (ZÜRS 4).
Protecting farmers’ livelihoods from
drought: Swiss Re has partnered with a
provider of satellite-based soil moisture
data to develop the Soil Moisture Deficit
Index, which in turn is used as a parametric
trigger to determine payouts to farmers
when soil moisture levels fall below a
pre-determined level. This innovative, yet
easy to use insurance solution is providing
a growing number of farmers in Europe
with affordable access to financial protection
from drought.
Helping Mexico become more resilient
to natural catastrophes: In March 2020,
the World Bank issued four tranches of
catastrophe bonds providing the Government
of Mexico with financial protection of up
to a record USD 485 million against losses
from natural catastrophes – of which
USD 250 million was allocated to named
storms and the remainder to earthquakes
– with Swiss Re acting as the transformer
between Mexico’s state-owned insurer
and the World Bank. In addition, proceeds
of the catastrophe bonds are used to
finance sustainable development projects
supported by the World Bank.
You can read more about these solutions
in the Sustainability Report, pages 24–35.
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161
Climate-related financial disclosures
Climate strategy
Business solutions that tackle
energy transition risks
Examples of recent transactions that tackle
energy transition risks include:
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Swiss Re | Financial Report 2020
Opportunities related to transition risks
in our re/insurance business
The transition to a net-zero emissions
economy offers business opportunities for a
re/insurer across a range of sectors such as
power and energy, materials and processes,
logistics and transport, and agroforestry
and food. While Swiss Re is active in all
types of renewable energy re/insurance,
over the years we have become a recognised
lead market for offshore wind risks. In 2015,
Swiss Re Corporate Solutions established a
Centre of Competence for Wind Power and,
through this focused investment, we have
built up and refined the technical expertise
required to understand and manage these
risks. For example, in 2020, we were the
lead insurer for the construction of the
640-megawatt Yunlin wind project eight
kilometres off the coast of Taiwan. Thanks
to our involvement in this project and our
expertise in offshore wind, we have also
been selected as the preferred insurer for
the construction of the 350-megawatt
Guanyin offshore wind project near the Taipei
airport, which is set to enter the construction
phase in 2022. In addition, we insured the
Changfang and Xidao offshore wind farm off
the coast of Taiwan. Over the next decade,
we expect many new development
opportunities to arise, which are likely to
create demand for re/insurance protection
in numerous lines of business, such as
credit, engineering, property, and liability.
Promoting greener shipping
technologies with marine insurance:
In 2020, Spain’s leading shipping company
unveiled its first fast ferry powered by
liquefied natural gas, which generates up to
30% less CO2 emissions, 99% less sulphur,
and up to 85% less nitrogen oxide than the
heavy fuel oil typically used in the shipping
industry. Swiss Re’s Global Marine division
provided reinsurance cover for the
construction of this ship as well as hull
reinsurance, supporting efforts to meet the
International Maritime Organization’s target
to reduce the industry’s overall greenhouse
gas emissions by 50% relative to 2008
levels, by 2050.
Enabling the expansion of offshore wind
in Taiwan: Swiss Re Corporate Solutions
and Reinsurance joined forces to provide
both primary and reinsurance cover for a
640-megawatt offshore wind project off
the coast of Taiwan. Construction of the
wind farm began in 2020, and once it is
completed in 2021, the Yunlin wind farm
will consist of 80 wind turbines, which are
expected to power approximately 605 000
households.
Protecting solar panels in Puerto Rico:
Swiss Re Corporate Solutions provided a
leading residential solar and energy storage
service provider with parametric named
storm coverage for its solar panels in Puerto
Rico. In addition to providing protection
against the risk of physical damage caused
by storms, the insurance solution offered
protection against the risk of a downed
power grid that would prevent the transfer
of excess energy from the solar panels into
the grid as well as the risk that customers
might miss their lease payments following
a devastating hurricane.
Financing solar utility-scale projects in
the US: Swiss Re Corporate Solutions and
its data partner, kWh Analytics, successfully
developed a ten-year Solar Revenue Put
for an investor in large, utility-scale solar
projects. The Solar Revenue Put is an
insurance product that guarantees up to
95% of a solar farm’s expected output,
helping to mitigate a central risk of generating
solar power – lack of sunshine. It was the
first time that this product was used in the
financing or refinancing of solar projects
within the US private-placement debt market.
Green bonds
Opportunities for our investments
We expect our consistent and broad-based
integration of environmental, social and
governance (ESG) criteria along the
investment process to contribute to an
improved risk/return relationship in our
investment portfolio, particularly over the
longer term. We address sustainability
risks such as climate change to make the
portfolio more resilient against financial
market shocks. This is of crucial importance
as such risk factors are not yet fully reflected
in current market valuations. As part
of our adaptation strategy, we consider
investment opportunities that enable the
transition to a net-zero emissions economy.
Green bond proceeds are used exclusively to finance environmentally sustainable
projects that address key areas of concern, including not only climate change, but also
natural resource conservation, biodiversity conservation, and pollution prevention and
control. We support the transition to a net-zero emissions economy by investing in green
bonds following the ICMA Green Bond Principles. As of 31 December 2020, we held
USD 2.3 billion of green bonds and are targeting a portfolio1 of USD 4.0 billion by the end
of 2024. We have embraced the opportunity to participate in the impressive average
market growth of 54% p.a. since 2014.2,3
19.5% Sovereign
17.3% Agency
14.7% Supranational
10.9% Regional governments
3.6% Agency securitised
0.9% Municipals
20.5% Financials
6.9% Utilities
2.0% Information technology
1.9% Non-cyclical services
0.9% Basic industries
0.3% General industrials
0.3% Non-cyclical consumer goods
0.2% Resources
0.1% Cyclical services
1 Consisting of green, social and sustainability bonds.
2 Moody’s, “Sustainable Finance – Global: Sustainable bond volumes to top USD 650 billion in 2021”,
4 February 2021.
3 Moody’s – Green bonds: Key numbers and trends, 2018.
Renewable and social infrastructure loans
For our infrastructure loan allocation, we
work with best-in-class managers to
gain access to, and provide financing for,
renewable energy projects that reflect our
risk appetite, generate attractive long-term
returns and help build a more sustainable
energy supply for the future. As of
31 December 2020, we held
23% Renewable energy infrastructure
23% Social infrastructure
54% Others
49%
51%
49%
51%
23% Renewable energy infrastructure
23% Social infrastructure
54% Others
23% Erneuerbare Energieinfrastruktur
23% Soziale Infrastruktur
54% Sonstiges
49%
51%
24%
23% Erneuerbare Energieinfrastruktur
23% Soziale Infrastruktur
54% Sonstiges
49%
51%
24%
USD 468 million of renewables, making
up approximately 23% of our infrastructure
loan portfolio, of which 51% are in solar
panels and 49% in wind farms. In 2020, we
established a new target to deploy an
additional USD 750 million to renewable
and social infrastructure loans by the end
of 2024.
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163
Climate-related financial disclosures
Climate strategy
Real estate
Our real estate investment portfolio
comprises commercial and residential
buildings with a total market value of
USD 5.4 billion as of 31 December 2020.
These are predominantly located in
Switzerland, the US, Germany, Australia,
the UK, and Central and Eastern Europe
(CEE). As sustainability considerations
are a key pillar of long-term sustainable
value creation, we incorporate them into
decision-making throughout the whole
operating model, including external
investment manager due diligence.
New property investments are evaluated
from an environmental and social
perspective, which includes both a
property’s current and potential future
status as it relates to energy efficiency,
Energy sources
public transport connectivity, use of
sustainable materials, occupier well-being
and community engagement. Ongoing
business plan execution and asset
management of properties already in the
portfolio always incorporate different ways
to improve sustainability characteristics,
as economically and financially sensible.
For real estate investments in Switzerland,
we apply the following sustainability
criteria: analysis of energy sources as a
percentage of market value and
MINERGIE® certifications. MINERGIE® is
a Swiss sustainability label for new and
refurbished buildings. By the end of 2020,
the combined market value of our
MINERGIE®-certified buildings reached
USD 0.6 billion, or 27% of our Swiss
portfolio of direct real estate investments
by value, which corresponds to an energy
consumption floor area of 87 075m2.
The Swiss portfolio is gradually shifting
away from fossil fuels as a heating source
to either renewable energy (26%) or
district heating (14%). Whenever this is
not possible, gas (39%) is considered
as an alternative, given its smaller carbon
footprint compared to oil (18%).
Switzerland
USD 429m / 82 497m2
27% MINERGIE®-
certified
73% No certification
27% MINERGIE®-
zertifiziert
73% Keine
Zertifizierung
3%
Others1
39%
Gas
26%
Renewable energy
18%
Oil
14%
District heating
Includes wood pellets, projects under construction, land and non-heated assets.
1
Energiequellen
100%
39%
Gas
26%
Erneuerbare Energie
18%
Öl
14%
Fernwärme
3%
Übrige1
100%
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The externally managed real estate portfolio is predominantly invested in Australia, CEE, the UK and the US, and contains 50% green
buildings based on regional energy labels. The Australian portfolio is the most advanced, followed by the UK portfolio.
Australia
UK
US
53% NABERS Energy 5
31% NABERS Energy 4/4.5
16% NABERS Energy < 4 or not certified
24% BREEAM “Excellent”
25% BREEAM “Very Good”
51% Not certified
13% LEED “Gold”
30% LEED “Silver”
57% Not certified
In the US, our approach to sustainability includes some of the most recognised certificates and guidelines such as the LEED certification
Grossbritannien
of the US Green Building Council (USGBC). We also benchmark our US portfolio against GRESB, an industry-driven organisation
transforming the way capital markets assess ESG performance of real assets.1
Australien
USA
1 Due to a change in our investment setup, the 2020 GRESB Assessment does not reflect the portfolio’s performance appropriately for 2020.
53% NABERS Energie 5
31% NABERS Energie 4/4.5
16% NABERS Energie < 4
oder nicht zertifiziert
24% BREEAM «Ausgezeichnet»
25% BREEAM «Sehr gut»
51% Nicht zertifiziert
13% LEED «Gold»
30% LEED «Silber»
57% Nicht zertifiziert
Swiss Re | Financial Report 2020
165
Climate-related financial disclosures
Climate strategy
Swiss Re’s climate resilience under
different scenarios
The TCFD requests that companies describe
the resilience of their strategy, taking into
account different climate-related scenarios
including a 2°C or lower increase.
Swiss Re aligns its scenario analysis for
physical climate risks with the Representative
Concentration Pathway (RCP) and Shared
Socio-Economic Pathway (SSP) scenarios
adopted by the Intergovernmental Panel on
Climate Change (IPCC).8 Differences
between projected physical impacts across
various scenarios in the near- to mid-term
are minor, but a considerable divergence is
expected for the second half of the 21st
century. Furthermore, there is significant
uncertainty within a single scenario, mainly
caused by different modelling assumptions
used in various climate models.9
In principle, it would be possible for
Swiss Re to compute the potential long-term
effects caused by climate change on AEL
based on today’s re/insurance book.
However, given the many factors that shape
our future re/insurance books, a stand-alone
climate-change scenario analysis would be
incomplete for the following reasons:
Looking at climate effects in isolation would
mean ignoring the other factors that will
shape Swiss Re’s future re/insurance book
and thus also our future AEL. These factors
include our strategy and risk appetite
How we ensure resilience of
our underwriting business in a
changing climate
(which can be redefined during the annual
renewal process of property re/insurance
business), market conditions, capital costs,
insurance penetration, storm hardening and
other climate adaptation measures. Since
our re/insurance book and current AEL are
the result of a complex interaction between
all of these factors, any future scenario
would have to consider all of them, in the
process rendering the effect of climate
change on the resulting AEL marginal.
Moreover, the future AEL for Swiss Re’s
weather-related re/insurance book will
depend both on our future market share
and scenario projections of overall business
volume.10 Independent studies have
shown a wide range for future market
business volumes, thus rendering
long-term projections very challenging.
The complex dynamics become apparent
when considering that over the next decades,
significant population growth is expected in
Asia and Africa. At the same time, the
population in Europe and North America is
unlikely to grow considerably or may even
start to decline, as projected by the United
Nations Department of Economics and
Social Affairs. Over the same time period,
real GDP per capita is expected to increase
by more than 45% in the United States and
will likely more than double in China by
2050 based on Swiss Re estimates. Global
urbanisation will increase from approximately
56% today to almost 70% by mid-century.11
These socio-economic dynamics will
lead to vast changes of insured value
distributions and the re/insurance
landscape in general. From a re/insurance
perspective, socio-economic dynamics will
often overshadow slowly evolving climate
trends and thus limit the decision-power
of quantitative climate scenario analyses
and stress tests in which only changes to
climatic conditions of natural hazards are
considered. For example, based on climate
projections, the overall frequency of North
Atlantic hurricanes is expected to decrease
by more than 10% for a global mean
temperature increase of 2°C. At the same
time, the frequency of the most intense
hurricanes (category 4 and 5 hurricanes)
is expected to increase by about 10%.12
These climatic changes to the most material
natural perils for the re/insurance industry
need to be analysed in conjunction with
vast socio-economic changes that occur
over the same timeframes.
It is important to state that in a warming
climate there is significant uncertainty
around projected changes to severe
weather events such as hurricanes, as
also outlined in the section on modelling
and pricing of weather-related perils
(pages 152–155). Therefore, Swiss Re
relies on several processes and strategies
to minimise the impact of such uncertainty
on its underwriting business.
4. A qualitative scenario process to assess
the most material impacts of climatic and
socio-economic trends that affect
insured risks. This is supported by
quantitative assessments on the likely
range of expected changes to assess
their materiality over different time
horizons and emission pathways.
1. Diversification of insured natural hazards
with regard to regions, lines of business,
sectors and clients.
2. Flexible management and steering of
weather-related exposure through
limited duration of re/insurance
contracts (typically one-year contracts
for property insurance).
3. Regular updates of Swiss Re’s in-house
risk models to ensure adequate costing
of natural hazards for the current and
near-term climate and socio-economic
environment.
8 RCP scenarios represent possible future concentration trajectories of greenhouse gases. The scenarios are named after the resulting radiative forcing at the end of the
21st century, eg 8.5W/m2 for RCP8.5, where no mitigation measures nor technical innovation will limit temperature increases. SSP narratives describe alternative pathways
for future society.
IPCC Fifth Assessment Report (AR5), Chapter 11, 2013.
9
10 See, eg Kunreuther, Howard; Michel-Kerjan, Erwann; and Ranger, Nicola, “Insuring Future Climate Catastrophes” (2012). Published Articles & Papers. Paper 171.
11 United Nations, Department of Economic and Social Affairs, Population Division (2018). World Urbanization Prospects: The 2018 Revision.
12 Knutson, T., and Co-authors, 2020: Tropical Cyclones and Climate Change Assessment: Part II: Projected Response to Anthropogenic Warming. Bull. Amer. Meteor. Soc.,
101, E303–E322.
166
Swiss Re | Financial Report 2020
Qualitative scenarios help us focus our
attention and modelling improvements on
relevant factors that will affect the physical
risk landscape. Relevant regional key risks
and potential for risk reduction through
adaptation were identified by IPCC in the
Fifth Assessment Report (AR5).13
For the regions where Swiss Re is most
exposed to weather-related risks (see AEL
figure, page 153), a noticeable increase in
flood damage is expected, especially
beyond 2040 if no adequate adaptation
measures are taken. Wildfire hazards in
different regions have already reached
medium-to-high risk levels and will continue
to contribute to increasing economic and
insured losses. Drought conditions will affect
crop productivity and agriculture insurance
and can lead to more land subsidence
affecting property insurance. Swiss Re
discussed the increasing relevance of these
secondary perils in the face of climate
change in recent sigma publications
(sigma 2/2019, sigma 2/2020).
On a societal level, our Economics of
Climate Adaptation studies have shown
that climate change can lead to an increase
of economic losses in specific locations
due to weather risks of up to 30% within the
next 25 years. More importantly though,
economic development, urbanisation,
higher population densities and asset
concentrations in flood plains are expected
to be the dominant factors in increasing
weather-related economic losses. As these
factors become more pronounced, our
models will gradually factor in this trend,
since they are updated and refined at
regular intervals.
In addition, we have also started to assess
different transition risk and opportunity
scenarios that are relevant to the transition
to a low, and ultimately net-zero, carbon
economy. We focus on reducing our carbon
intensity in both our investments and
insurance activities and explore ways to
accelerate this transition by allocating
our investments and providing risk transfer
solutions accordingly.
Scenario analysis conclusion:
We do not consider climate change to be a single factor posing a fundamental threat to
the resilience of our business. It is one of many important factors we need to take into
consideration when shaping our future business strategy. A key condition for our ability
to continue acting as an ultimate risk-taker is diversification with regard to regions, lines
of business, sectors and clients. In a world of strong or unmitigated climate change,
however, the proportion of weather-related risks we could re/insure would decline and
the protection gap would likely increase further. In light of the above, we are developing
qualitative scenarios for physical and transition risks to be considered as part of our
strategic business planning.
13 See eg Figure SPM.8 in IPCC AR5 Synthesis Report: Climate Change, Summary for Policymakers (2014).
Swiss Re | Financial Report 2020
167
Climate-related financial disclosures
Climate risk management
The processes we use to identify, assess and manage climate-related
risks are integrated into our risk management, underwriting and
asset management.
Sound risk management, underwriting and
asset management lie at the core of the
re/insurance business. This enables us to
use our existing processes and instruments
to address climate-related risks.
Physical risks
To assess our P&C businesses accurately
and to structure sound risk transfer solutions,
we need to clearly understand the economic
impact of natural catastrophes and the
potential effect of climate change on their
frequency and severity.
Natural catastrophes constitute one of the
core risks modelled in Swiss Re’s risk
landscape. Besides man-made risks, natural
catastrophe risks are the key risk category
in our P&C re/insurance risk landscape.
We have an internal property risk modelling
team that builds, maintains and updates
sophisticated models for all relevant natural
catastrophe risks (flood, tropical cyclones,
windstorms, earthquakes). The models are
based on current scientific knowledge
and are regularly updated to include new
scientific findings – including from our
research collaborations with academic
institutions – and to make use of advances
in computing and modelling capabilities.
Swiss Re’s proprietary and fully integrated
risk models are important tools for managing
the business: we use them to determine
the economic capital required to support
the risks on our books as well as to allocate
risk-taking capacity to our different lines
of business.
Transition risks in our re/insurance
business
To ensure appropriate risk identification of
transition risks and assess potential impacts
on our business, we continue to monitor
and identify such risks in risk management
and casualty underwriting, as well as for
relevant legal developments.
For all types of transition risks described on
pages 158 and 159, we have risk monitoring
in place. Technological developments are
monitored through Swiss Re’s respective
underwriting units and pricing of associated
covers is reviewed on an annual basis.
General sustainability risks
in our re/insurance business
Our Sustainable Business Risk (SBR)
Framework is an advanced risk management
instrument that allows us to identify, assess
and address social and environmental risks
associated with our transactions, both
on the underwriting and investment side.
Two policies of our SBR Framework are
particularly relevant in the context of
climate change: the thermal coal policy
and the oil and gas policy.
In 2018, we introduced a thermal coal
policy, pledging not to provide re/insurance
to businesses with more than 30% exposure
to thermal coal utilities or mining. The policy
applies to both old and new thermal coal
projects and across all lines of business.
While it is easier to implement this policy in
some parts of our business, for others the
transition will take some time and require a
continued and constructive dialogue with
our clients. In 2020, we continued to
implement the thermal coal policy for treaty
business (see also Climate metrics and
targets, pages 172–173). In this context, we
had over 400 engagements with insureds,
brokers, investors and regulators across all
regions on the topic of thermal coal.
168
Swiss Re | Financial Report 2020
Phasing out the most severe oil and
gas transition risks
We implemented a project with the
Norwegian energy research company
Rystad Energy where we have studied
the value chain CO2 intensities
associated with the production of the
world’s oil and gas companies. We found
that the carbon emission intensities over
the value chain of various hydrocarbons
(naturally-occurring compounds that
form the basis of crude oil, natural gas,
coal and other important energy
sources) can vary substantially. This
analysis provided the basis for our
updated oil and gas policy. Read more
about this in our Sustainability Report
2020, page 39.
To learn more about our SBR Framework,
carbon risk steering mechanism and thermal
coal and oil and gas policies, please visit our
Sustainability Report 2020, pages 36–43.
In addition, we started implementing our
updated oil and gas policy to shift away
from highly carbon-intensive oil and gas
production (see box). From July 2021, we
will no longer provide individual insurance
covers for those oil and gas companies that
are responsible for the world’s 5% most
carbon-intensive oil and gas production.
From July 2023, we will no longer provide
individual insurance covers for those oil and
gas companies that are responsible for the
world’s 10% most carbon-intensive oil and
gas production.
Our oil and gas policy also prevents us from
offering any re/insurance cover for offshore
drilling activities in the Arctic.
Our climate-related policies are initial
steps towards the development of a
comprehensive carbon-risk steering
mechanism to manage and reduce the
carbon intensity and associated risks
embedded in our re/insurance business.
In 2020, we made progress in applying
a carbon footprinting methodology we
had previously helped develop in a project
with peers via the CRO Forum in our direct
and facultative liability portfolios. This
methodology will support our carbon risk
steering towards reaching net-zero emissions
on the liability side of our business by 2050.
For further information on the carbon
footprint of our direct insurance portfolio,
see Climate metrics and targets, page 172.
Swiss Re | Financial Report 2020
169
Our dedicated approach to climate risk
management involves the systematic
monitoring of the carbon footprint of our
government bond, corporate bond and
listed equity portfolio. For our corporate
bond and listed equity portfolio, we also
track related forward-looking indicators. In
2020, we further strengthened our approach
to assessing the alignment of our portfolio
with a 1.5°C target by evaluating the
temperature alignment of our corporate
bond and listed equity portfolio. As part of
our active risk management, we no longer
invest in coal and oil sands-related
companies that are above the set thresholds,
and monitor related investments that are
below these thresholds (for specific
information on the thresholds please refer
to page 175). And consistent with our
Group-wide Sustainable Business Risk
Framework, we have defined further fossil
fuel-related guidelines, such as avoiding
investments in the 10% most carbon
intensive oil and gas companies
(for details, see page 169). Additional
actions to support the transition to a
net-zero emissions economy are described
in Opportunities for our investments
(pages 163–165) and Climate metrics
and targets (pages 174–175).
Climate-related financial disclosures
Climate risk management
Investments
Swiss Re is a long-term investor. As a result,
it is important that we also take a long-term
view on the risk factors that may have an
adverse impact on our portfolio, such as
climate change. Together with sustainability,
climate change is therefore a core topic for
our Asset Management.
We are committed to investing our assets
responsibly in a controlled and structured
way by integrating ESG considerations
along the entire investment process. For
more information on our approach to
ESG integration, refer to our Responsible
Investing homepage (www.swissre.com/
responsible-investing) as well as pages
45–51 of our Sustainability Report 2020.
As a founding member of the UN-convened
Net-Zero Asset Owner Alliance (AOA)
launched in 2019, we have committed to
having a net-zero emissions investment
portfolio by 2050 in accordance with
Article 2.1c of the Paris Agreement
(www.swissre.com/ri-climate-action-aoa).
Our commitment includes supporting the
net-zero transition of economic sectors
by advocating for and engaging on
corporate and industry action. We consider
engagement with investee companies
to be a particularly effective instrument for
enabling them to strengthen their long-term
business performance. Swiss Re was
instrumental to the development of the
Alliance Inaugural 2025 Target Setting
Protocol (TSP)14, a guide for individual and
collective target setting and reporting by
AOA members for the period from 2020 to
2025. In accordance with the TSP, we have
defined targets for financing the transition,
our engagement activities, the sub-portfolio,
and investments in the coal sector, taking
scientific evidence into account to the
extent possible (for details, see Climate
metrics and targets, pages 174–175).
14 https://www.unepfi.org/wordpress/wp-content/uploads/2021/01/Alliance-Target-Setting-Protocol-2021.pdf
170
Swiss Re | Financial Report 2020
Our investment-related climate strategy
Set targets1
Take actions
Measure
Report
Define targets to reach
net-zero emissions in
alignment with 1.5°C by
2050 at the latest
Actively manage transition
and physical risks, and
support real economy
transition to net zero
Measure and monitor
trajectory of needed
development
towards net zero
Inform shareholders
and other stakeholders
transparently on
developments
• Financing targets
• Renewable infrastructure
• Renewable infrastructure
loan investment target2 and
implementation
• Green bond investment
target3 and implementation
loan investments
• Green bond investments
• Financial Report: TCFD
• Voting & engagement targets • Exercise voting rights &
• Voting & engagement
engage
records
• Sub-portfolio targets
• Corporate bonds
• Listed equities
• Real estate
• Sector targets
• Corporate bonds & listed
equities coal phase-out &
coal expansion restriction
• Infrastructure loan & private
placement fossil fuel4
guidelines
• Carbon Footprint
• Corporate bonds
• Listed equities
• Real estate
• Government bonds
• Fossil fuel exposure
• Forward-looking indicators
In alignment with the Net-Zero Asset Owner Alliance Inaugural 2025 Target Setting Protocol.
Investment target also includes social infrastructure loans.
Investment target also includes social and sustainability bonds.
1
2
3
4 Fossil fuel: coal, oil & gas (including oil sands).
Source: Swiss Re
• Sustainability Report
• Responsible Investing
homepage
• Assessments and
questionnaires (eg PRI, CDP)
Swiss Re | Financial Report 2020
171
Climate-related financial disclosures
Climate metrics
and targets
We use a number of metrics and targets to assess and
manage relevant climate-related risks and opportunities.
We assess and manage climate-related
risks and opportunities in our re/insurance
business, our investments and in our
own operations.
Re/insurance
Annual expected losses (AEL)
AEL for weather-related natural perils
can be used as an indicator for our average
current climate-related risk exposure.
However, AEL figures do not, by definition,
provide an adequate measure for the
potential risk of individual years with
exceptionally intense natural catastrophe
losses. Adequate metrics for the risk of
individual rare natural catastrophes are
Value at Risk (VaR) or Tail Value at Risk (Tail
VaR). For example, the 99.5% VaR measures
the loss likely to be exceeded in only one
year out of two hundred, see also page 71,
where the results of insurance risk stress
tests are provided for peak insurance risks.
The AEL figures are the result of expected
weather activities, the vulnerability of insured
assets and operations, their values and
the volume and structure of our insurance
products. Changes in the AEL figures
will show the evolution of our climate risk
exposure. This could be due to climate
change, but also due to changes in the
vulnerability of insured assets and operations,
their values or changes in our business
strategy. AEL figures are updated on an
annual basis.
The five weather-related perils with the
highest gross AEL for our business as of the
end of 2020 are indicated in the diagram
on the right.
172
Swiss Re | Financial Report 2020
First steps to align our underwriting
portfolio with the Paris Agreement
We have started to develop a carbon risk
steering mechanism with the goal to align
our underwriting portfolio with the Paris
Agreement and decarbonise it by 2050.
The first step was the introduction of a
thermal coal policy, followed by the revision
of our oil and gas policy (see page 169,
Climate risk management, for details). In
2020, we applied for the first time the
carbon footprinting methodology we had
previously co-developed with the CRO
Forum to underwriting. We applied
the methodology in our direct insurance
portfolios. Based on this methodology, we
estimate the weighted average carbon
intensity of our direct insurance portfolios at
120 tonnes of CO2 equivalent per million
USD of revenue (120 tonnes CO2e/USDm
revenue). We will gradually expand the
scope of this metric. Once fully implemented,
this will help us steer the overall carbon
footprint embedded in our re/insurance
businesses. Ultimately, it will support us in
reaching net-zero emissions by 2050 on
the liability side of our balance sheet.
Annual expected losses for weather-related perils, Swiss Re Group (USD m)
500
680
770
500
680
770
North Atlantic
hurricane
US Tornado
European
windstorm
Japanese
tropical cyclone
Flood Europe
Source: Swiss Re
Wirbelsturm im
Nordatlantik
Tornado in
den USA
Windsturm
in Europa
Tropischer
Wirbelsturm
in Japan
Über-
schwemmung
in Europa
230
220
240
150
150
180
130
140
210
80
90
100
2018
2019
2020
230
220
240
150
150
180
130
140
210
80
90
100
2018
2019
2020
Weather-related catastrophes: insured vs uninsured losses
There is a substantial protection gap between total economic losses from weather-related catastrophes and insured losses in all
regions. This data does not represent a company-specific metric but is an important overall risk indicator (see table below).
in USD bn, at 2020 prices
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Uninsured loss in m USD, inflated
Insured loss in m USD, inflated
Continent
300
250
200
150
100
50
0
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Insured loss
Uninsured loss
Source: Swiss Re Institute
Another important step we took in 2020 to
advance our carbon steering mechanism
was the development of an exit strategy for
thermal coal in our treaty business. This
complements the policies we have already
developed with a focus on our direct and
2012
facultative business. Together, they put us
on course to reach our Group-wide target of
completely phasing out our thermal coal
business in OECD countries by 2030, and
in the rest of the world by 2040.
in Mrd. USD, zu Preisen von 2020
2010
2011
300
250
200
150
100
Our approach defines thresholds for coal
exposures in treaties across our property,
engineering, casualty, credit and surety and
marine cargo lines of business. The initial
coal exposure thresholds will become
effective in 2023 and vary depending on
the line of business and the geographical
area. These thresholds will then be gradually
lowered until the final phase-out targets
are reached.
0
50
These coal-related actions in our treaty
business are important steps on our path to
reaching a net-zero emissions re/insurance
portfolio by 2050. They are also in line with
the commitment we made in 2019 by
becoming a member of the Powering Past
Coal Alliance.
2016
2015
2013
2014
Climate-related commitments to
the United Nations and the Insurance
Development Forum
Reflecting our efforts to help expand
re/insurance protection by working with
public-sector clients, we made a commitment
to the United Nations to advise up to 50
sovereigns and sub-sovereigns on climate
risk resilience and to offer them USD 10 billion
of insurance cover against this risk by 2020.
You can see the progress we have made
against this goal in the table below.
2018
2019
2020
In addition, Swiss Re and a number of
our industry peers have endorsed the joint
Tripartite Agreement between the
Insurance Development Forum (IDF), the
UN Development Programme, and the
government of Germany, in which they
2017
commit to increasing insurance protection
in climate-exposed countries. Industry
members collectively committed to offer
up to USD 5 billion of risk capacity for
climate risk insurance to contribute to the
G7 InsuResilience target of protecting
500 million individuals against climate risk
by 2025. In 2020, the Tripartite formed
13 country teams, with three more in the
exploration phase. Swiss Re contributed
to the projects alongside ten other
industry members.
Uninsured loss in m USD, inflated
Insured loss in m USD, inflated
Continent
i
i
r
r
f
f
A
A
Total climate protection offered to (sub-)sovereigns since 2014
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Number of (sub-)sovereigns advised
Z
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i
s
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p
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Z
N
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/
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a
by 2018
e
z
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96
i
n
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s
A
a
k
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f
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p
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by 2019
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z
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120
i
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by 2020
e
z
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i
130
Amount of climate protection offered (in USD)
Versicherte Schäden
Nicht versicherte Schäden
*Nordamerika und Lateinamerika/Karibik
8.2 billion
Quelle: Swiss Re Institute
10.0 billion
10.7 billion
Swiss Re | Financial Report 2020
173
Climate-related financial disclosures
Climate metrics and targets
Investments
Through our dedicated climate strategy, we
are working to achieve a net-zero emissions
investment portfolio by 2050 by setting
intermediate targets every five years and
regularly reporting on progress. In
accordance with the AOA’s TSP, we set
targets for the years 2020 to 2025. For our
corporate bond, listed equity and real estate
sub-portfolio targets, we set the base year
at the end of 2018, reflecting previous
portfolio actions.
Our investment-related climate targets and actions for 2020–2025
Targets by 2025
aligned with the Net-Zero Asset Owner Alliance Inaugural 2025
Target Setting Protocol
Actions
Financing
Transition
• Green bonds: USD 4bn1
• Renewable infrastructure loans: +USD 750m2
• Green bonds: constant market monitoring to identify
potential investments
• Renewable infrastructure loans: constant market
monitoring to identify potential investments
Engagement
Engagement topic: alignment with 1.5°C target
• Engagement with investee companies delegated to
investment managers based on Swiss Re Engagement
Framework and portfolio monitoring results
• Direct engagement with investment managers
• Engagement collaboration through Climate Action 100+
Sub-Portfolio
• Corporate bonds & listed equities: –35% carbon
• Corporate bonds & listed equities: constant portfolio
intensity3
• Real estate: –5% carbon intensity4
monitoring to identify optimisation opportunities, also
aligned with engagement targets and actions
• Real estate: ongoing portfolio improvements through
refurbishments and energy usage optimisations
Sector
• Corporate bonds & listed equities:
• Corporate bonds & listed equities: coal maturities to run
coal phase-out by 2030
off by 2030, ongoing monitoring
• Infrastructure loans & private placements: maturity
• Corporate bonds & listed equities: expansion restrictions
limitation for fossil fuel5-related investments
for capital expenditures >USD 100 million for coal
mining, coal-fired capacity >300 megawatts for
coal-based power generation
• Infrastructure loans & private placements: fossil fuel5
guideline application in investment decisions
Investment target also includes social and sustainability bonds.
Investment target also includes social infrastructure loans.
1
2
3 Base year 2018.
4 Base year 2018.
5 Fossil fuel: coal, oil & gas (including oil sands).
174
Swiss Re | Financial Report 2020
Our long-term objective for 2030 is to fully
exit coal-related assets, such as coal mining
and coal-based power generation, for our
listed equity and corporate bond portfolio
via normal portfolio reallocations. To
increase efforts to mitigate transition risks
in our portfolio, we have also begun to limit
investments in companies active in coal
mining or coal-based power generation
that are planning to expand their capacity.
We therefore apply a threshold for capital
expenditures above USD 100 million
for coal mining expansion, and one of
300 megawatts for coal-fired capacity,
applicable to our listed equity and
corporate bond portfolios.
To further strengthen our mitigation
strategy in less liquid asset classes, we
developed dedicated fossil fuel guidelines
for our infrastructure loan and our private
placement portfolios in 2020. This is
particularly important as both have a
long-term investment horizon. For upstream
(exploration and production), midstream
(transportation and storage) and
downstream (refinement and distribution)
investments, we are limiting the maturities
for fossil fuel-related assets. The guidelines
ensure an investment universe that is in
line with our commitment to a net-zero
emissions investment portfolio by 2050.
Financing transition targets
Green bond proceeds are used to finance
environmentally sustainable projects and
thereby facilitate the transition towards a
net-zero emissions economy. By the end
of 2020, we held USD 2.3 billion in green
bonds. As part of our adaptation strategy,
our mandate also considers social and
sustainability bonds. This enables us not
only to support the environment, but also
underserved groups or populations, thus
generating a positive impact on society.
Our ambition is to achieve our investment
target of USD 4 billion for green, social and
sustainability bonds by the end of 2024.
Infrastructure loans are an attractive asset
class for our investment portfolio given their
credit quality and inherent liquidity premium.
Renewable infrastructure loans in particular
are used to finance environmentally
sustainable infrastructure projects. By the
end of 2020, we held USD 468 million
of renewable energy infrastructure loans
and an additional USD 455 million were
allocated to social infrastructure, such as
hospitals, student dorms or affordable
housing projects.
As part of our climate-positive investments,
we have for the first time set a target to
increase our renewable energy and social
infrastructure loan portfolio by
USD 750 million by the end of 2024.
Engagement targets
We believe that engagement with the
real economy is an integral component to
support the limitation of global warming to
1.5°C. In 2020, we therefore established
an Engagement Framework aligned with
the engagement targets defined in the AOA’s
TSP. For details on our external managers’
engagement activities related to our two
topics “Alignment of Business Model
with 1.5°C Target” and “Disclosure of
ESG Key Metrics”, please refer to the
Sustainability Report 2020, pages 50–51.
Sub-portfolio targets
As Swiss Re committed to have a net-zero
emissions investment portfolio by 2050,
we established an intermediate portfolio
emission reduction target for the period
from 2020 to 2025. Informed by IPCC’s
pathways consistent with the 1.5°C target,
we defined a carbon intensity reduction
target of –35% for our corporate bond and
listed equity portfolio, to be achieved by
2025 with 2018 as the base year. This is
also well in line with the AOA’s TSP
recommendation of a reduction of at least
–16% to –29%. Having chosen 2018 as
the base year for our target, we included an
additional 5% reduction for the one
year of difference to the AOA’s base year.
Furthermore, we set a carbon intensity
reduction target for our Swiss and German
real estate investment portfolio of –5% with
2018 as the base year, to be achieved by
2025. This builds on our analysis showing
that the portfolio emission intensity is already
well aligned with the 1.5°C trajectory.
Sector targets
Coal assets are particularly carbon intensive
and susceptible to stranded asset risk given
the long life of these assets, as well as the
evolving regulations on carbon emissions.
To ensure we actively manage such risks,
we have stopped investing in companies
that use at least 30% thermal coal for power
generation or produce 30% or more of their
revenues from thermal coal mining. We also
exclude oil sands companies that generate
20% or more of their revenues from such
operations from the investment universe.
Furthermore, in 2019, we extended our
mitigation approach by implementing an
absolute coal threshold to identify large
carbon emitters with a diversified business
mix, where relative thresholds may provide
inadequate guidance. We do not invest
in mining companies producing at least
20 million tonnes of coal per year and
power utility generators with more than
10 gigawatts of installed coal fire capacity.
Additionally, as part of the updated oil and
gas policy of our Group-wide Sustainable
Business Risk Framework, we divested from
the world’s 10% most carbon-intensive oil
and gas companies in 2020.
Swiss Re | Financial Report 2020
175
Climate-related financial disclosures
Climate metrics and targets
Carbon footprint of our investment portfolio
In line with TCFD guidelines, we monitor the carbon footprint of our corporate bond and
listed equity portfolio on an ongoing basis. For the carbon footprints of these portfolios,
we use the metric “weighted average carbon intensity”, which defines the portfolio
carbon intensity based on relative investment share. We also monitor any coal-related
activities in our private equity investments.
Carbon footprint of our corporate
bond portfolio
The US corporate bond portfolio remains
below its corresponding benchmark in
terms of weighted average carbon intensity,
given its continued underweight in high
carbon intensity holdings.
322
174
163
134
Since 2019, the UK corporate bond
portfolio carbon intensity further
decreased, whereas the index carbon
intensity remained relatively stable.
Carbon footprint of our listed
equity portfolio
The portfolio of listed equities continues
to be significantly less carbon intensive
than the corresponding benchmark due to
its focus on high quality companies with
low carbon intensity.
130
73
US Corp IG ESG BB+ index
US IG corporate bond portfolio
(tonnes CO2e /USDm revenue)
322
174
163
134
US Corp IG ESG BB+ index
US IG Kreditportefeuille
(Tonnen CO2e /Mio. USD Umsatz)
UK Corp IG ESG BB+ index
UK IG corporate bond portfolio
(tonnes CO2e /USDm revenue)
UK Corp IG ESG BB+ index
UK IG Kreditportefeuille
(Tonnen CO2e / Mio. USD Umsatz)
130
73
MSCI ACWI ESG Leaders index
Listed equity portfolio
(tonnes CO2e /USDm revenue)
MSCI ACWI ESG Leaders index
Aktienportefeuille
(Tonnen CO2e /Mio. USD Umsatz)
Carbon footprint of our corporate bond and listed equity portfolio
Since the end of 2015, carbon intensities in both the corporate bond and the listed
equity portfolio decreased substantially as part of our fossil fuel divestment. In 2020,
carbon footprints for both, the corporate bond and listed equity portfolios, further
decreased. In alignment with the AOA’s TSP, we adjusted the carbon footprint scope
of our listed equity portfolio to include ETFs and exclude strategic holdings.
31/12/2015
30/12/2016
29/12/2017
31/12/2018
31/12/2019
31/12/2020
369
285
252
242
168
161
152
91
198
123
82
172
73
51
Corporate bond
portfolio
Listed equity portfolio
– old scope
Listed equity portfolio
– new scope
(tonnes CO2e/
USDm revenue)
31.12.2015
30.12.2016
29.12.2017
31.12.2018
31.12.2019
31.12.2020
369
285
252
242
176
Swiss Re | Financial Report 2020
168
161
152
91
198
123
82
172
73
51
Unternehmens-
Börsennotiertes
anleiheportefeuille
Aktienportefeuille –
Börsennotiertes
Aktienportefeuille–
(Tonnen CO2e /
Mio. USD Umsatz)
alter Erhebungsumfang
neuer Erhebungsumfang
To take our dedicated approach towards climate risk management one step further, we
started to measure the carbon intensity of our government bonds in 2020. We
implemented a widely adopted approach for these bonds, which constitute the largest
holding within our investment portfolio. Here, the metric “weighted average carbon
intensity” is also defined as the portfolio carbon intensity based on relative investment
share but is combined with an additional element allowing for the comparison of the
carbon intensity of economies. The greenhouse gas emissions of a specific bond’s
issuing country are divided by its gross domestic product adjusted by purchasing power
parity (PPP). This enables the equitable comparison of carbon intensity in terms of
physical production and corresponding environmental impact.
Carbon footprint of our government
bond portfolio
The composition of our government bond
portfolio is impacted by the fact that
asset-liability management is at the core of
our investment approach. In 2020,
Swiss Re’s government bond portfolio
was less carbon intensive than the G201
countries due to our higher allocation
to low carbon intensity countries.
0.42
0.32
G20
Swiss Re
(kg CO2e /
USD GDP PPP-adjusted)
1 G20 carbon intensity calculated as total of emissions of the G20 divided by the total PPP-adjusted GDP.
0,42
0,32
G20
Swiss Re
(kg CO2e /
USD BIP KKP-bereinigt)
Swiss Re | Financial Report 2020
177
Climate-related financial disclosures
Climate metrics and targets
Greenhouse gas emissions from our
own operations (Scope 1, 2 and 3)
Reducing our operational carbon footprint
is an important part of our Group
Sustainability Strategy. In 2003, Swiss Re
was one of the first major companies to
become carbon neutral.
By the end of 2020, we achieved 100%
renewable power sourcing for our
operations. All remaining emissions are
compensated by purchasing high-quality
carbon offsets (carbon avoidance
certificates) in line with our carbon
neutrality claim.
Successful conclusion of our
Greenhouse Neutral Programme
Our first implementation plan to become
carbon neutral was our Greenhouse Neutral
Programme, starting in 2003 and ending in
2020. Throughout the course of the
programme, we publicly reported on our
Scope 1 and 2 greenhouse gas emissions,
plus a major source of Scope 3 emissions
(business travel). From 2003 to 2013, we
cut CO2 emissions per employee (full-time
equivalent, FTE) by 49.3%. From 2013
onward, we expanded our reporting to
include further Scope 3 emissions such as
waste and paper. By the end of 2020, we
had reduced CO2 emissions by another
59.6% (2019: 10%) per employee relative
to the 2013 level. As the 2020 data is
distorted by the impact of the COVID-19
pandemic, we also show the figures per
end of 2019 where relevant (see table on
next page).
178
Swiss Re | Financial Report 2020
CO2NetZero Programme to reduce our
operational footprint to net zero
Swiss Re has committed to reducing its
operational CO2 footprint to net-zero
emissions by 2030. To achieve this goal, we
will “do our best, remove the rest” under our
CO2NetZero Programme. “Doing our best”
means we will intensify our efforts to reduce
emissions. A special focus lies on our
business travel emissions, which are
currently responsible for the bulk of our
operational carbon footprint. We have set
ourselves the company-wide target of
reducing our flight emissions by 30% in
2021, relative to the 2018 level, and will
define a new, ambitious target for the
post-pandemic period. “Removing the rest”
means we are moving from buying
conventional carbon offsets to supporting
carbon removal projects to compensate for
any unavoided emissions.
Carbon removal is a new form of emission
compensation that extracts CO2 out of the
atmosphere and stores it permanently. This
is a prerequisite for balancing remaining
gross emissions in any net-zero emissions
target, including the Paris Agreement.
Carbon removal is currently much more
expensive than conventional carbon
offsetting, as the carbon removal industry is
still in its infancy. To cover the first-mover
price for carbon removal certificates, we are
stepping up our internal carbon levy from
less than USD 10 per tonne of CO2 to
USD 100 per tonne of CO2 in 2021. Swiss Re
is the first multinational company with a
triple-digit real internal carbon price on both
its direct emissions and indirect operational
emissions (such as business travel). A real
carbon price – unlike the more commonly
used shadow carbon price – impacts
budgets and is therefore particularly effective
in fostering low-carbon decision-making
within the company. Externally, a triple-digit
carbon price signals to our stakeholders
that Swiss Re is a credible partner when it
comes to addressing climate risks. The new
carbon steering levy will gradually increase
to USD 200 per tonne of CO2 by 2030.
This price transparency and the 10-year
planning horizon will allow us to enter into
long-term purchase agreements with
carbon removal service providers, which
sends a particularly strong market signal
to the emerging carbon removal industry.
CO2 emissions per employee (full-time equivalent, FTE), Swiss Re Group
20131
kg/FTE
20191
kg/FTE
2020
kg/FTE
Change in %
since 2019
Change in %
2013–20192
Change in %
2013–2020
Scope 1 Heating
Scope 2 Power
Scope 3 Business travel
Copy paper
Waste
Water
Technical gases
Commuting
Total
396
313
3 724
34
50
13
97
1 225
5 852
202
137
3 849
10
33
9
98
926
5 266
172
44
1 626
6
18
7
38
454
2 363
–15.2
–68.0
–57.8
–45.8
–47.0
–28.0
–61.8
–51.0
–55.1
–49.0
–56.2
3.4
–70.6
–34.0
–30.8
1.0
–24.4
–10.0
–56.6
–86.0
–56.3
–83.6
–64.9
–50.6
–61.4
–62.9
–59.6
1 The figures for 2013 and 2019 have been restated due to the sale of our ReAssure business in the UK and the
adjustment of how we handle renewable electricity credentials. An overview of the restatement is available in the
Sustainability Report, page 90.
2 Because of the distorting effect of the COVID-19 crisis, we also show the figures per end of 2019.
You can learn more about our Greenhouse
Neutral Programme and net-zero
commitment for operations in our
Sustainability Report 2020, pages 60–69.
Swiss Re | Financial Report 2020
179
Financial statements
180
Swiss Re | Financial Report 2020
Contents
Group financial statements
Income statement
182
182
Statement of comprehensive income 183
Balance sheet
Statement of shareholders’ equity
Statement of cash flows
186
188
190
294
294
295
296
298
306
307
Notes to the Group financial statements 193
Swiss Re Ltd
Annual Report
Income statement
Balance sheet
Notes
Proposal for allocation of
disposable profit
Report of the statutory auditor
Note 1 Organisation and summary of
accounting policies
Note 2 Information on business
segments
Note 3 Insurance information
Note 4 Premiums written
Note 5 Unpaid claims and claim
adjustment expenses
193
202
213
218
219
Note 6 Deferred acquisition costs (DAC)
and acquired present value of future
profits (PVFP)
234
Note 7 Investments
Note 8 Fair value disclosures
236
244
Note 9 Derivative financial instruments 254
Note 10 Acquisitions and disposals
258
Note 11 Debt and contingent capital
instruments
Note 12 Leases
Note 13 Earnings per share
Note 14 Income taxes
Note 15 Benefit plans
Note 16 Share-based payments
Note 17 Compensation, participations
and loans of members of governing
bodies
Note 18 Related parties
Note 19 Commitments and contingent
liabilities
Note 20 Significant subsidiaries and
equity investees
Note 21 Variable interest entities
Report of the statutory auditor
Group financial years 2011–2020
259
262
263
264
267
273
275
276
277
278
281
286
292
Swiss Re | Financial Report 2020
181
Financial statements
Income
statement
For the years ended 31 December
USD millions
Revenues
Gross premiums written
Net premiums written
Change in unearned premiums
Premiums earned
Fee income from policyholders
Net investment income – non-participating business1
Net realised investment gains/losses – non-participating business2
Net investment result – unit-linked and with-profit business
Other revenues
Total revenues
Expenses
Claims and claim adjustment expenses
Life and health benefits
Return credited to policyholders
Acquisition costs
Operating expenses
Total expenses before interest expenses
Income/loss before interest and income tax expense
Interest expenses
Income/loss before income tax expense
Income tax expense/benefit
Net income/loss before attribution of non-controlling interests
Income/loss attributable to non-controlling interests
Net income/loss attributable to common shareholders
Earnings per share in USD
Basic
Diluted
Earnings per share in CHF3
Basic
Diluted
Note
2019
2020
4
4
3
3
7
7
7
3
3
3
14
13
13
13
13
42 228
39 649
–1 675
37 974
620
4 171
1 580
4 939
30
49 314
–18 683
–13 087
–4 633
–7 834
–3 579
–47 816
1 498
–589
909
–140
769
–42
727
2.46
2.39
2.46
2.40
42 951
39 827
494
40 321
449
2 988
1 730
–2 187
37
43 338
–19 838
–13 929
1 760
–8 236
–3 597
–43 840
–502
–588
–1 090
266
–824
–54
–878
–3.04
–3.04
-2.97
–2.97
1 Total impairments for the years ended 31 December of USD 80 million in 2019 and of USD 5 million in 2020, respectively, were fully recognised in earnings.
2 Total impairments for the years ended 31 December of USD 10 million in 2019 and of USD 29 million in 2020, respectively, were fully recognised in earnings.
3 The translation from USD to CHF is shown for informational purposes only and has been calculated using the Group’s average exchange rates.
The accompanying notes are an integral part of the Group financial statements.
182
Swiss Re | Financial Report 2020
Statement of
comprehensive income
For the years ended 31 December
USD millions
Net income/loss before attribution of non-controlling interests
Other comprehensive income, net of tax:
Change in net unrealised investment gains/losses
Change in other-than-temporary impairment
Change in cash flow hedges
Change in foreign currency translation
Change in adjustment for pension benefits
Change in credit risk of financial liabilities at fair value option
Transactions with non-controlling interests
Disposal of ReAssure
Other comprehensive income/loss attributable to non-controlling interests
Total comprehensive income/loss before attribution of non-controlling interests
Comprehensive income/loss attributable to non-controlling interests
Total comprehensive income/loss attributable to common shareholders
The accompanying notes are an integral part of the Group financial statements.
2019
769
3 375
2
–9
46
–29
–2
–56
341
4 437
–383
4 054
2020
–824
2 741
2
52
–24
1
–2 080
127
–5
–181
–186
Swiss Re | Financial Report 2020
183
Financial statements
Reclassification out of accumulated other comprehensive income
For the years ended 31 December
2019
USD millions
Balance as of 1 January
Transactions with non-controlling interests
Change during the period
Amounts reclassified out of accumulated other
comprehensive income
Tax
Balance as of period end
2020
USD millions
Balance as of 1 January
Amounts reclassified on disposal of ReAssure
Change during the period
Amounts reclassified out of accumulated other
comprehensive income
Tax
Balance as of period end
Net unrealised
investment
gains/losses1
1 905
–128
5 668
–1 491
–802
5 152
Net unrealised
investment
gains/losses1
5 152
–2 133
5 634
–2 263
–630
5 760
Other-than-
temporary
impairment1
–3
Cash flow
hedges1
6
1
–57
Foreign
currency
translation1, 2
–5 904
64
Adjustment
for pension
benefits3
–828
7
–93
2
–1
48
–2
135
–89
–5 794
46
18
–850
Credit risk of
financial liabilities at
fair value option
5
–2
3
Other-than-
temporary
impairment1
–1
Cash flow
hedges1
–2
17
–15
–1
0
Foreign
currency
translation1, 2
–5 794
–13
–166
Adjustment
for pension
benefits3
–850
66
–166
18
200
–5 755
137
5
–808
Credit risk of
financial liabilities at
fair value option
3
1
4
Accumulated other
comprehensive
income
–4 819
–56
5 516
–1 262
–871
–1 492
Accumulated other
comprehensive
income
–1 492
–2 080
5 320
–2 123
–425
–800
1 Reclassification adjustment included in net income is presented in “Net realised investment gains/losses – non-participating business”.
2 Reclassification adjustment is limited to translation gains and losses realised upon sale or upon complete or substantially complete liquidation of an investment in a foreign entity.
3 Reclassification adjustment included in net income is presented in “Operating expenses”.
The accompanying notes are an integral part of the Group financial statements.
184
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Swiss Re | Financial Report 2020
185
Financial statements
Balance sheet
Assets
As of 31 December
USD millions
Investments
Fixed income securities:
Note
7, 8, 9
2019
2020
Available-for-sale (including 14 175 in 2019 and 7 435 in 2020 subject to securities
lending and repurchase agreements) (amortised cost: 2019: 74 780; 2020: 73 862)
Trading (including 1 911 in 2019 and 1 551 in 2020 subject to securities
lending and repurchase agreements)
Equity securities at fair value through earnings (including 186 in 2019 and 59 in 2020
subject to securities lending and repurchase agreements)
Policy loans, mortgages and other loans
Investment real estate
Short-term investments (including 1 157 in 2019 and 3 969 in 2020
subject to securities lending and repurchase agreements)
Other invested assets
Investments for unit-linked and with-profit business (including equity securities at fair value through earnings:
520 in 2019 and 463 in 2020)
Total investments
Cash and cash equivalents (including 1 257 in 2019 and 773 in 2020 subject to securities lending,
and 4 in 2019 and 3 in 2020 backing unit-linked and with-profit contracts)
Accrued investment income
Premiums and other receivables
Reinsurance recoverable on unpaid claims and policy benefits
Funds held by ceding companies
Deferred acquisition costs
Acquired present value of future profits
Goodwill
Income taxes recoverable
Deferred tax assets
Other assets
Assets held for sale¹
6
6
14
10
79 163
81 080
2 410
1 938
2 993
3 021
2 528
5 768
7 343
4 899
3 315
2 602
16 082
10 314
520
103 746
463
120 693
7 562
673
15 271
5 898
9 472
7 838
1 042
3 945
466
4 726
3 489
74 439
5 470
626
15 934
5 892
10 726
8 230
928
4 021
337
6 079
3 686
Total assets
238 567
182 622
1 Please refer to Note 10 ”Acquisitions and disposals” for more details.
The accompanying notes are an integral part of the Group financial statements.
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Swiss Re | Financial Report 2020
Liabilities and Equity
USD millions
Liabilities
Unpaid claims and claim adjustment expenses
Liabilities for life and health policy benefits
Policyholder account balances
Unearned premiums
Funds held under reinsurance treaties
Reinsurance balances payable
Income taxes payable
Deferred and other non-current tax liabilities
Short-term debt
Accrued expenses and other liabilities
Long-term debt
Liabilities held for sale¹
Total liabilities
Equity
Common shares, CHF 0.10 par value
2019: 327 404 704; 2020: 317 497 306 shares authorised and issued
Additional paid-in capital
Treasury shares, net of tax
Accumulated other comprehensive income:
Net unrealised investment gains/losses, net of tax
Other-than-temporary impairment, net of tax
Cash flow hedges, net of tax
Foreign currency translation, net of tax
Adjustment for pension and other post-retirement benefits, net of tax
Credit risk of financial liabilities at fair value option, net of tax
Total accumulated other comprehensive income
Retained earnings
Shareholders’ equity
Non-controlling interests
Total equity
Total liabilities and equity
1 Please refer to Note 10 ”Acquisitions and disposals” for more details.
The accompanying notes are an integral part of the Group financial statements.
Note
2019
2020
5
8
14
11
7
11
10
72 373
19 836
5 405
13 365
3 521
889
378
5 663
185
7 191
10 138
68 586
207 530
31
256
–2 220
5 152
–1
–2
–5 794
–850
3
–1 492
32 676
29 251
1 786
31 037
81 258
22 456
5 192
13 309
5 146
1 097
336
6 740
153
8 093
11 584
155 364
30
251
–1 396
5 760
–1
–5 755
–808
4
–800
29 050
27 135
123
27 258
238 567
182 622
Swiss Re | Financial Report 2020
187
Financial statements
Statement of
shareholders’ equity
For the years ended 31 December
USD millions
Common shares
Balance as of 1 January
Cancellation of shares bought back
Balance as of period end
Additional paid-in capital
Balance as of 1 January
Transactions with non-controlling interests1
Cancellation of shares bought back
Share-based compensation
Realised gains/losses on treasury shares
Balance as of period end
Treasury shares, net of tax
Balance as of 1 January
Purchase of treasury shares
Cancellation of shares bought back
Issuance of treasury shares, including share-based compensation to employees
Balance as of period end
Net unrealised investment gains/losses, net of tax
Balance as of 1 January
Transactions with non-controlling interests1
Disposal of ReAssure2
Changes during the period
Balance as of period end
Other-than-temporary impairment, net of tax
Balance as of 1 January
Changes during the period
Balance as of period end
Cash flow hedges, net of tax
Balance as of 1 January
Transactions with non-controlling interests1
Changes during the period
Balance as of period end
The accompanying notes are an integral part of the Group financial statements.
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2019
2020
32
–1
31
496
–241
–23
–9
33
256
–2 291
–1 041
1 020
92
–2 220
1 905
–128
3 375
5 152
–3
2
–1
6
1
–9
–2
31
–1
30
256
9
–27
–1
14
251
–2 220
–228
1 011
41
–1 396
5 152
–2 133
2 741
5 760
–1
–1
–2
2
0
USD millions
Foreign currency translation, net of tax
Balance as of 1 January
Transactions with non-controlling interests1
Disposal of ReAssure2
Changes during the period
Balance as of period end
Adjustment for pension and other post-retirement benefits, net of tax
Balance as of 1 January
Transactions with non-controlling interests1
Disposal of ReAssure2
Changes during the period
Balance as of period end
Credit risk of financial liabilities at fair value option, net of tax
Balance as of 1 January
Changes during the period
Balance as of period end
Retained earnings
Balance as of 1 January
Net income/loss after attribution of non-controlling interests
Dividends on common shares
Cancellation of shares bought back
Impact of ASU 2016-023
Balance as of period end
Shareholders’ equity
Non-controlling interests
Balance as of 1 January
Transactions with non-controlling interests1
Income/loss attributable to non-controlling interests
Other comprehensive income attributable to non-controlling interests:
Change in net unrealised investment gains/losses
Change in foreign currency translation
Other
Disposal of ReAssure2
Balance as of period end
Total equity
2019
2020
–5 904
64
46
–5 794
–828
7
–29
–850
5
–2
3
34 512
727
–1 659
–996
92
32 676
29 251
797
606
42
380
–25
–14
1 786
31 037
–5 794
–13
52
–5 755
–850
66
–24
–808
3
1
4
32 676
–878
–1 765
–983
29 050
27 135
1 786
4
54
179
–53
1
–1 848
123
27 258
1 In 2019, MS&AD Insurance Group Holdings, Inc. (MS&AD) acquired a 10% stake in ReAssure Group Plc. (ReAssure), then a subsidiary of the Group, increasing its total non-controlling interest to
25%. In the fourth quarter of 2019, the Group agreed to reacquire the 25% stake in ReAssure in connection with the agreement to sell ReAssure to Phoenix Group Holdings Plc. (Phoenix). In the
third quarter of 2020, the Group completed the agreed sale.
2 In the third quarter of 2020, the Group completed the sale of ReAssure to Phoenix.
3 Impact of Accounting Standards Update in 2019. Please refer to the Annual Report 2019 for more details.
The accompanying notes are an integral part of the Group financial statements.
Swiss Re | Financial Report 2020
189
Financial statements
Statement of
cash flows
For the years ended 31 December
USD millions
Cash flows from operating activities
Net income/loss attributable to common shareholders
Add income/loss attributable to non-controlling interests
Adjustments to reconcile net income to net cash provided/used by operating activities:
Depreciation, amortisation and other non-cash items
Net realised investment gains/losses
Income from equity-accounted investees, net of dividends received
Change in:
Technical provisions and other reinsurance assets and liabilities, net
Funds held by ceding companies and under reinsurance treaties
Reinsurance recoverable on unpaid claims and policy benefits
Other assets and liabilities, net
Income taxes payable/recoverable
Trading positions, net
Net cash provided/used by operating activities
Cash flows from investing activities
Fixed income securities:
Sales
Maturities
Purchases
Net purchases/sales/maturities of short-term investments
Equity securities:
Sales
Purchases
Securities purchased/sold under agreement to resell/repurchase, net
Cash paid/received for acquisitions/disposals and reinsurance transactions, net
Net purchases/sales/maturities of other investments
Net purchases/sales/maturities of investments held for unit-linked and with-profit business
Net cash provided/used by investing activities
Cash flows from financing activities
Policyholder account balances, unit-linked and with-profit business:
Deposits
Withdrawals
Issuance/repayment of long-term debt
Issuance/repayment of short-term debt
Purchase/sale of treasury shares
Dividends paid to shareholders
Transactions with non-controlling interests
Net cash provided/used by financing activities
The accompanying notes are an integral part of the Group financial statements.
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2019
2020
727
42
538
–5 515
–283
10 659
–5
–571
–472
–471
–252
4 397
51 008
7 732
–58 240
–405
2 225
–1 495
–869
340
581
1 584
2 461
551
–2 629
3 614
–2 205
–946
–1 659
634
–2 640
–878
54
617
972
175
4 736
393
214
–281
–630
22
5 394
50 302
7 333
–52 212
–9 681
1 782
–1 749
–1 587
–2 535
–1 262
1 888
–7 721
215
–1 630
1 071
–190
–199
–1 765
–2 498
USD millions
Total net cash provided/used
Effect of foreign currency translation
Change in cash and cash equivalents
Cash and cash equivalents as of 1 January
Cash and cash equivalents as of 1 January classified as assets held for sale
Reclassified to assets held for sale
Cash and cash equivalents as of 31 December
2019
4 218
88
4 306
5 985
–2 729
7 562
2020
–4 825
4
–4 821
7 562
2 729
5 470
Interest paid was USD 572
2020, respectively. Tax paid was USD 611
million and USD 563
million (thereof USD 24
million and USD 7
million for letter of credit fees) for 2019 and
million and USD 364
million for 2019 and 2020, respectively.
Non-cash investing activities for 2020 amounted to USD 1.1 billion. USD 1.4 billion reflects the receipt of shares in Phoenix as part of the
sales consideration for ReAssure to Phoenix. This is reduced by USD 0.3 billion representing the transaction with MS&AD. Please refer to
Note 10 “Acquisitions and disposals“ for more details.
Cash and cash equivalents include restricted cash and cash equivalents, for instance pledged cash and cash equivalents (please refer to
Note 7 “Investments“).
The accompanying notes are an integral part of the Group financial statements.
Swiss Re | Financial Report 2020
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Financial statements
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Swiss Re | Financial Report 2020
Notes to the Group
financial statements
1 Organisation and summary of significant accounting policies
Nature of operations
The Swiss Re Group, which is headquartered in Zurich, Switzerland, comprises Swiss Re Ltd (the parent company) and its subsidiaries
(collectively, the “Swiss Re Group” or the “Group”). The Swiss Re Group is a wholesale provider of reinsurance, insurance and other
insurance-based forms of risk transfer. Working through brokers and a network of offices around the globe, the Group serves a client base
consisting of insurance companies, mid- to large-sized corporations and public-sector clients.
Basis of presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in
the United States of America (US GAAP) and comply with Swiss law. All significant intra-group transactions and balances have been
eliminated on consolidation.
On 22 July 2020, the Group completed the sale of ReAssure to Phoenix. Subsequently, the subject business was deconsolidated as of that
date. Further details on the transaction are provided in Note 10 “Acquisitions and disposals”.
The Board of Directors of Swiss Re Ltd has decided that as of 1 January 2024 the Group’s consolidated financial statements will be prepared
in accordance with International Financial Reporting Standards (IFRS). Financial statements for periods ending on or prior to 31 December
2023 will continue to be prepared in accordance with US GAAP.
Principles of consolidation
The Group’s financial statements include the consolidated financial statements of Swiss Re Ltd and its subsidiaries. Voting entities which
Swiss Re Ltd directly or indirectly controls through holding a majority of the voting rights are consolidated in the Group’s accounts. Variable
interest entities (VIEs) are consolidated when the Swiss Re Group is the primary beneficiary. The Group is the primary beneficiary when it has
power over the activities that impact the VIE’s economic performance and at the same time has the obligation to absorb losses or the right to
receive benefits that could potentially be significant to the VIE. Companies which the Group does not control, but over which it directly or
indirectly exercises significant influence, are accounted for using the equity method or the fair value option and are included in other invested
assets. The Swiss Re Group’s share of net profit or loss in investments accounted for under the equity method is included in net investment
income. Equity and net income of these companies are adjusted as necessary to be in line with the Group’s accounting policies. The results
of consolidated subsidiaries and investments accounted for using the equity method are included in the financial statements for the period
commencing from the date of acquisition.
Use of estimates in the preparation of financial statements
The preparation of financial statements requires management to make significant estimates and assumptions that affect the reported
amounts of assets, liabilities, revenues and expenses as well as the related disclosure, including contingent assets and liabilities. The Swiss
Re Group’s liabilities for unpaid claims and claim adjustment expenses and policy benefits for life and health include estimates for premium,
claim and benefit data not received from ceding companies at the date of the financial statements. In addition, the Group uses certain
financial instruments and invests in securities of certain entities for which exchange trading does not exist. The Group determines these
estimates based on historical information, actuarial analyses, financial modelling and other analytical techniques. Actual results could differ
significantly from the estimates described above.
Foreign currency remeasurement and translation
Transactions denominated in foreign currencies are remeasured to the respective subsidiary’s functional currency at average exchange rates.
Monetary assets and liabilities are remeasured to the functional currency at closing exchange rates, whereas non-monetary assets and
liabilities are remeasured to the functional currency at historical rates. Remeasurement gains and losses on monetary assets and liabilities
and trading securities are reported in earnings. Remeasurement gains and losses on available-for-sale securities, investments in
consolidated subsidiaries and investments accounted for using the equity method are reported in shareholders’ equity.
For consolidation purposes, assets and liabilities of subsidiaries with functional currencies other than US dollars are translated from the
functional currency to US dollars at closing rates. Revenues and expenses are translated at average exchange rates. Translation adjustments
are reported in shareholders’ equity.
Swiss Re | Financial Report 2020
193
Financial statements
Valuation of financial assets
The fair value of the majority of the Group’s financial instruments is based on quoted prices in active markets or observable inputs. These
instruments include government and agency securities, commercial paper, most investment-grade corporate debt, most high-yield debt
securities, exchange-traded derivative instruments, most mortgage- and asset-backed securities and listed equity securities. In markets with
reduced or no liquidity, spreads between bid and offer prices are normally wider compared to spreads in highly liquid markets. Such market
conditions affect the valuation of certain asset classes of the Group, such as some asset-backed securities as well as certain derivative
structures referencing such asset classes.
The Group considers both the credit risk of its counterparties and own risk of non-performance in the valuation of derivative instruments and
other over-the-counter financial assets. In determining the fair value of these financial instruments, the assessment of the Group’s exposure
to the credit risk of its counterparties incorporates consideration of existing collateral and netting arrangements entered into with each
counterparty. The measure of the counterparty credit risk is estimated by incorporating the observable credit spreads, where available, or
credit spread estimates derived based on the benchmarking techniques where market data is not available. The impact of the Group’s own
risk of non-performance is analysed in a manner consistent with the aforementioned approach, with consideration given to the Group’s
observable credit spreads. The value representing such risk is incorporated into the fair value of the financial instruments (primarily
derivatives), in a liability position as of the measurement date. The change in this adjustment from period to period is reflected in realised
investment gains and losses in the income statement.
For assets or derivative structures at fair value, the Group uses market prices or inputs derived from market prices. A separate internal price
verification process, independent of the trading function, provides an additional control over the market prices or market inputs used to
determine the fair values of such assets. Although management considers that appropriate values have been ascribed to such assets, there is
always a level of uncertainty and judgement related to these valuations. Subsequent valuations could differ significantly from the results of
the process described above. The Group may become aware of counterparty valuations, either directly through the exchange of information
or indirectly, for example through collateral demands. Any implied differences are considered in the independent price verification process
and may result in adjustments to initially indicated valuations. As of 31
financial instruments in excess of its own market value estimates.
2020, the Group had not provided any collateral on
December
Investments
The Group’s investments in fixed income securities are classified as available-for-sale (AFS) or trading. Fixed income securities AFS are
carried at fair value, based on quoted market prices, with the difference between the applicable measure of cost and fair value being
recognised in shareholders’ equity. Trading fixed income securities are carried at fair value with unrealised gains and losses recognised in
earnings. A trading classification is used for securities that are bought and held principally for the purpose of selling them in the near term.
For fixed income securities AFS that are other-than-temporary impaired and for which there is not an intention to sell, the impairment is
separated into (i) the estimated amount relating to credit loss, and (ii) the amount relating to all other factors. The estimated credit loss
amount is recognised in earnings, with the remainder of the loss amount recognised in other comprehensive income. In cases where there is
an intention or requirement to sell and the fair value is lower than cost expressed in functional currency terms, the cost of fixed income
securities AFS is reduced to fair value, with a corresponding charge to realised investment losses. Subsequent recoveries are not recognised
in earnings.
Equity investments are carried at fair value with unrealised gains and losses recognised in earnings, with the exception of equity method
investments and investments that result in consolidation.
Interest on fixed income securities is recorded in net investment income when earned and is adjusted for the amortisation of any purchase
premium or discount. Dividends on equity securities are recognised as investment income on the ex-dividend date. Realised gains and
losses on sales are included in earnings and are calculated using the specific identification method.
Policy loans, mortgages and other loans are carried at amortised cost. Interest income is recognised in accordance with the effective yield
method.
Investment in real estate that the Group intends to hold for the production of income is carried at depreciated cost, net of any write-downs for
impairment in value. Depreciation on buildings is recognised on a straight-line basis over the estimated useful life of the asset. Land is
recognised at cost and not depreciated. Impairment in value is recognised if the sum of the estimated future undiscounted cash flows from
the use of the real estate is lower than its carrying value. The impairment loss is measured as the amount by which the asset’s carrying
amount exceeds its fair value and is recognised in realised investment losses. Depreciation and other related charges or credits are included
in net investment income. Investment in real estate held for sale is carried at the lower of cost or fair value, less estimated selling costs, and is
not depreciated. Reductions in the carrying value of real estate held for sale are included in realised investment losses.
Short-term investments are measured at fair value with changes in fair value recognised in net income. The Group considers highly liquid
investments with a remaining maturity at the date of acquisition of one year or less, but greater than three months, to be short-term
investments.
Other invested assets include affiliated companies, equity accounted companies, derivative financial instruments, collateral receivables,
securities purchased under agreement to resell, deposits and time deposits, and investments without readily determinable fair value
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(including limited partnership investments). Investments in limited partnerships where the Group’s interest equals or exceeds 3% are
accounted for using the equity method. Investments in limited partnerships where the Group’s interest is below 3% and equity investments
in corporate entities which are not publicly traded are accounted for at estimated fair value with changes in fair value recognised in earnings.
The Group enters into securities lending arrangements under which it loans certain securities in exchange for collateral and receives
securities lending fees. The Group’s policy is to require collateral, consisting of cash or securities, equal to at least 102% of the carrying value
of the securities loaned. In certain arrangements, the Group may accept collateral of less than 102% if the structure of the overall transaction
offers an equivalent level of security. Cash received as collateral is recognised along with an obligation to return the cash. Securities received
as collateral that can be sold or repledged are also recognised along with an obligation to return those securities. Securities lending fees are
recognised over the term of the related loans.
Derivative financial instruments and hedge accounting
The Group uses a variety of derivative financial instruments including swaps, options, forwards and exchange-traded financial futures for the
Group’s trading and hedging strategy in line with the overall risk management strategy. Derivative financial instruments are primarily used as
a means of managing exposure to price, foreign currency and/or interest rate risk on planned or anticipated investment purchases, existing
assets or existing liabilities and also to lock in attractive investment conditions for funds which become available in the future. The Group
recognises all of its derivative instruments on the balance sheet at fair value. Changes in fair value on derivatives that are not designated as
hedging instruments are recorded in income.
If the derivative is designated as a hedge of the fair value of assets or liabilities, changes in the fair value of the derivative are recognised in
earnings, together with changes in the fair value of the related hedged item. If the derivative is designated as a hedge of the variability in
expected future cash flows related to a particular risk, changes in the fair value of the derivative are reported in other comprehensive income
until the hedged item is recognised in earnings. The ineffective portion of the hedge is recognised in earnings. When hedge accounting is
discontinued on a cash flow hedge, the net gain or loss remains in accumulated other comprehensive income and is reclassified to earnings
in the period in which the formerly hedged transaction is reported in earnings. When the Group discontinues hedge accounting because it is
no longer probable that a forecasted transaction will occur within the required time period, the derivative continues to be carried on the
balance sheet at fair value, and gains and losses that were previously recorded in accumulated other comprehensive income are recognised
in earnings.
The Group recognises separately derivatives that are embedded within other host instruments if the economic characteristics and risks are
not clearly and closely related to the economic characteristics and risks of the host contract and if it meets the definition of a derivative if it
were a free-standing contract.
Derivative financial instrument assets are generally included in other invested assets and derivative financial instrument liabilities are
generally included in accrued expenses and other liabilities.
The Group also designates non-derivative and derivative monetary financial instruments as hedges of the foreign currency exposure of its net
investment in certain foreign operations. From the inception of the hedging relationship, remeasurement gains and losses on the designated
non-derivative and derivative monetary financial instruments and translation gains and losses on the hedged net investment are reported as
translation gains and losses in shareholders’ equity.
Cash and cash equivalents
Cash and cash equivalents include cash on hand, short-term deposits, certain short-term investments in money market funds and highly
liquid debt instruments with a remaining maturity at the date of acquisition of three months or less.
Deferred acquisition costs
The Group incurs costs in connection with acquiring new and renewal reinsurance and insurance business. Some of these costs, which
consist primarily of commissions, are deferred as they are directly related to the successful acquisition of such business.
Deferred acquisition costs for short-duration contracts are amortised in proportion to premiums earned. Future investment income is
considered in determining the recoverability of deferred acquisition costs for short-duration contracts. Deferred acquisition costs for long-
duration contracts are amortised over the life of underlying contracts. Deferred acquisition costs for universal-life and similar products are
amortised based on the present value of estimated gross profits. Estimated gross profits are updated quarterly.
Modifications of insurance and reinsurance contracts
The Group accounts for modifications of insurance and reinsurance contracts that result in a substantially unchanged contract as a
continuation of the replaced contract. The associated deferred acquisition costs and present value of future profits (PVFP) will continue to be
amortised. The Group accounts for modifications of insurance and reinsurance contracts that result in a substantially changed contract as an
extinguishment of the replaced contract. The associated deferred acquisition costs or PVFP are written off immediately through income and
any new deferrable costs associated with the replacement contract are deferred.
Business combinations
The Group applies the acquisition method of accounting for business combinations. This method allocates the cost of the acquired entity to
the assets and liabilities assumed based on their estimated fair values at the date of acquisition.
Swiss Re | Financial Report 2020
195
Financial statements
Life Capital closed blocks of business can be acquired in different legal forms, either through an acquisition of an entity’s share capital or
through a reinsurance transaction. The Group’s policy is to treat these transactions consistently regardless of the legal form of the acquisition.
Accordingly, the Group records the acquired assets and liabilities directly to the balance sheet. Premiums, life and health benefits and other
income statement items are not recorded in the income statement on the date of the acquisition.
The underlying assets and liabilities acquired are subsequently accounted for according to the relevant US GAAP guidance. This includes
specific requirements applicable to subsequent accounting for assets and liabilities recognised as part of the acquisition method of
accounting, including present value of future profits, goodwill and other intangible assets.
Acquired present value of future profits
The acquired present value of future profits (PVFP) of business in force is recorded in connection with the acquisition of life and health
business. The initial value is calculated as the difference between established reserves, which are set up in line with US GAAP accounting
policies and assumptions of the Group, and their fair value at the acquisition date. The resulting PVFP, which could be positive or negative, is
amortised on a constant yield basis over the expected revenue recognition period of the business acquired, generally over periods ranging
up to 30 years, with the accrual of interest added to the unamortised balance at the earned rate. Amortisation and accrual of interest are
recognised in acquisition costs. The earned rate corresponds to either the current earned rate or the original earned rate depending on the
business written. The rate is consistently applied for the entire life of the applicable business. For universal-life and similar products, PVFP is
amortised in line with estimated gross profits, which are updated quarterly. The carrying value of PVFP is reviewed periodically for indicators
of impairment in value. Adjustments to PVFP reflecting impairment in value are recognised in acquisition costs during the period in which the
determination of impairment is made, or in other comprehensive income for shadow loss recognition.
Goodwill
The excess of the purchase price of acquired businesses over the estimated fair value of net assets acquired is recorded as goodwill, which is
reviewed periodically for indicators of impairment in value. Adjustments to reflect impairment in value are recognised in earnings in the
period in which the determination of impairment is made.
Other assets
Other assets include deferred expenses on retroactive reinsurance, prepaid reinsurance premiums, receivables related to investing activities,
real estate for own use, other classes of property, plant and equipment, lease right-of-use asset, accrued income, certain intangible assets
and prepaid assets.
The excess of estimated liabilities for claims and claim adjustment expenses payable over consideration received in respect of retroactive
property and casualty reinsurance contracts is recorded as a deferred expense. The deferred expense on retroactive reinsurance contracts is
amortised through earnings over the expected claims-paying period.
Real estate for own use as well as other classes of property, plant and equipment are carried at depreciated cost. Depreciation on buildings is
recognised on a straight-line basis over the estimated useful life. Land is recognised at cost and not depreciated.
Leases
The Group recognises for finance and operating leases a liability to make lease payments (the lease liability) and a right-of-use asset
representing the right to use the underlying asset for the lease term. The lease right-of-use asset is included in “other assets” and the lease
liability is included in “accrued expenses and other liabilities” on the balance sheet. Lease expense for lease payments is recognised on a
straight-line basis over the lease term.
Additional disclosures are provided in Note 12 “Leases”.
Capitalised software costs
External direct costs of materials and services incurred to develop or obtain software for internal use, payroll and payroll-related costs for
employees directly associated with software development and interest cost incurred while developing software for internal use are
capitalised and amortised on a straight-line basis through earnings over the estimated useful life.
Income taxes
Deferred income tax assets and liabilities are recognised based on the difference between financial statement carrying amounts and the
corresponding income tax bases of assets and liabilities using enacted income tax rates and laws. A valuation allowance is recorded against
deferred tax assets when it is deemed more likely than not that some or all of the deferred tax assets may not be realised.
The Group recognises the effect of income tax positions only if sustaining those positions is more likely than not. Changes in recognition or
measurement are reflected in the period in which a change in judgement occurs.
The Group releases stranded tax effects for unrealised gains/losses on AFS securities to earnings on a straight-line basis over the average
duration of the relevant AFS portfolio as an approximation of when the individual securities within the portfolio are sold or mature. For
adjustment for pension and other post-retirement benefits, stranded tax effects are released to earnings when the relevant pension plan is
terminated. For foreign currency translation, stranded tax effects are released to earnings in line with the recycling of the underlying foreign
currency translation amounts.
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Swiss Re | Financial Report 2020
Unpaid claims and claim adjustment expenses
Liabilities for unpaid claims and claim adjustment expenses for property and casualty and for life and health insurance and reinsurance
contracts are accrued when insured events occur and are based on the estimated ultimate cost of settling the claims, using reports and
individual case estimates received from ceding companies. Reserves also are established for claims incurred but not reported, which are
developed on the basis of past experience adjusted for current trends and other factors that modify past experience. The establishment of
the appropriate level of reserves is an inherently uncertain process involving estimates and judgements made by management, and therefore
there can be no assurance that ultimate claims and claim adjustment expenses will not exceed the loss reserves currently established by the
Group. These estimates are regularly reviewed, and adjustments for differences between estimates and actual payments for claims and for
changes in estimates are reflected in income in the period in which the estimates are changed or payments are made.
The COVID-19 pandemic has created additional uncertainty, both in respect of estimation of claims across the insurance and reinsurance
industry and assessments of the wider potential global health and economic impacts. This uncertainty has been compounded by the
evolving nature of the pandemic, including the spread of new strains of the virus, and is driven, among other factors, by lack of definitive
answers about the impacts of the pandemic and related mitigation efforts on economies and societies across the globe, the efficacy of
vaccines and other treatments, and the long-term health and social impacts of the pandemic on populations, as well as by evolving
responses of governments and regulators, responses of businesses and outcomes of legal actions that have already been brought or may in
the future be brought. The Group has recorded its best estimate of claims and claim adjustment expenses incurred as a result of the
pandemic as at 31 December 2020, which best estimate reflects the Group’s expectations based on current facts and circumstances.
However, the Group may, as a result of the myriad uncertainties, need to change its estimates for claims incurred and additional future claims
over time as underlying facts develop.
The Group does not discount liabilities arising from prospective property and casualty insurance and reinsurance contracts, including
liabilities which are discounted for US statutory reporting purposes. Liabilities arising from property and casualty insurance and reinsurance
contracts acquired in a business combination are initially recognised at fair value in accordance with the acquisition method of accounting.
The Group does not discount life and health claim reserves except for disability income claims in payment and mortality claims paid out in
the form of an annuity. These claims are recognised at the estimated present value of the remaining ultimate net costs of the incurred claims.
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.
Liabilities for life and health policy benefits
Liabilities for life and health policy benefits from reinsurance business are generally calculated using the net level premium method, based on
assumptions as to investment yields, mortality, withdrawals, lapses and policyholder dividends. Assumptions are set at the time the contract
is issued or, in the case of contracts acquired by purchase, at the purchase date. The assumptions are based on projections from past
experience, making allowance for possible adverse deviation. Interest rate assumptions for life and health (re)insurance benefit liabilities are
based on estimates of expected investment yields. Assumed mortality rates are generally based on experience multiples applied to the
actuarial select and ultimate tables based on industry experience.
Liabilities for life and health policy benefits are increased with a charge to earnings if it is determined that future cash flows, including
investment income, are insufficient to cover future benefits and expenses. Where assets backing liabilities for policy benefits are held as AFS,
these liabilities for policyholder benefits are increased by a shadow adjustment, with a charge to other comprehensive income, where future
cash flows at market rates are insufficient to cover future benefits and expenses.
Policyholder account balances
Policyholder account balances relate to universal-life-type contracts and investment contracts.
Universal-life-type contracts are long-duration insurance contracts, providing either death or annuity benefits, with terms that are not fixed
and guaranteed.
Investment contracts are long-duration contracts that do not incorporate significant insurance risk, ie there is no mortality and morbidity risk,
or the mortality and morbidity risk associated with the insurance benefit features offered in the contract is of insignificant amount or remote
probability. Amounts received as payment for investment contracts are reported as policyholder account balances. Related assets are
included in general account assets except for investments for unit-linked and with-profit business, which are presented in a separate line
item on the face of the balance sheet.
Amounts assessed against policyholders for mortality, administration and surrender are shown as fee income. Amounts credited to
policyholders are shown as interest credited to policyholders. Investment income and realised investment gains and losses allocable to
policyholders are included in net investment income and net realised investment gains/losses except for unit-linked and with-profit business,
which is presented in a separate line item on the face of the income statement.
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Financial statements
Unit-linked and with-profit business are presented together as they are similar in nature. For unit-linked contracts, the investment risk is
borne by the policyholder. For with-profit contracts, the majority of the investment risk is also borne by the policyholder, although there are
certain guarantees that limit the downside risk for the policyholder, and a certain proportion of the returns may be retained by Swiss Re
Group (typically 10%). Additional disclosures are provided in Note 7 “Investments”.
Funds held assets and liabilities
On the asset side, funds held by ceding companies consist mainly of amounts retained by the ceding company for business written on a
funds withheld basis. In addition, the account also includes amounts arising from the application of the deposit method of accounting to
ceded retrocession or reinsurance contracts.
On the liability side, funds held under reinsurance treaties consist mainly of amounts arising from the application of the deposit method of
accounting to inward insurance and reinsurance contracts. In addition, the account also includes amounts retained from ceded business
written on a funds withheld basis.
Funds withheld assets are assets that would normally be paid to the Group but are withheld by the cedent to reduce a potential credit risk or
to retain control over investments. In case of funds withheld liabilities, it is the Group that withholds assets related to ceded business in order
to reduce its credit risk or retain control over the investments.
The deposit method of accounting is applied to insurance and reinsurance contracts that do not indemnify the ceding company or the Group
against loss or liability relating to insurance risk. Under the deposit method of accounting, the deposit asset or liability is initially measured
based on the consideration paid or received. For contracts that transfer neither significant timing nor underwriting risk, and contracts that
transfer only significant timing risk, changes in estimates of the timing or amounts of cash flows are accounted for by recalculating the
effective yield. The deposit is then adjusted to the amount that would have existed had the new effective yield been applied since the
inception of the contract. The revenue and expense recorded for such contracts is included in net investment income. For contracts that
transfer only significant underwriting risk, once a loss is incurred, the deposit is adjusted by the present value of the incurred loss. At each
subsequent balance sheet date, the portion of the deposit attributable to the incurred loss is recalculated by discounting the estimated future
cash flows. The resulting changes in the carrying amount of the deposit are recognised in claims and claim adjustment expenses.
Funds withheld balances are presented together with assets and liabilities arising from the application of the deposit method because of
their common deposit-type character.
Shadow adjustments
Shadow adjustments are recognised in other comprehensive income reflecting the offset of adjustments to deferred acquisition costs and
PVFP, typically related to universal-life-type contracts, and policyholder liabilities. The purpose is to reflect the fact that certain amounts
recorded as unrealised investment gains and losses within shareholders’ equity will ultimately accrue to policyholders and not shareholders.
Shadow loss recognition testing becomes relevant in low interest rate environments. The test considers whether the hypothetical sale of AFS
securities and the reinvestment of proceeds at lower yields would lead to negative operational earnings in future periods, thereby causing a
loss recognition event. For shadow loss recognition testing, the Group uses current market yields to determine best estimate US GAAP
reserves rather than using locked-in or current book yields. If the unlocked best estimate US GAAP reserves based on current market rates
are in excess of reserves based on locked-in or current book yields, a shadow loss recognition reserve is set up. These reserves are
recognised in other comprehensive income and do not impact net income. In addition, shadow loss recognition reserves can reverse up to
the amount of losses recognised due to past loss events.
Premiums
Property and casualty reinsurance premiums are recorded when written and include an estimate for written premiums receivable at period
end. Premiums earned are generally recognised in income over the contract period in proportion to the amount of reinsurance provided.
Unearned premiums consist of the unexpired portion of reinsurance provided. Life reinsurance premiums are earned when due. Related
policy benefits are recorded in relation to the associated premium or gross profits so that profits are recognised over the expected lives of the
contracts.
Life and health reinsurance premiums for group coverages are generally earned over the term of the coverage. For group contracts that allow
experience adjustments to premiums, such premiums are recognised as the related experience emerges.
Reinstatement premiums are due where coverage limits for the remaining life of the contract are reinstated under pre-defined contract
terms. The recognition of reinstatement premiums as written depends on individual contract features. Reinstatement premiums are either
recognised as written at the time a loss event occurs or in line with the recognition pattern of premiums written of the underlying contract.
The accrual of reinstatement premiums is based on actuarial estimates of ultimate losses. Reinstatement premiums are generally earned in
proportion to the amount of reinsurance provided.
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Insurance and reinsurance ceded
The Group uses retrocession arrangements to increase its aggregate underwriting capacity, to diversify its risk and to reduce the risk of
catastrophic loss on reinsurance assumed. The ceding of risks to retrocessionaires does not relieve the Group of its obligations to its ceding
companies. The Group regularly evaluates the financial condition of its retrocessionaires and monitors the concentration of credit risk to
minimise its exposure to financial loss from retrocessionaires’ insolvency. Premiums and losses ceded under retrocession contracts are
reported as reductions of premiums earned and claims and claim adjustment expenses. Amounts recoverable for ceded short- and long-
duration contracts, including universal-life-type and investment contracts, are reported as assets in the accompanying consolidated balance
sheet.
The Group provides reserves for uncollectible amounts on reinsurance balances ceded, based on management’s assessment of the
collectability of the outstanding balances.
Receivables
Premium and claims receivables which have been invoiced are accounted for at face value. Together with assets arising from the application
of the deposit method of accounting that meet the definition of financing receivables they are regularly assessed for impairment. Evidence of
impairment is the age of the receivable and/or any financial difficulties of the counterparty. Allowances are set up on the net balance,
meaning all balances related to the same counterparty are considered. The amount of the allowance is set up in relation to the time a
receivable has been due and any financial difficulties of the debtor and can be as high as the outstanding net balance.
Pensions and other post-retirement benefits
The Group accounts for its pension and other post-retirement benefit costs using the accrual method of accounting. Amounts charged to
expense are based on periodic actuarial determinations.
Share-based payment transactions
As of 31 December 2020, the Group has a Leadership Performance Plan, restricted shares and a Global Share Participation Plan. These
plans are described in more detail in Note 16 “Share-based payments”. 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.
For share-based compensation plans which are settled in cash, compensation costs are recognised as liabilities, whereas for equity-settled
plans, compensation costs are recognised as an accrual to additional paid-in capital within shareholders’ equity.
Treasury shares
Treasury shares are reported at cost in shareholders’ equity.
Earnings per common share
Basic earnings per common share are determined by dividing net income available to shareholders by the weighted average number of
common shares entitled to dividends during the year. Diluted earnings per common share reflect the effect on earnings and average
common shares outstanding associated with dilutive securities.
Subsequent events
Subsequent events for the current reporting period have been evaluated up to 17 March 2021. This is the date on which the financial
statements are available to be issued.
Adoption of new accounting standards
In August 2018, the FASB issued ASU 2018-13, “Disclosure Framework – Changes to the Disclosure Requirements for Fair Value
Measurement”, an update to Topic 820, “Fair Value Measurement”. The amendments in this ASU add, remove and modify some disclosure
requirements on fair value measurement. The Group adopted the standard retrospectively on 1 January 2020 with the exception of the
amendments which require prospective adoption. The applicable amendments of ASU 2018-13 are reflected in Note 8 “Fair value
disclosures”.
In August 2018, the FASB issued ASU 2018-14, “Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit
Plans”, an update to Subtopic 715-20, “Compensation – Retirement Benefits – Defined Benefit Plans – General”. The amendments in this
Update remove, clarify and add disclosure requirements related to defined benefit pension and other postretirement plans. The Group
adopted the annual disclosure requirements retrospectively as of year-end 2020, which are provided in Note 15 “Benefit plans”.
In August 2018, the FASB issued ASU 2018-15, “Customer’s Accounting for Implementation Cost Incurred in a Cloud Computing
Arrangement That Is a Service Contract”, a consensus of the FASB Emerging Issues Task Force (EITF) to Subtopic 350-40, “Internal-Use
Software”. The amendments in this ASU align the requirements for capitalising implementation costs incurred in a cloud computing
arrangement (CCA) that is a service contract with the requirements for capitalising implementation costs incurred to develop or obtain
internal use software. The update requires that implementation costs related to a CCA that is a service contract need to be capitalised based
on the phase and nature of the costs. The Group adopted ASU 2018-15 prospectively on 1 January 2020. The adoption did not have a
material impact on the Group’s financial statements.
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Financial statements
In October 2018, the FASB issued ASU 2018-17, “Targeted Improvements to Related Party Guidance for Variable Interest Entities”, an
update to Topic 810, “Consolidation”. The standard requires that indirect interests held through related parties in common control
arrangements should be considered on a proportional basis for determining whether fees paid to decision makers and service providers are
variable interests. The Group adopted the ASU retrospectively on 1 January 2020. The adoption did not have an impact on the Group’s
financial statements.
In November 2018, the FASB issued ASU 2018-18, “Clarifying the Interaction between Topic 808 and Topic 606”, an update to Topic 808,
“Collaborative Arrangements”. The amendments in this ASU provide guidance on whether certain transactions between collaborative
arrangement participants should be accounted for with revenue under Topic 606 “Revenue from Contracts with Customers”. In particular,
the update requires that in a transaction with a collaborative arrangement participant that is not directly related to sales to third parties, the
presentation of the transaction together with revenue recognised under Topic 606 is precluded. The Group adopted ASU 2018-18 on 1
January 2020 retrospectively to the date of initial application of Topic 606. The adoption did not have an impact on the Group’s financial
statements.
In April 2019, the FASB issued ASU 2019-04, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815,
Derivatives and Hedging, and Topic 825, Financial Instruments”. The ASU provides selective clarifications and corrections of guidance on
credit losses, hedging, and recognising and measuring financial instruments. The Group adopted the standard on 1 January 2020 with the
exception of the guidance relating to ASU 2016-13 “Measurement of Credit Losses”. The adoption did not have an impact on the Group’s
financial statements. The amendments related to credit losses will be adopted together with ASU 2016-13 as required by the standard.
In March 2020, the FASB issued ASU 2020-03, “Codification Improvements to Financial Instruments”. The amendments in this ASU
address seven specific issues identified related to financial instruments with the aim to improve and clarify the Codification, correct
unintended application of current guidance and eliminate inconsistencies. The Group adopted issues 1, 2, 3, 4 and 5 on 9 March 2020,
which is the issuance date of the ASU. The adoption did not have an impact on the Group’s financial statements. Issues 6 and 7 will be
adopted together with ASU 2016-13 “Measurement of Credit Losses” as required by the standard.
In March 2020, the FASB issued ASU 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting”, an update to
Topic 848, “Reference Rate Reform”. In response to concerns about structural risks of interbank offered rates (IBORs) and, particularly, the
risk of cessation of the London Interbank Offered Rate (LIBOR), regulators in several jurisdictions around the world have undertaken
reference rate reform initiatives to identify alternative reference rates. The amendments in this update provide optional expedients and
exceptions for applying US GAAP accounting principles to contracts, hedging relationships and other transactions that reference LIBOR or
another reference rate expected to be discontinued because of these reference rate reform initiatives. The Group adopted ASU 2020-04 on
12 March 2020, which is the issuance date of the standard. There is a choice to apply the guidance by Topic or industry Subtopic at any
time prospectively during the effective period from 12 March 2020 through 31 December 2022. As of 31 December 2020, the Group
applied the guidance to Topic 815 related to changes to the critical terms of a hedging relationship due to reference rate reform as well as to
Topic 944 related to changes resulting from the replacement of discontinued reference rates included in contracts within the scope of Topic
944, “Financial Services – Insurance”. While these elections did not have a material impact on the Consolidated Financial Statements, they
ease the administrative burden of accounting for contracts impacted by the reference rate reform.
Future adoption of new accounting standards
In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses”, an update to Topic 326, “Financial Instruments – Credit
Losses”. ASU 2016-13 replaces the incurred loss impairment methodology in current US GAAP with a methodology that reflects expected
credit losses. The standard is applicable to all financial assets such as financial instruments that are measured at amortised cost, available-
for-sale debt securities and reinsurance recoverables. The objective of the expected credit loss model is that a reporting entity recognises its
estimate of expected credit losses incorporating forward-looking information in a valuation allowance for financial assets in scope. As
amended by ASU 2019-10 “Effective Dates”, ASU 2016-13 is effective for annual and interim periods beginning after 15 December 2022.
For most affected financial assets, the ASU must be adopted using a modified retrospective approach, with a cumulative effect adjustment
recorded to opening retained earnings on the adoption date. The Group is currently assessing the impact of the new requirements.
In January 2017, the FASB issued ASU 2017-04, “Simplifying the Test for Goodwill Impairment”, an update to Topic 350, “Intangibles –
Goodwill and Other”. This ASU simplifies the subsequent measurement of goodwill and eliminates Step 2 from the goodwill impairment test.
In computing the implied fair value of goodwill under Step 2, an entity has to perform procedures to determine the fair value of its assets and
liabilities (including unrecognised assets and liabilities) at the impairment testing date following the procedure that would be required in
determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, under the amendments in this
update, an entity should perform its regular goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount.
An entity should recognise an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value;
however, the loss recognised should not exceed the total amount of goodwill allocated to that reporting unit. As amended by ASU 2019-10
“Effective Dates”, ASU 2017-04 is effective for goodwill impairment tests in annual and interim periods beginning after 15 December 2022.
Early application of the ASU is permitted. The Group is currently assessing the impact of the new requirements.
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In August 2018, the FASB issued ASU 2018-12, “Targeted Improvements to the Accounting for Long-Duration Contracts”, an update to
Topic 944,
“Financial Services – Insurance”. This ASU requires that the cash flows and net premium ratio will be updated for changes in
insurance assumptions (eg mortality, morbidity, terminations) when measuring the liability for future policy benefits for nonparticipating
traditional and limited-payment insurance and reinsurance contracts. There will no longer be a provision for adverse deviation. In addition,
the discount rate used to reflect the time value of money in the calculation of the liability for future policy benefits will be standardised.
Further, the ASU requires deferred acquisition costs (DAC) relating to most long-duration contracts to be amortised on a constant basis over
the expected term of the contract. As amended by ASU 2020-11 “Effective Date and Early Application”, ASU 2018-12 is effective for annual
periods beginning after 15 December 2024, and interim periods beginning after 15 December 2025. Due to the decision of the Board of
Directors of Swiss Re Ltd to prepare the Group’s consolidated financial statements in accordance with IFRS beginning 1 January 2024, the
Group does not plan to adopt ASU 2018-12.
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201
Financial statements
2 Information on business segments
The Group provides reinsurance and insurance throughout the world through its business segments. The business segments are determined
by the organisational structure and by the way in which management reviews the operating performance of the Group.
The Group presents four core operating business segments: Property & Casualty Reinsurance, Life & Health Reinsurance, Corporate Solutions
and Life Capital. The presentation of each segment’s balance sheet is closely aligned to the segment legal entity structure. The assignment of
assets and liabilities for entities that span more than one segment is determined by considering local statutory requirements, legal and other
constraints, the economic view of duration and currency requirements of the business written and the capacity of the segments to absorb
risks. Interest expense is based on the segment’s capital funding position. The tax impact of a segment is derived from the legal entity tax
obligations and the segmentation of the pre-tax result. While most of the tax items can be directly attributed to individual segments, the tax
which impacts two or more segments is allocated to the segments on a reasonable basis. Property & Casualty Reinsurance and Life & Health
Reinsurance share the same year-to-date effective tax rate as both business segments belong to the Reinsurance Business Unit.
Accounting policies applied by the business segments are in line with those described in the summary of significant accounting policies
(please refer to Note 1). Cross-segmental dividends and gains and losses on certain one-off transfers and transactions between segments
are accounted for through segmental shareholders' equity.
The Group operating segments are outlined below.
Property & Casualty Reinsurance and Life & Health Reinsurance
Reinsurance consists of two segments, Property & Casualty and Life & Health. The Reinsurance Business Unit operates globally, both through
brokers and directly with clients, and provides a large range of solutions for risk and capital management. Clients include stock and mutual
insurance companies as well as public sector and governmental entities. In addition to traditional reinsurance solutions, Reinsurance offers
insurance-linked securities and other insurance-related capital market products in both Property & Casualty and Life & Health.
Property & Casualty includes the business lines property, casualty (including motor) and specialty. Life & Health includes the life and health
lines of business.
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 highly customised solutions tailored to the needs of clients. Corporate
Solutions serves customers from offices worldwide.
Life Capital
In the fourth quarter of 2019, the Group entered into an agreement to sell its subsidiary ReAssure, previously within the Life Capital business
segment, to Phoenix. On 22 July 2020, the Group successfully completed the sale of ReAssure to Phoenix, following the receipt of all
required regulatory and anti-trust approvals. The sale effectively led to the deconsolidation of ReAssure from the Group financial statements
in the third quarter of 2020.
For more details on the transaction, please refer to Note 10 ”Acquisitions and disposals”.
Life Capital manages Swiss Re’s primary life and health business as well as its primary retail property and casualty business. It encompasses
the closed and open life and health insurance books, including the ReAssure business sold in 2020 and the business comprising elipsLife
and iptiQ.
Through ReAssure, Swiss Re acquired closed blocks of inforce life and health insurance business, either through reinsurance or corporate
acquisition, and typically assumed responsibility for administering the underlying policies. The administration of the business was managed
directly or, where appropriate, in partnership with a third party. In the open books business, elipsLife, the Group life and health insurance
business, offers solutions to pension funds, corporates and affinity groups through an intermediated business to business to consumer
(“B2B2C”) model. The iptiQ business partners with distributors and enables individuals to address their protection needs on a white labelled
basis.
As announced on 19 June 2020, the segmental disclosures will be revised to reflect the way the Group will manage its business activities
going forward. As of 1 January 2021, the Life Capital reporting segment ceases to be managed as a separate Business Unit. iptiQ becomes
a stand-alone division, and is reported as part of the Group items reporting segment. elipsLife moves to the Corporate Solutions reporting
segment.
Group items
Items not allocated to the business segments are included in the “Group items” column, which encompasses Swiss Re Ltd, the Group’s
ultimate parent company, Principal Investments and certain Treasury units and reinsurance and insurance business in run-off. Swiss Re Ltd
charges trademark licence fees to the business segments which are reported as other revenues. Certain administrative expenses of the
corporate centre functions that are not recharged to the operating segments are reported as Group items.
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Consolidation
Segment information is presented net of external and internal retrocession and other intra-group arrangements. The Group total is obtained
after elimination of intra-group transactions in the “Consolidation” column. This includes significant intra-group reinsurance arrangements,
recharge of trademark licence fees and intersegmental funding.
Swiss Re | Financial Report 2020
203
Financial statements
a) Business segments – income statement
For the year ended 31 December
2019
USD millions
Revenues
Gross premiums written
Net premiums written
Change in unearned premiums
Premiums earned
Fee income from policyholders
Net investment income – non-participating business
Net realised investment gains/losses –
non-participating business
Net investment result –
unit-linked and with-profit business
Other revenues
Total revenues
Expenses
Claims and claim adjustment expenses
Life and health benefits
Return credited to policyholders
Acquisition costs
Operating expenses
Total expenses before interest expenses
Income/loss before interest and income tax
expense/benefit
Interest expenses
Income/loss before income tax expense/benefit
Income tax expense/benefit
Net income/loss before attribution of
non-controlling interests
Property & Casualty
Reinsurance
Life & Health
Reinsurance
Corporate
Solutions
Life Capital Group items Consolidation
Total
21 562
20 882
–1 607
19 275
1 419
14 452
12 734
101
12 835
169
1 207
4 974
4 253
–87
4 166
234
2 831
1 780
–82
1 698
451
1 193
–1 591
552
–434
883
628
162
18
–111
18
21 595
118
4
14 961
5
4 567
4 821
1
8 182
414
855
–412
–846
42 228
39 649
–1 675
37 974
620
4 171
1 580
4 939
30
49 314
–14 783
–3 900
–10 587
–162
–1 975
–746
–20 782 –13 470
–4 810
–1 189
–2 500
–4 471
–409
–721
–8 101
–640
–788
–5 328
813
–352
461
–65
1 491
–445
1 046
–147
–761
–40
–801
143
81
–72
9
–133
–547
–547
308
–114
194
62
396
899
–658
–124
256
–18 683
–13 087
–4 633
–7 834
412
–3 579
412 –47 816
–434
434
0
0
0
1 498
–589
909
–140
769
–42
727
79.7
31.7
111.4
3.4
Income/loss attributable to non-controlling interests
Net income/loss attributable to common shareholders
396
899
11
–647
–53
–177
256
Claims ratio in %
Expense ratio in %
Combined ratio in %
Management expense ratio¹ in %
Net operating margin2 in %
76.7
31.1
107.8
3.8
93.6
34.3
127.9
5.2
10.0
–16.7
2.4
1 Management expense ratio is calculated as ”Operating expenses” divided by ”Total revenues” excluding ”Net realised investment gains/losses – non-participating business” and ”Net
investment result – unit-linked and with-profit business”.
2 Net operating margin is calculated as ”Income before interest and income tax expense” divided by ”Total revenues” excluding ”Net investment result – unit-linked and with-profit business”.
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Business segments – income statement
For the year ended 31 December
2020
USD millions
Revenues
Gross premiums written
Net premiums written
Change in unearned premiums
Premiums earned
Fee income from policyholders
Net investment income – non-participating business
Net realised investment gains –
non-participating business
Net investment result –
unit-linked and with-profit business
Other revenues
Total revenues
Expenses
Claims and claim adjustment expenses
Life and health benefits
Return credited to policyholders
Acquisition costs
Operating expenses
Total expenses before interest expenses
Income/loss before interest and income tax
expense/benefit
Interest expenses
Income/loss before income tax expense/benefit
Income tax expense/benefit
Net income/loss before attribution of
non-controlling interests
Property & Casualty
Reinsurance
Life & Health
Reinsurance
Corporate
Solutions
Life Capital Group items Consolidation
Total
21 512
20 636
196
20 832
1 178
15 067
13 657
68
13 725
158
1 140
4 839
3 824
223
4 047
140
2 533
1 686
7
1 693
291
827
24
24
24
20
–1 024
–317
683
445
74
243
285
26
22 719
–32
4
15 440
5
4 266
–2 155
1
900
407
736
–406
–723
42 951
39 827
494
40 321
449
2 988
1 730
–2 187
37
43 338
–16 403
–3 433
–12 204
5
–1 999
–786
–22 707 –14 984
–5 104
–1 200
–592
–690
–4 715
–2
–1 716
1 755
–527
–613
–1 103
12
–321
–309
62
456
–367
89
–18
–449
–31
–480
136
–203
–55
–258
41
–9
–14
–714
–737
–1
–131
–132
45
–19 838
–13 929
1 760
–8 236
406
–3 597
406 –43 840
–317
317
0
–502
–588
–1 090
266
–247
71
–344
–217
–87
0
–824
Income attributable to non-controlling interests
Net income/loss attributable to common shareholders
–247
71
–6
–350
–48
–265
–87
0
Claims ratio in %
Expense ratio in %
Combined ratio in %
Management expense ratio¹ in %
Net operating margin2 in %
78.7
30.3
109.0
0.1
84.8
31.7
116.5
5.2
2.9
–10.5
–6.6
–54
–878
79.7
30.5
110.2
–1.1
1 Management expense ratio is calculated as ”Operating expenses” divided by ”Total revenues” excluding ”Net realised investment gains/losses – non-participating business” and ”Net
investment result – unit-linked and with-profit business”.
2 Net operating margin is calculated as ”Income before interest and income tax expense” divided by ”Total revenues” excluding ”Net investment result – unit-linked and with-profit business”.
Swiss Re | Financial Report 2020
205
Financial statements
Business segments – balance sheet
As of 31 December
2019
USD millions
Assets
Fixed income securities
Equity securities
Other investments
Short-term investments
Investments for unit-linked and with-profit business
Cash and cash equivalents
Deferred acquisition costs
Acquired present value of future profits
Reinsurance recoverable
Other reinsurance assets
Goodwill
Other
Assets held for sale1
Total assets
Liabilities
Unpaid claims and claim adjustment expenses
Liabilities for life and health policy benefits
Policyholder account balances
Other reinsurance liabilities
Short-term debt
Long-term debt
Other
Liabilities held for sale1
Total liabilities
Property & Casualty
Reinsurance
Life & Health
Reinsurance
Corporate
Solutions
Life Capital
Group items Consolidation
Total
38 877
1 749
14 606
3 283
3 674
2 613
2 325
12 524
1 895
7 723
32 008
620
4 871
1 678
520
1 694
4 529
577
4 887
8 471
1 846
5 325
7 473
172
147
380
1 698
483
7 058
2 667
204
2 342
89 269
67 026
22 624
3 088
57
865
377
494
213
465
3 111
5 951
127
395
5 009
50
2
3
–12 606
–11 483
–4 873
658
74 983
90 262
2 256
7 842
–8 950
–544
–38 456
49 963
12 899
915
5 511
11 662
13 094
20 679
1 401
2 904
1 500
11 225
7 970
12 881
728
4 987
798
1 093
80 950
58 773
20 487
2 489
4 250
4 004
2 034
66
838
1 015
68 624
83 320
–6 054
–5 821
–5 051
–2 356
–8 728
–10 408
–38
–38 456
2
60
494
1 900
2 456
81 573
2 993
12 892
5 768
520
7 562
7 838
1 042
5 898
24 743
3 945
9 354
74 439
238 567
72 373
19 836
5 405
17 775
185
10 138
13 232
68 586
207 530
Shareholders’ equity
8 318
8 253
2 005
5 289
5 386
0
29 251
Non-controlling interests
Total equity
1
8 319
8 253
132
2 137
1 653
6 942
5 386
0
1 786
31 037
Total liabilities and equity
89 269
67 026
22 624
90 262
7 842
–38 456
238 567
1 Please refer to Note 10 ”Acquisitions and disposals” for more details.
206
Swiss Re | Financial Report 2020
Business segments – balance sheet
As of 31 December
2020
USD millions
Assets
Fixed income securities
Equity securities
Other investments
Short-term investments
Investments for unit-linked and with-profit business
Cash and cash equivalents
Deferred acquisition costs
Acquired present value of future profits
Reinsurance recoverable
Other reinsurance assets
Goodwill
Other
Total assets
Liabilities
Unpaid claims and claim adjustment expenses
Liabilities for life and health policy benefits
Policyholder account balances
Other reinsurance liabilities
Short-term debt
Long-term debt
Other
Total liabilities
0
Property & Casualty
Reinsurance
Life & Health
Reinsurance
Corporate
Solutions
Life Capital
Group items Consolidation
Total
39 691
1 518
19 345
9 216
2 941
2 576
2 030
13 003
1 958
8 769
101 047
55 267
14 570
435
4 771
16 834
91 877
32 958
641
3 502
4 275
463
1 625
4 900
510
2 042
7 883
1 869
7 705
68 373
14 863
20 207
1 303
1 399
1 500
12 304
9 416
60 992
7 024
204
144
1 865
558
413
6 733
2 491
194
2 366
21 992
13 560
746
4 137
498
909
19 850
3 244
110
817
535
294
285
418
258
4 469
101
2 426
5 018
191
52
56
9
–12 595
–5 171
–1 195
1 193
11 623
4 580
12 433
–13 885
–32 846
2 727
1 495
3 889
887
66
808
9 872
9
9
–5 168
–1
74
60
2 400
3 067
5 619
–1 515
–1 908
–8 389
–15 865
–32 846
83 018
4 899
16 231
16 082
463
5 470
8 230
928
5 892
26 660
4 021
10 728
182 622
81 258
22 456
5 192
19 552
153
11 584
15 169
155 364
Shareholders’ equity
9 168
7 381
2 021
1 751
6 814
0
27 135
Non-controlling interests
Total equity
2
9 170
7 381
121
2 142
1 751
6 814
0
123
27 258
Total liabilities and equity
101 047
68 373
21 992
11 623
12 433
–32 846
182 622
Swiss Re | Financial Report 2020
207
Financial statements
b) Property & Casualty Reinsurance business segment – by line of business
For the year ended 31 December
2019
USD millions
Revenues
Gross premiums written
Net premiums written
Change in unearned premiums
Premiums earned
Net investment income
Net realised investment gains/losses
Other revenues
Total revenues
Expenses
Claims and claim adjustment expenses
Acquisition costs
Operating expenses
Total expenses before interest expenses
Income/loss before interest and income tax expense
Interest expenses
Income/loss before income tax expense
Claims ratio in %
Expense ratio in %
Combined ratio in %
Property
Casualty
Specialty
Unallocated
Total
7 927
7 329
–122
7 207
10 497
10 452
–1 166
9 286
3 138
3 101
–319
2 782
7 207
9 286
2 782
–5 328
–1 365
–610
–7 303
–7 675
–2 758
–395
–10 828
–96
–1 542
–96
–1 542
73.9
27.4
101.3
82.6
34.0
116.6
–1 780
–687
–184
–2 651
131
131
64.0
31.3
95.3
1 419
883
18
2 320
0
2 320
–352
1 968
21 562
20 882
–1 607
19 275
1 419
883
18
21 595
–14 783
–4 810
–1 189
–20 782
813
–352
461
76.7
31.1
107.8
208
Swiss Re | Financial Report 2020
Property & Casualty Reinsurance business segment – by line of business
For the year ended 31 December
2020
USD millions
Revenues
Gross premiums written
Net premiums written
Change in unearned premiums
Premiums earned
Net investment income
Net realised investment gains/losses
Other revenues
Total revenues
Expenses
Claims and claim adjustment expenses
Acquisition costs
Operating expenses
Total expenses before interest expenses
Income/loss before interest and income tax expense
Interest expenses
Income/loss before income tax expense
Claims ratio in %
Expense ratio in %
Combined ratio in %
Property
Casualty
Specialty
Unallocated
Total
9 001
8 278
–28
8 250
9 445
9 364
245
9 609
3 066
2 994
–21
2 973
8 250
9 609
2 973
–6 785
–1 640
–604
–9 029
–7 570
–2 732
–443
–10 745
–2 048
–732
–153
–2 933
–779
–1 136
–779
–1 136
82.2
27.2
109.4
78.8
33.0
111.8
40
40
68.9
29.8
98.7
1 178
683
26
1 887
0
1 887
–321
1 566
21 512
20 636
196
20 832
1 178
683
26
22 719
–16 403
–5 104
–1 200
–22 707
12
–321
–309
78.7
30.3
109.0
Swiss Re | Financial Report 2020
209
Financial statements
c) Life & Health Reinsurance business segment – by line of business
For the year ended 31 December
2019
USD millions
Revenues
Gross premiums written
Net premiums written
Change in unearned premiums
Premiums earned
Fee income from policyholders
Net investment income – non-participating business
Net realised investment gains/losses – non-participating business
Net investment result – unit-linked and with-profit business
Other revenues
Total revenues
Expenses
Life and health benefits
Return credited to policyholders
Acquisition costs
Operating expenses
Total expenses before interest expenses
Income before interest and income tax expense
Interest expenses
Income before income tax expense
Management expense ratio1 in %
Net operating margin2 in %
Life
Health
Unallocated
Total
10 123
8 522
126
8 648
169
912
–24
118
3
9 826
–7 316
–162
–1 295
–472
–9 245
581
581
4.8
6.0
4 329
4 212
–25
4 187
295
1
4 483
–3 271
–680
–274
–4 225
258
258
6.1
5.8
14 452
12 734
101
12 835
169
1 207
628
118
4
14 961
–10 587
–162
–1 975
–746
–13 470
1 491
–445
1 046
5.2
10.0
652
652
0
652
–445
207
1 Management expense ratio is calculated as ”Operating expenses” divided by ”Total revenues” excluding ”Net realised investment gains/losses – non-participating business” and ”Net
investment result – unit-linked and with-profit business”.
2 Net operating margin is calculated as ”Income before interest and income tax expense” divided by ”Total revenues” excluding ”Net investment result – unit-linked and with-profit business”.
210
Swiss Re | Financial Report 2020
Life & Health Reinsurance business segment – by line of business
For the year ended 31 December
2020
USD millions
Revenues
Gross premiums written
Net premiums written
Change in unearned premiums
Premiums earned
Fee income from policyholders
Net investment income – non-participating business
Net realised investment gains/losses – non-participating business
Net investment result – unit-linked and with-profit business
Other revenues
Total revenues
Expenses
Life and health benefits
Return credited to policyholders
Acquisition costs
Operating expenses
Total expenses before interest expenses
Income/loss before interest and income tax expense
Interest expenses
Income/loss before income tax expense
Management expense ratio1 in %
Net operating margin2 in %
Life
Health
Unallocated
Total
10 291
9 156
36
9 192
158
870
54
–32
3
10 245
–8 587
5
–1 309
–522
–10 413
–168
–168
5.1
-1.6
4 776
4 501
32
4 533
270
–12
1
4 792
–3 617
–690
–264
–4 571
221
221
5.5
4.6
15 067
13 657
68
13 725
158
1 140
445
–32
4
15 440
–12 204
5
–1 999
–786
–14 984
456
–367
89
5.2
2.9
403
403
0
403
–367
36
1 Management expense ratio is calculated as ”Operating expenses” divided by ”Total revenues” excluding ”Net realised investment gains/losses – non-participating business” and ”Net
investment result – unit-linked and with-profit business”.
2 Net operating margin is calculated as ”Income/loss before interest and income tax expense” divided by ”Total revenues” excluding ”Net investment result – unit-linked and with-profit business”.
Swiss Re | Financial Report 2020
211
Financial statements
d) Net premiums earned and fee income from policyholders by geography
Net premiums earned and fee income from policyholders by region for the years ended 31 December
USD millions
Americas
Europe (including Middle East and Africa)
Asia-Pacific
Total
Net premiums earned and fee income from policyholders by country for the years ended 31 December
USD millions
United States
United Kingdom
China
Australia
Japan
Canada
Germany
Netherlands
Switzerland
France
Ireland
Other
Total
2019
18 158
12 017
8 419
38 594
2019
15 804
3 593
2 136
2 026
1 620
1 205
1 330
913
1 071
941
709
7 246
38 594
2020
19 462
12 889
8 419
40 770
2020
17 130
3 793
2 133
1 865
1 677
1 341
1 336
1 325
1 205
968
757
7 240
40 770
Net premiums earned and fee income from policyholders are allocated by country, based on the underlying contract.
212
Swiss Re | Financial Report 2020
3 Insurance information
Premiums earned and fees assessed against policyholders
For the years ended 31 December
2019
USD millions
Premiums earned, thereof:
Direct
Reinsurance
Intra-group transactions (assumed and ceded)
Premiums earned before retrocession
to external parties
Retrocession to external parties
Net premiums earned
Fee income from policyholders, thereof:
Direct
Reinsurance
Gross fee income before retrocession
to external parties
Retrocession to external parties
Net fee income
2020
USD millions
Premiums earned, thereof:
Direct
Reinsurance
Intra-group transactions (assumed and ceded)
Premiums earned before retrocession
to external parties
Retrocession to external parties
Net premiums earned
Fee income from policyholders, thereof:
Direct
Reinsurance
Gross fee income before retrocession
to external parties
Retrocession to external parties
Net fee income
Property & Casualty
Reinsurance
Life & Health
Reinsurance
Corporate
Solutions
Life Capital
Group Items
Total
19 577
265
19 842
–567
19 275
0
14
13 836
205
14 055
–1 220
12 835
170
170
–1
169
3 837
910
–265
4 482
–316
4 166
0
2 211
95
–205
2 101
–403
1 698
360
91
451
451
6 062
34 418
0
40 480
–2 506
37 974
360
261
621
–1
620
0
0
Property & Casualty
Reinsurance
Life & Health
Reinsurance
Corporate
Solutions
Life Capital
Group Items
Total
21 152
418
14 794
343
21 570
–738
20 832
15 137
–1 412
13 725
3 896
940
–411
4 425
–378
4 047
159
159
–1
158
0
2 427
67
–350
2 144
–451
1 693
205
86
291
10
14
24
24
6 333
36 967
0
43 300
–2 979
40 321
205
245
450
–1
449
0
291
0
Swiss Re | Financial Report 2020
213
Financial statements
Claims and claim adjustment expenses
For the year ended 31 December
2019
USD millions
Claims paid, thereof:
Property & Casualty
Reinsurance
Life & Health
Reinsurance
Corporate
Solutions
Life Capital
Group Items
Total
Gross claims paid to external parties
Intra-group transactions (assumed and ceded)
–12 453
–585
–10 077
–165
–3 836
585
–3 481
165
–13 038
352
–12 686
–10 242
1 049
–9 193
–3 251
264
–2 987
–3 316
472
–2 844
–2 151
–25
–1 394
–8
–1 143
25
–2 176
79
–1 402
8
–1 118
205
–2 097
–1 394
–913
409
8
417
–73
344
–29 847
0
–29 847
2 137
–27 710
0
–4 279
0
–4 279
219
0
–4 060
–14 783
–10 587
–3 900
–2 500
0
–31 770
Property & Casualty
Reinsurance
Life & Health
Reinsurance
Corporate
Solutions
Life Capital
Group Items
Total
–4 875
–28
–2 148
–4
–4 903
93
–4 810
–2 152
177
–1 975
–729
28
–701
61
–640
–458
4
–454
45
–409
–8 210
0
–8 210
376
–7 834
0
Claims before receivables from
retrocession to external parties
Retrocession to external parties
Net claims paid
Change in unpaid claims and claim adjustment
expenses; life and health benefits, thereof:
Gross – with external parties
Intra-group transactions (assumed and ceded)
Unpaid claims and claim adjustment expenses;
life and health benefits before impact of
retrocession to external parties
Retrocession to external parties
Net unpaid claims and claim adjustment
expenses; life and health benefits
Claims and claim adjustment expenses;
life and health benefits
Acquisition costs
For the year ended 31 December
2019
USD millions
Acquisition costs, thereof:
Gross acquisition costs with external parties
Intra-group transactions (assumed and ceded)
Acquisition costs before impact of
retrocession to external parties
Retrocession to external parties
Net acquisition costs
214
Swiss Re | Financial Report 2020
Claims and claim adjustment expenses
For the year ended 31 December
2020
USD millions
Claims paid, thereof:
Property & Casualty
Reinsurance
Life & Health
Reinsurance
Corporate
Solutions
Life Capital
Group Items
Total
Gross claims paid to external parties
Intra-group transactions (assumed and ceded)
–12 225
–553
–11 813
–222
–3 221
553
–2 791
222
Claims before receivables from
retrocession to external parties
Retrocession to external parties
Net claims paid
Change in unpaid claims and claim adjustment
expenses; life and health benefits, thereof:
Gross – with external parties
Intra-group transactions (assumed and ceded)
Unpaid claims and claim adjustment expenses;
life and health benefits before impact of
retrocession to external parties
Retrocession to external parties
Net unpaid claims and claim adjustment
expenses; life and health benefits
Claims and claim adjustment expenses;
life and health benefits
Acquisition costs
For the year ended 31 December
2020
USD millions
Acquisition costs, thereof:
Gross acquisition costs with external parties
Intra-group transactions (assumed and ceded)
Acquisition costs before impact of
retrocession to external parties
Retrocession to external parties
Net acquisition costs
–12 778
416
–12 362
–12 035
1 228
–10 807
–2 668
225
–2 443
–2 569
414
–2 155
–4 087
278
–1 474
–88
–646
–284
–3 809
–232
–1 562
165
–930
–60
428
94
522
–85
–7
–7
–7
–2
–2
–30 057
0
–30 057
2 283
–27 774
–5 781
0
–5 781
–212
–4 041
–1 397
–990
437
–2
–5 993
–16 403
–12 204
–3 433
–1 718
–9
–33 767
Property & Casualty
Reinsurance
Life & Health
Reinsurance
Corporate
Solutions
Life Capital
Group Items
Total
–5 142
–68
–2 243
–24
–5 210
106
–5 104
–2 267
268
–1 999
–712
66
–646
54
–592
–599
26
–573
46
–527
–14
–14
–14
–8 710
0
–8 710
474
–8 236
Swiss Re | Financial Report 2020
215
Financial statements
Reinsurance recoverable on unpaid claims and policy benefits
As of 31 December 2019 and 2020, the Group had a reinsurance recoverable of USD
The concentration of credit risk is regularly monitored and evaluated. The reinsurance programme with Berkshire Hathaway and subsidiaries
accounted for 33% and 30% of the Group’s reinsurance recoverable as of year-end 2019 and 2020, respectively.
million, respectively.
million and USD
5 898
5 892
Reinsurance receivables
Reinsurance receivables as of 31 December were as follows:
USD millions
Premium receivables invoiced
Receivables invoiced from ceded re/insurance business
Assets arising from the application of the deposit method of
accounting and meeting the definition of financing receivables
Recognised allowance
2019
3 589
444
249
–56
2020
3 960
468
649
–73
Policyholder dividends
Policyholder dividends are recognised as an element of policyholder benefits. The relative percentage of participating insurance of the life
and health policy benefits in 2019 and 2020 was 10% and 0%, respectively. The amount of policyholder dividend expense in 2019 and
2020 was USD 165
million, respectively.
million and USD 42
216
Swiss Re | Financial Report 2020
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Swiss Re | Financial Report 2020
217
Financial statements
4 Premiums written
For the years ended 31 December
2019
USD millions
Gross premiums written, thereof:
Direct
Reinsurance
Intra-group transactions (assumed)
Gross premiums written
Intra-group transactions (ceded)
Gross premiums written before
retrocession to external parties
Retrocession to external parties
Net premiums written
2020
USD millions
Gross premiums written, thereof:
Direct
Reinsurance
Intra-group transactions (assumed)
Gross premiums written
Intra-group transactions (ceded)
Gross premiums written before
retrocession to external parties
Retrocession to external parties
Net premiums written
Property & Casualty
Reinsurance
Life & Health
Reinsurance
Corporate
Solutions
Life Capital
Group Items
Consolidation
Total
21 189
373
21 562
–68
21 494
–612
20 882
14
13 794
644
14 452
–506
13 946
–1 212
12 734
3 869
1 037
68
4 974
–373
4 601
–348
4 253
2 230
95
506
2 831
–644
2 187
–407
1 780
–1 591
–1 591
1 591
0
0
6 113
36 115
0
42 228
0
42 228
–2 579
39 649
Property & Casualty
Reinsurance
Life & Health
Reinsurance
Corporate
Solutions
Life Capital
Group Items
Consolidation
Total
20 871
641
21 512
–48
21 464
–828
20 636
14 732
335
15 067
15 067
–1 410
13 657
3 883
908
48
4 839
–589
4 250
–426
3 824
2 466
67
2 533
–387
2 146
–460
1 686
10
14
24
24
24
6 359
36 592
0
42 951
0
42 951
–3 124
39 827
–1 024
–1 024
1 024
0
218
Swiss Re | Financial Report 2020
5 Unpaid claims and claim adjustment expenses
A reconciliation of the opening and closing reserve balances for unpaid claims and claim adjustment expenses for the years ended
31 December is presented as follows:
USD millions
Balance as of 1 January
Balance as of 1 January classified as held for sale
Reinsurance recoverable
Deferred expense on retroactive reinsurance
Net balance as of 1 January
Incurred related to:
Current year
Prior year
Amortisation of deferred expense on retroactive reinsurance and impact of commutations
Total incurred
Paid related to:
Current year
Prior year
Total paid
Foreign exchange
Effect of acquisitions, disposals, new retroactive reinsurance and other items
Net balance as of period end
Reinsurance recoverable
Deferred expense on retroactive reinsurance
Reclassified to liabilities held for sale
Balance as of period end
2019
67 446
−3 606
−169
63 671
29 338
2 231
−23
31 546
2020
72 373
497
−3 732
−168
68 970
34 064
166
−36
34 194
−9 702
−18 008
−27 710
−10 329
−17 445
−27 774
161
1 302
68 970
3 732
168
–497
72 373
2 149
−108
77 431
3 636
191
81 258
Swiss Re | Financial Report 2020
219
Financial statements
Prior-year development
Non-life claims development in the year ended 31 December 2020 on prior years is mainly driven by favourable property experience largely
offset by adverse casualty experience. Development in property is principally due to reserve releases related to natural catastrophe events in
Asia. The deterioration for casualty mostly comes from adverse claims experience for liability in North America, partially offset by favourable
development for accident & health and motor. Specialty was impacted by adverse claims experience in engineering and large losses for
credit and surety, partly offset by positive claims experience and reduction of large losses for marine.
For life and health lines of business, development on prior years' unpaid claims is unfavourable. For health business, adverse experience in
disability portfolios in Australia and the US led to unfavourable claims development. Claims development related to prior years for disability
portfolios also includes an element of interest accretion for unpaid claims reported at an estimated present value. For life business,
favourable development in the US, driven by positive experience, is partly offset by unfavourable development in Latin America and the UK
due to adverse experience.
A summary of prior year net claims and claim adjustment expenses development by lines of business for the years ended 31
shown below1:
December is
USD millions
Line of business:
Property
Casualty
Specialty
Life and health
Total
2019
2020
367
1 425
105
334
2 231
–582
456
26
266
166
1 Adverse development is shown as positive numbers, and represents a charge to the income statement. Favourable development is shown as negative, and represents a credit to the income
statement.
US asbestos and environmental claims exposure
The Group‘s obligation for claims payments and claims settlement charges also includes obligations for long-latent injury claims arising out
of policies written prior to 1986, in particular in the area of US asbestos and environmental liability.
At the end of 2020, the Group carried net reserves for US asbestos and environmental liabilities equal to USD 1 428 million. During 2020,
the Group incurred net losses of USD 18 million and net paid losses of USD 80 million in relation to these liabilities.
Estimating ultimate asbestos and environmental liabilities is particularly complex for a number of reasons relating in part to the long period
between exposure and manifestation of claims, and in part to other factors, which include risks and lack of predictability inherent in complex
litigation, changes in projected costs to resolve, and in the projected number of, asbestos and environmental claims, the effect of bankruptcy
protection, insolvencies, and changes in the legal, legislative and regulatory environment. As a result, the Group believes that projection of
exposures for asbestos and environmental claims is subject to far less predictability relative to non-environmental and non-asbestos
exposures. Management believes that its reserves for asbestos and environmental claims are appropriately established based upon known
facts and the current state of the law. However, reserves are subject to revision as new information becomes available and as claims develop.
Additional liabilities may arise for amounts in excess of reserves, and the Group‘s estimate of claims and claim adjustment expenses may
change. Any such additional liabilities or increases in estimates cannot be reasonably estimated in advance but could result in charges that
could be material to operating results.
220
Swiss Re | Financial Report 2020
Short duration contract unpaid claims and claim adjustment expenses
Basis of presentation for claims development information
This section of the note provides claims development information and information on reserves for claims relating to insured events that have
occurred but have not yet been reported (“IBNR”).
Claims development information and IBNR are presented on an accident year basis and by line of business for individually significant
categories. Additional aggregation or disaggregation is provided where appropriate, necessary and practicable (“disaggregation
categories”). For instance, Reinsurance liability and motor lines of business are further disaggregated into proportional and non-proportional
treaty types to provide more specific information on claims development. Amounts shown in the claims development tables are on a nominal
basis, including cases where the Group discounts claims liabilities for measurement under US GAAP, and are net of external retrocession and
retrocession between business segments to the extent that a retrocession programme can be allocated to a disaggregation category. Ceded
retroactive reinsurance is not included in the claims development table if it cannot be allocated on a reasonable basis to the disaggregation
categories used to present claims development information.
In the Property & Casualty Reinsurance and Corporate Solutions segments, all contracts that transfer significant insurance risk are included in
scope to the extent they can be allocated to a disaggregation category. For many reinsurance contracts, proportional contracts in particular,
ceding companies do not report losses by accident year. In these cases, the Group has allocated reported losses by underwriting year to
accident year to produce the accident year tables. Similarly, IBNR is calculated on an underwriting year basis and then the liabilities are
allocated to accident year.
In the Life & Health Reinsurance segment, contracts classified as short duration include group life business, certain types of disability and
long-term care contracts, group accident, health coverage including critical illness and medical expenses. The Group provides claims
development information for Life & Health Reinsurance where reported accident year information is available and there is potential for claims
development. This primarily applies to the group disability business in Australia and the UK. This business is generally considered to have
relatively higher claims estimation uncertainty than other life and health lines such as group life, due to longer claims development periods.
In the Life Capital segment, short duration contracts include mainly disability medical expenses business. The Group provides no claims
development information for Life Capital as its short duration reserves are not material.
The number of years shown in the claims development tables differs by business segment.
For Property & Casualty Reinsurance and Life & Health Reinsurance, the Group discloses data for ten accident years and reporting periods.
The Corporate Solutions business segment was created in 2012. Therefore, nine accident years and reporting periods are shown for this
business unit. Corporate Solutions related business written in Property & Casualty Reinsurance prior to 2012 is included in the net claims
development information reported by this segment. All but an immaterial portion of claims arising from accident years prior to 2012 relate to
accident years which are over ten years ago and therefore out of the required range of disclosure.
The current reporting period estimate of net claims liabilities for accident years older than the number of years shown in the claims
development tables is presented as a total after disclosure of cumulative paid claims.
The information presented in claims development tables is presented at current balance sheet foreign exchange rates as of the date of these
financial statements to permit an analysis of claims development excluding the impact of foreign exchange movements.
Some of the information provided in the following tables is Required Supplementary Information (RSI) under US GAAP and does not form
part of these consolidated audited financial statements. Claims development information for all periods except the current reporting period
and any information derived from it – including average annual percentage payout of claims incurred – is considered RSI and is identified as
RSI in the tables presented.
Swiss Re | Financial Report 2020
221
Financial statements
Methodology for determining the presented amounts of liabilities for IBNR claims
The liability for unpaid claims and claim adjustment expenses is based on an estimate of the ultimate cost of settling the claims based on
both information reported to us by ceding companies and internal estimates.
Non-life re/insurance contracts
The Group develops and recognises its own estimate of IBNR claims, which includes circumstances in which cedents have 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. For reinsurance business, case reserves and estimated IBNR are reported by cedents and this IBNR is presented together with the
Group‘s own estimate as IBNR in the claims development tables. For insurance business, reserving is performed similarly, except that
estimates for case reserves and IBNR are performed by the Group.
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.
In most cases, these standard actuarial techniques encompass a number of loss development factor techniques applied to claim tables of
paid and reported losses. Other actuarial techniques may be applicable to specific categories. For instance, the analysis of frequency and
severity could be applied in all disaggregation categories. Life contingency techniques for projecting regular payments related to bodily
injury claims are applied to motor proportional, motor non-proportional, liability proportional, liability non-proportional, accident and health
and similar Corporate Solutions lines, where the information is available. In some cases, techniques specific to the projection of future
payments for specific risks such as asbestos or pollution claims are applied to both proportional and non-proportional liability claims, also in
Corporate Solutions (see also separate section “US asbestos and environmental claims exposure” on page 220).
Contract-level reserving is based on standard actuarial techniques but requires more detailed contract, pricing, claim and exposure
information than required for the business reviewed on a portfolio level.
In addition, the following applies to all non-life re/insurance business:
For the most recent underwriting years, reliance may be made on the Group‘s costing and underwriting functions for the initial estimates
of claims, although the initial reserving estimates may differ from these pricing estimates if there is good reason to believe losses are likely
to emerge higher or lower, and in light of the limited claims experience to date. Reviews of those initial estimates are performed regularly,
forming a basis for adjustments on both the current and prior underwriting years.
The reserving process considers any information available in respect of either a specific case or a large loss event and the impact of any
unusual features in the technical accounting of information provided by cedents.
Life and health re/insurance contracts
For the Life & Health Reinsurance business, liability for IBNR claims includes provision for “not yet reported claims” expected to have been
incurred in respect of both already processed and not yet processed reinsurance accounts and generally includes provisions for the cost of
claims on disability contracts that currently are within their deferred period. The IBNR reserving calculations have been made using
appropriate techniques, such as chain ladder and/or Bornhuetter-Ferguson approaches, depending upon the level of detail available and the
assumed level of development of the claim. For certain lines of business, IBNR claims reserves include reported but not admitted claims,
allowing for expected rates of decline for these claims.
Claims frequency information
Claims frequency information is not available for the disaggregation categories of Property & Casualty Reinsurance, as cedents do not report
claims frequency information to the Group for most of the assumed reinsurance contract types. These contracts are to be found in all
disaggregation categories presented.
Life & Health Reinsurance reports claims frequency information based on individual incidence. The number of reported claims is the actual
number of claims booked. For disability business, claims with multiple payments in a year are counted as one claim. Claims that are reported
but not admitted are included in the claim count.
For Corporate Solutions, claims frequency is displayed for direct business only, as individual claims information is generally not available for
assumed and ceded business. Claims are counted individually per contract to produce the claims frequency table. For some direct business,
summary reports are received and multiple claims are booked under a single claim code; this is usually done at a programme, policy year,
state, country and/or line of business level of detail. This approach may be applied to business which has a high volume of claim counts, but
with only minor claims dollars associated with each claim.
222
Swiss Re | Financial Report 2020
Property & Casualty Reinsurance – Property
Incurred claims and allocated claim adjustment expenses, net of reinsurance
USD millions
Accident year
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total
Reporting year
2011
4 513
2012
4 586
2 772
RSI
2013
4 399
2 597
3 255
2014
4 463
2 393
3 267
2 808
2015
4 414
2 349
3 087
2 642
2 914
2016
4 409
2 318
2 999
2 458
2 840
4 030
2017
4 428
2 303
2 974
2 426
2 667
3 752
6 132
2018
4 468
2 303
2 958
2 423
2 634
3 446
6 041
4 799
2019
4 470
2 297
2 954
2 411
2 592
3 440
5 802
5 294
5 351
2020
4 482
2 294
2 947
2 423
2 573
3 411
5 771
5 019
5 268
7 363
41 551
thereof
IBNR
23
5
–2
9
9
10
53
74
555
4 385
5 121
Cumulative claims paid and allocated claim adjustment expenses, net of reinsurance
USD millions
Accident year
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total
Reporting year
2011
704
2012
2 524
236
RSI
2013
3 371
1 639
550
2014
3 835
2 040
2 076
469
2015
4 140
2 163
2 601
1 755
472
2016
4 248
2 208
2 802
2 146
1 696
653
2017
4 376
2 228
2 865
2 279
2 229
2 283
1 002
2018
4 401
2 239
2 887
2 325
2 402
2 932
3 736
642
All liabilities before 2011
Liabilities for claims and claim adjustment expenses, net of reinsurance
Average annual percentage payout of incurred claims by age, net of reinsurance
2019
4 416
2 248
2 904
2 342
2 482
3 151
4 845
3 557
944
2020
4 425
2 250
2 918
2 362
2 506
3 239
5 187
4 175
3 332
1 330
31 724
205
10 032
Years
Property (RSI)
1
16.8%
2
50.3%
3
17.7%
4
6.7%
5
3.1%
6
1.1%
7
1.2%
8
0.5%
9
0.2%
10
0.2%
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 accident year claims
incurred are higher due to natural catastrophes which also affected 2018-2020 accident years. In addition, the current accident year was
impacted by COVID-19.
Swiss Re | Financial Report 2020
223
Financial statements
Property & Casualty Reinsurance – Liability, proportional
Incurred claims and allocated claim adjustment expenses, net of reinsurance
USD millions
Accident year
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total
Reporting year
2011
650
2012
708
531
RSI
2013
731
615
741
2014
678
571
764
1 009
2015
636
542
772
1 000
1 280
2016
632
514
766
1 013
1 329
1 732
2017
606
523
770
1 002
1 418
1 738
1 985
2018
599
514
760
990
1 493
1 737
2 096
1 916
2019
598
528
757
1 028
1 564
1 842
2 239
2 095
2 744
2020
588
526
760
1 036
1 548
1 892
2 420
2 241
3 115
2 999
17 125
thereof
IBNR
54
58
87
157
267
573
869
1 245
2 204
2 692
8 206
Cumulative claims paid and allocated claim adjustment expenses, net of reinsurance
USD millions
Accident year
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total
Reporting year
2011
2
2012
110
12
RSI
2013
185
120
13
2014
255
188
131
24
2015
341
247
238
162
35
2016
387
301
354
298
214
47
2017
422
360
437
438
431
94
50
2018
446
396
513
575
662
395
257
52
All liabilities before 2011
Liabilities for claims and claim adjustment expenses, net of reinsurance
Average annual percentage payout of incurred claims by age, net of reinsurance
2019
468
432
567
672
915
665
551
314
84
2020
472
436
599
755
1 094
906
1 015
597
426
114
6 414
1 165
11 876
Years
Liability, proportional (RSI)
1
2.2%
2
12.6%
3
13.4%
4
14.3%
5
13.0%
6
10.0%
7
7.0%
8
5.0%
9
2.3%
10
0.7%
The increase in the incurred losses for accident years 2013 to 2020 is driven by volume increases of business being written. The increases
in the incurred losses in reporting year 2020 for accident years 2016 to 2019 are driven by US business. The current accident year was
impacted by COVID-19.
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.
224
Swiss Re | Financial Report 2020
Property & Casualty Reinsurance – Liability, non-proportional
Incurred claims and allocated claim adjustment expenses, net of reinsurance
USD millions
Accident year
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total
Reporting year
2011
415
2012
444
340
2013
482
358
421
RSI
2014
441
317
402
446
2015
397
288
365
451
1 860
2016
363
267
309
418
1 901
608
2017
355
256
283
375
1 869
591
500
2018
341
232
260
345
1 886
620
517
459
2019
342
227
261
365
1 910
667
600
464
2 424
Cumulative claims paid and allocated claim adjustment expenses, net of reinsurance
USD millions
Accident year
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total
Reporting year
2011
1
2012
10
–4
RSI
2013
66
11
–2
2014
114
35
11
–2
2015
141
53
37
8
0
2016
149
85
60
40
94
14
2017
162
100
84
71
204
224
–2
2018
176
115
109
101
337
250
18
–1
2019
194
130
133
142
490
303
48
21
211
All liabilities before 2011
Liabilities for claims and claim adjustment expenses, net of reinsurance
Average annual percentage payout of incurred claims by age, net of reinsurance
thereof
IBNR
31
36
56
107
129
162
213
265
543
815
2 357
2020
347
219
255
364
1 886
720
649
483
2 395
849
8 167
2020
212
139
145
169
596
365
124
72
499
10
2 331
3 856
9 692
Years
Liability, non-proportional (RSI)
1
0.9%
2
7.9%
3
8.8%
4
9.4%
5
9.5%
6
7.2%
7
6.9%
8
5.2%
9
4.6%
10
5.2%
The increase in incurred losses for accident year 2015 compared to other years is due to an increase in volume of business written in that
year. Accident year 2019 includes an Adverse Development Cover and a Loss Portfolio Transfer written with Corporate Solutions. Liabilities
before 2011 include reserves for historic US Asbestos and Environmental losses. The current accident year was impacted by COVID-19.
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.
Swiss Re | Financial Report 2020
225
Financial statements
Property & Casualty Reinsurance – Accident & Health
Incurred claims and allocated claim adjustment expenses, net of reinsurance
USD millions
Accident year
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total
Reporting year
2011
233
2012
253
338
RSI
2013
248
346
354
2014
240
331
360
306
2015
243
321
346
340
439
2016
237
318
336
331
436
597
Cumulative claims paid and allocated claim adjustment expenses, net of reinsurance
USD millions
Accident year
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total
Reporting year
2011
48
2012
122
81
RSI
2013
143
186
56
2014
154
213
144
30
2015
163
229
185
104
62
2016
168
240
209
147
139
74
All liabilities before 2011
Liabilities for claims and claim adjustment expenses, net of reinsurance
Average annual percentage payout of incurred claims by age, net of reinsurance
thereof
IBNR
21
22
32
42
45
129
206
187
242
533
1 459
2017
237
311
328
320
414
631
737
2017
177
249
222
175
192
179
96
2018
233
309
326
308
404
625
771
730
2018
180
252
230
193
225
273
235
98
2019
232
304
321
307
395
589
732
818
807
2019
183
256
236
208
244
328
336
316
113
2020
228
297
309
292
375
583
723
814
799
901
5 321
2020
185
258
242
215
257
358
395
458
332
122
2 822
2 924
5 423
Years
Accident & Health (RSI)
1
15.9%
2
26.0%
3
13.5%
4
7.7%
5
4.7%
6
3.3%
7
2.3%
8
1.5%
9
1.0%
10
0.9%
The increase in incurred losses from accident year 2015 onwards is due to an increase in the volume of workers‘ compensation written on a
proportional basis with the current year impacted by COVID-19. The 2010 and prior accident years include the run-off of business written by
entities acquired as part of the acquisition of General Electric Insurance Solutions during 2006. This business, which generally had a longer
payment pattern, was not renewed.
226
Swiss Re | Financial Report 2020
Property & Casualty Reinsurance – Motor, proportional
Incurred claims and allocated claim adjustment expenses, net of reinsurance
USD millions
Accident year
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total
Reporting year
2011
1 048
2012
1 042
1 573
RSI
2013
1 012
1 562
1 628
2014
967
1 545
1 601
2 085
2015
968
1 532
1 607
2 045
1 983
2016
967
1 521
1 579
2 044
1 979
2 557
2017
966
1 520
1 572
2 026
1 982
2 675
2 438
2018
956
1 517
1 567
2 015
1 986
2 725
2 455
2 089
2019
960
1 516
1 567
2 013
1 986
2 727
2 441
2 124
2 090
2020
963
1 520
1 568
2 011
1 994
2 732
2 453
2 102
2 066
1 916
19 325
thereof
IBNR
–13
24
12
–7
15
39
136
225
416
1 015
1 862
Cumulative claims paid and allocated claim adjustment expenses, net of reinsurance
USD millions
Accident year
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total
Reporting year
2011
277
RSI
2012
702
501
2013
893
1 167
599
2014
927
1 337
1 225
767
2015
947
1 388
1 415
1 530
823
2016
957
1 421
1 462
1 787
1 486
844
2017
965
1 443
1 494
1 867
1 736
1 872
776
2018
968
1 456
1 510
1 904
1 840
2 229
1 560
636
All liabilities before 2011
Liabilities for claims and claim adjustment expenses, net of reinsurance
Average annual percentage payout of incurred claims by age, net of reinsurance
2019
971
1 467
1 520
1 925
1 886
2 414
1 901
1 364
674
2020
971
1 473
1 529
1 938
1 912
2 520
2 078
1 613
1 320
630
15 984
340
3 681
Years
Motor, proportional (RSI)
1
33.8%
2
37.2%
3
13.4%
4
4.7%
5
2.4%
6
1.2%
7
0.7%
8
0.5%
9
0.4%
10
0.0%
The increase in the incurred losses from accident years 2012 to 2016 is driven by new business volume across all regions, with the current
accident year impacted by COVID-19. Proportional motor business includes both longer-tailed liability business and shorter-tailed hull
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.
Swiss Re | Financial Report 2020
227
Financial statements
Property & Casualty Reinsurance – Motor, non-proportional
Incurred claims and allocated claim adjustment expenses, net of reinsurance
USD millions
Accident year
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total
Reporting year
2011
430
2012
471
350
RSI
2013
450
367
456
2014
447
345
479
428
2015
432
329
481
461
404
2016
425
330
462
457
426
488
Cumulative claims paid and allocated claim adjustment expenses, net of reinsurance
USD millions
Accident year
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total
Reporting year
2011
-11
2012
21
2
RSI
2013
58
25
7
2014
82
50
90
4
2015
107
86
156
63
–1
2016
122
113
202
108
34
9
All liabilities before 2011
Liabilities for claims and claim adjustment expenses, net of reinsurance
Average annual percentage payout of incurred claims by age, net of reinsurance
thereof
IBNR
99
60
68
66
83
123
177
212
330
444
1 662
2017
413
311
448
456
463
609
605
2017
138
139
229
148
94
67
9
2018
441
320
454
449
458
571
636
510
2019
434
315
453
426
470
564
623
553
1 231
2018
150
161
256
193
160
129
60
4
2019
157
173
273
223
206
184
128
36
93
2020
430
318
459
423
468
550
629
560
1 243
536
5 616
2020
179
181
288
243
236
244
205
97
310
3
1 986
2 876
6 506
Years
Motor, non-proportional (RSI)
1
1.2%
2
10.7%
3
10.9%
4
10.4%
5
8.6%
6
6.2%
7
4.8%
8
3.3%
9
2.1%
10
5.1%
Claims development in non-proportional motor business is considered long-tailed as it is dominated by liability exposures leading to bodily
injury claims which pay out for the lifetime of the claimant.
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 incurred losses for accident year 2019 compared to other years is due to an increase in volume of business written,
with the current accident year impacted by COVID-19.
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.
228
Swiss Re | Financial Report 2020
Property & Casualty Reinsurance – Specialty
Incurred claims and allocated claim adjustment expenses, net of reinsurance
USD millions
Accident year
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total
Reporting year
2011
1 327
2012
1 316
977
RSI
2013
1 226
1 036
1 131
2014
1 139
1 056
1 054
1 138
2015
1 184
1 036
1 011
1 124
1 278
2016
1 178
1 034
974
1 022
1 252
1 317
2017
1 193
1 021
963
995
1 235
1 305
1 643
2018
1 177
1 018
941
980
1 225
1 255
1 565
1 685
2019
1 175
1 014
929
984
1 224
1 255
1 434
1 777
1 785
2020
1 175
1 006
932
966
1 246
1 238
1 400
1 744
1 950
1 867
13 524
thereof
IBNR
2
7
22
32
47
91
125
467
662
1 161
2 616
Cumulative claims paid and allocated claim adjustment expenses, net of reinsurance
USD millions
Accident year
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total
Reporting year
2011
170
2012
577
132
2013
799
458
154
2014
904
698
432
181
2015
956
791
621
422
139
RSI
2016
991
848
734
607
400
146
2017
1 056
891
789
706
711
491
186
2018
1 078
926
826
764
876
740
592
189
2019
1 095
945
850
802
980
909
879
663
284
All liabilities before 2011
Liabilities for claims and claim adjustment expenses, net of reinsurance
Average annual percentage payout of incurred claims by age, net of reinsurance
2020
1 104
952
863
826
1 036
1 000
1 046
984
716
307
8 834
625
5 315
Years
Specialty (RSI)
1
14.1%
2
27.7%
3
20.8%
4
11.3%
5
6.3%
6
3.9%
7
3.5%
8
1.7%
9
1.1%
10
0.8%
This category contains several individual large losses on marine, aviation and space lines, including the Costa Concordia event in accident
year 2012. From 2017 to 2020 accident years, claims incurred is higher due to natural catastrophes, with the current accident year
impacted by COVID-19. Accident year 2019 has increased this year due to aviation and engineering but is partially offset by marine
decreases.
Swiss Re | Financial Report 2020
229
Financial statements
Corporate Solutions
Incurred claims and allocated claim adjustment expenses, net of reinsurance
USD millions
Reporting year
Accident year
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total
2012
1 311
2013
1 237
1 613
2014
1 162
1 593
1 855
2015
1 129
1 523
1 799
1 907
2016
1 127
1 439
1 728
2 080
2 037
2017
1 184
1 436
1 732
2 144
2 124
3 036
2018
1 165
1 427
1 702
2 115
2 162
3 268
2 734
RSI
Cumulative claims paid and allocated claim adjustment expenses, net of reinsurance
USD millions
Accident year
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total
Reporting year
2012
184
2013
562
275
RSI
2014
724
673
276
2015
819
946
841
354
2016
908
1 106
1 137
914
373
2017
980
1 175
1 284
1 316
1 150
385
2018
1 014
1 252
1 375
1 514
1 405
1 520
421
All liabilities before 2012
Liabilities for claims and claim adjustment expenses, net of reinsurance
Average annual percentage payout of incurred claims by age, net of reinsurance
2019
1 210
1 399
1 631
1 932
2 153
3 016
2 673
2 835
2020
1 207
1 412
1 610
1 894
2 146
3 037
2 704
2 678
3 401
20 089
2019
1 044
1 300
1 473
1 650
1 676
2 131
1 447
534
2020
1 067
1 327
1 491
1 740
1 750
2 388
1 932
1 247
580
13 522
416
6 983
Cumulative
number of
reported claims
(in nominals)
13 004
26 338
21 671
18 252
17 439
20 609
25 472
20 509
10 662
173 956
thereof
IBNR
39
87
165
198
308
367
320
788
1 949
4 221
Years
Corporate Solutions (RSI)
1
17.0%
2
32.8%
3
17.5%
4
10.0%
5
5.7%
6
5.6%
7
2.4%
8
2.2%
9
1.9%
The increase in current accident year claims is driven by COVID-19-related losses and reserves and a number of large natural catastrophe
losses, impacting mainly the property line of business. Decrease across prior accident years is driven by favourable reserve development on
accident year 2019, mainly due to lower large man-made claims activity.
Reserves on the US liability line of business on accident years 2012-2019 were reduced by a Loss Portfolio Transfer to P&C Reinsurance of
USD 1.2bn in the financial year 2019. In addition, the impact of unfavourable development across all lines of business for accident years
2012-2018 was reduced by recoveries under an Adverse Development Cover with P&C Reinsurance in place since the second half of the
financial year 2019. For the financial year 2020, there were immaterial movements under both the Loss Portfolio Transfer and the Adverse
Development Cover.
P&C Reinsurance reports both the Adverse Development Cover and the Loss Portfolio Transfer under accident year 2019 (see ’’Property &
Casualty Reinsurance – Liability, non-proportional’’ on page 225).
230
Swiss Re | Financial Report 2020
Life & Health Reinsurance, long tail
Incurred claims and allocated claim adjustment expenses, net of reinsurance
USD millions
Reporting year
Accident year
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total
2011
229
2012
240
284
2013
303
380
512
2014
316
383
503
502
2015
331
409
501
457
428
2016
308
371
463
435
463
449
2017
301
374
462
437
448
465
458
2018
302
370
464
461
449
451
465
426
RSI
Cumulative
number of
reported claims
(in nominals)
6 945
9 525
12 168
14 227
17 140
14 667
17 303
16 491
12 806
2 295
123 567
thereof
IBNR
28
26
29
38
40
87
124
164
217
158
911
2019
309
386
489
486
481
483
488
461
396
2020
308
387
489
495
491
498
512
477
484
184
4 325
Cumulative claims paid and allocated claim adjustment expenses, net of reinsurance
USD millions
Accident year
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total
Reporting year
2011
20
2012
65
29
RSI
2013
105
92
39
2014
132
147
128
34
2015
153
188
195
114
38
2016
175
222
259
208
112
14
2017
191
246
302
274
198
91
13
2018
206
266
330
312
251
167
79
12
All liabilities before 2011
Liabilities for claims and claim adjustment expenses, net of reinsurance
2019
217
283
353
342
291
223
171
78
13
2020
228
298
374
369
327
268
246
171
83
5
2 369
294
2 250
Average annual percentage payout of incurred claims by age, net of reinsurance
Years
Life & Health Reinsurance,
long tail (RSI)
1
2
3
4
5
6
7
8
9
10
5.0% 15.2% 16.3% 11.8%
8.2%
6.5%
5.1%
4.5%
3.7%
3.6%
The increase in incurred losses from accident year 2013 onwards is due to an increase in volume of group disability business in Australia.
Disability business volume written in Australia has reduced since 2019.
Swiss Re | Financial Report 2020
231
Financial statements
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.
The net outstanding liabilities correspond to the total liabilities for unpaid claims and claim adjustment expenses, net of reinsurance for each
disaggregation category.
Other short duration contract lines include reserves for business that is not material to the Group and where accident year information is not
available. For Life & Health Reinsurance, in certain markets, cedents do not provide sufficient information to reinsurers to split claims incurred
and claims paid by accident year. This is based on existing market practice. For these markets, an assessment of available information from
other sources was made along with investigating approximations that could be used to provide claims development information by accident
year. However, these alternate sources and estimates, based on currently available data and methods, could not be used to generate
meaningful and representative accident year information and therefore have been excluded from disclosure. Other short duration contract
lines also contain other treaties from Property & Casualty Reinsurance and Corporate Solutions which could not be allocated on a consistent
basis to disaggregation categories or specific accident years.
For details on consolidation please refer to Note 2 ’’Information on business segments’’.
As of 31 December
USD millions
Net outstanding liabilities
Property & Casualty Reinsurance
Property
Liability, proportional
Liability, non-proportional
Accident & Health
Motor, proportional
Motor, non-proportional
Specialty
Corporate Solutions
Life & Health Reinsurance, long tail
Total net undiscounted outstanding liabilities excluding other short duration contract lines and
before unallocated reinsurance recoverable
Discounting impact on (Life & Health Reinsurance) short duration contracts
Impact of acquisition accounting
Total net discounted outstanding liabilities excluding other short duration contract lines and before unallocated reinsurance
recoverable
Other short duration contract lines
Total net discounted outstanding short duration liabilities
Allocated reinsurance recoverables on unpaid claims:
Property & Casualty Reinsurance
Property
Liability, proportional
Liability, non-proportional
Accident & Health
Motor, proportional
Motor, non-proportional
Specialty
Corporate Solutions
Consolidation
Impact of acquisition accounting
Other short duration contract lines
Total short duration reinsurance recoverable on outstanding liabilities
Exclusions:
Unallocated claim adjustment expenses
Long duration contracts
Total other reconciling items
Total unpaid claims and claim adjustment expenses
232
Swiss Re | Financial Report 2020
2020
10 032
11 876
9 692
5 423
3 681
6 506
5 315
6 983
2 250
61 758
–311
–435
61 012
4 131
65 143
572
245
239
238
52
220
506
5 217
–4 986
–79
523
2 747
1 242
12 126
13 368
81 258
Discounting information
The following disclosure covers the discounting impact for the disaggregation categories included in the claims development information.
Discounting information for Life & Health Reinsurance long tail as of 31 December was as follows:
USD millions
Carrying amount of discounted claims
Aggregate amount of the discount
Interest accretion1
Range of interest rates
2019
1 318
–305
28
3.0–3.4%
2020
1 374
–311
29
3.0–3.2%
1 Interest accretion is shown as part of “Life and health benefits” in the income statement.
Please refer to Note 1 ’’Organisation and summary of significant accounting policies’’ for more details about the Group‘s discounting
approach for unpaid claims and claim adjustment expenses.
Swiss Re | Financial Report 2020
233
Financial statements
6 Deferred acquisition costs (DAC) and
acquired present value of future profits (PVFP)
As of 31 December, the DAC were as follows:
2019
USD millions
Opening balance as of 1 January
Deferred
Effect of acquisitions/disposals and retrocessions
Amortisation
Effect of foreign currency translation and other
changes
Reclassified to held for sale
Closing balance
2020
USD millions
Opening balance as of 1 January
Opening balance as of 1 January classified as
held for sale
Deferred
Effect of acquisitions/disposals and retrocessions
Amortisation
Effect of foreign currency translation and other
changes
Closing balance
Property & Casualty
Reinsurance
2 156
5 269
–4 809
Life & Health
Reinsurance
4 784
434
–256
–445
Corporate
Solutions
488
621
–626
–3
12
2 613
4 529
483
Property & Casualty
Reinsurance
2 613
Life & Health
Reinsurance
4 529
Corporate
Solutions
483
5 016
–5 103
50
2 576
619
–2
–417
171
4 900
504
–579
5
413
Life Capital
789
229
68
–240
24
–657
213
Life Capital
213
657
211
–5932
–166
–37
285
Group Items
0
Group Items
–14
70
56
Total
8 217
6 553
–188
–6 120
33
–657
7 838
Total
7 838
657
6 350
–595
–6 279
259
8 230
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.
234
Swiss Re | Financial Report 2020
As of 31 December, the PVFP was as follows:
2019
USD millions
Opening balance as of 1 January
Effect of acquisitions/disposals and retrocessions
Amortisation
Interest accrued on unamortised PVFP
Effect of change in unrealised gains/losses
Effect of foreign currency translation
Reclassified to held for sale
Closing balance
2020
USD millions
Opening balance as of 1 January
Opening balance as of 1 January classified as held for sale
Effect of acquisitions/disposals and retrocessions2
Amortisation
Interest accrued on unamortised PVFP
Effect of change in unrealised gains/losses
Effect of foreign currency translation
Closing balance
1 Impact from termination of a reinsurance arrangement included.
2 Please refer to Note 10 “Acquisitions and disposals”.
Life & Health
Reinsurance
804
–1611
–108
32
10
577
Life & Health
Reinsurance
577
–99
28
4
510
Positive
PVFP
1 505
2032
–220
103
–13
43
–1 156
465
Positive
PVFP
465
1 156
–914
–328
73
–8
–26
418
Negative
PVFP
–491
46
–15
–16
476
0
Negative
PVFP
–476
444
33
–10
9
0
Life Capital
Total
Total
1 014
203
–174
88
–13
27
–680
465
1 818
42
–282
120
–13
37
–680
1 042
Life Capital
Total
Total
465
680
–470
–295
63
–8
–17
418
1 042
680
–470
–394
91
–8
–13
928
Retroceded PVFP 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.
The percentage of PVFP which is expected to be amortised in each of the next five years is 16%, 15%, 14%, 13% and 12%.
Swiss Re | Financial Report 2020
235
Financial statements
7 Investments
Investment income
Net investment income by source (excluding unit-linked and with-profit business) was as follows:
USD millions
Fixed income securities
Equity securities
Policy loans, mortgages and other loans
Investment real estate
Short-term investments
Other current investments
Share in earnings of equity-accounted investees
Cash and cash equivalents
Net result from deposit-accounted contracts
Deposits with ceding companies
Gross investment income
Investment expenses
Interest charged for funds held
Net investment income – non-participating business
20191
2 889
66
162
226
93
97
387
75
149
452
4 596
–412
–13
4 171
2020
2 251
92
127
241
36
103
–51
25
128
421
3 373
–378
–7
2 988
1 The Group revised its allocation of net investment income. The revision has no impact on the income statement or balance sheet of the Group. Comparative information for 2019 has been
adjusted accordingly.
Dividends received from investments accounted for using the equity method were USD 104
2020, respectively.
million and USD 124
million for 2019 and
Share in earnings of equity-accounted investees included impairments of the carrying amount of equity-accounted investees of
USD 80 million and USD 5 million for 2019 and 2020, respectively.
Realised gains and losses
Realised gains and losses for fixed income securities, equity securities and other investments (excluding unit-linked and with-profit business)
were as follows:
USD millions
Fixed income securities available-for-sale:
Gross realised gains
Gross realised losses
Other-than-temporary impairments
Net realised investment gains/losses on equity securities
Change in net unrealised investment gains/losses on equity securities
Net realised investment gains/losses on trading securities
Change in net unrealised investment gains/losses on trading securities
Net realised/unrealised gains/losses on other investments
Net realised/unrealised gains/losses on insurance-related activities
Foreign exchange gains/losses
Loss related to sale of ReAssure
Net realised investment gains/losses – non-participating business
2019
2020
1 590
–143
–5
200
478
153
–26
–197
108
–348
–230
1 580
1 676
–256
–29
–87
782
86
–33
–41
40
–163
–245
1 730
Net realised/unrealised gains/losses on insurance-related activities included impairments of USD 5 million and nil for 2019 and 2020,
respectively.
236
Swiss Re | Financial Report 2020
Investment result – unit-linked and with-profit business
For unit-linked contracts, the investment risk is borne by the policyholder. For with-profit contracts, the majority of the investment risk is also
borne by the policyholder, although there are certain guarantees that limit the downside risk for the policyholder, and a certain proportion of
the returns may be retained by the Group (typically 10%).
Net investment result on unit-linked and with-profit business credited to policyholders was as follows:
USD millions
Investment income – fixed income securities
Investment income – equity securities
Investment income – other
Total investment income – unit-linked and with-profit business
Realised gains/losses – fixed income securities
Realised gains/losses – equity securities
Realised gains/losses – other
Total realised gains/losses – unit-linked and with-profit business
Total net investment result – unit-linked and with-profit business
Unit-linked
58
733
25
816
89
3 333
90
3 512
4 328
2019
With-profit
101
76
11
188
135
279
9
423
611
Unit-linked
29
401
5
435
92
–2 566
–8
–2 482
–2 047
2020
With-profit
50
27
3
80
72
–283
–9
–220
–140
Impairment on fixed income securities related to credit losses
Other-than-temporary impairments for debt securities are bifurcated between credit and non-credit components, with the credit component
recognised through earnings and the non-credit component recognised in other comprehensive income. The credit component of other-
than-temporary impairments is defined as the difference between a security’s amortised cost basis and the present value of expected cash
flows. Methodologies for measuring the credit component of impairment are aligned to market observer forecasts of credit performance
drivers. Management believes that these forecasts are representative of median market expectations.
For securitised products, cash flow projection analysis is conducted by integrating forward-looking evaluation of collateral performance
drivers, including default rates, prepayment rates and loss severities and deal-level features, such as credit enhancement and prioritisation
among tranches for payments of principal and interest. Analytics are differentiated by asset class, product type and security-level differences
in historical and expected performance. For corporate bonds and hybrid debt instruments, an expected loss approach based on default
probabilities and loss severities expected in the current and forecasted economic environment is used for securities identified as credit-
impaired to project probability-weighted cash flows. Expected cash flows resulting from these analyses are discounted, and the present
value is compared to the amortised cost basis to determine the credit component of other-than-temporary impairments.
A reconciliation of other-than-temporary impairments related to credit losses recognised in earnings was as follows:
USD millions
Balance as of 1 January
Credit losses for which an other-than-temporary impairment was not previously recognised
Reductions for securities sold during the period
Increase of credit losses for which an other-than-temporary impairment has been recognised previously, when the
Group does not intend to sell, or more likely than not will not be required to sell before recovery
Impact of increase in cash flows expected to be collected
Impact of foreign exchange movements
Balance as of 31 December
2019
80
5
–24
2
–3
1
61
2020
61
18
–32
–2
1
46
Swiss Re | Financial Report 2020
237
Financial statements
Investments available-for-sale
Amortised cost or cost, estimated fair values and other-than-temporary impairments of fixed income securities classified as available-for-sale
as of 31 December were as follows:
2019
USD millions
Debt securities issued by governments
and government agencies:
US Treasury and other US government
corporations and agencies
US Agency securitised products
States of the United States and political
subdivisions of the states
United Kingdom
Germany
France
Canada
Japan
Other
Total
Corporate debt securities
Mortgage- and asset-backed securities
Reclassified to assets held for sale
Fixed income securities available-for-sale
2020
USD millions
Debt securities issued by governments
and government agencies:
US Treasury and other US government
corporations and agencies
US Agency securitised products
States of the United States and political
subdivisions of the states
United Kingdom
Germany
France
Canada
Japan
Other
Total
Corporate debt securities
Mortgage- and asset-backed securities
Fixed income securities available-for-sale
Amortised cost
or cost
Gross
unrealised
gains
Gross
unrealised
Other-than-temporary
impairments
recognised in other
losses comprehensive income
14 192
7 034
1 783
7 936
2 870
2 095
2 256
2 028
10 589
50 783
37 293
4 397
–17 693
74 780
377
104
168
1 309
298
343
139
98
583
3 419
3 749
195
–2 785
4 578
–31
–14
–3
–26
–35
–13
–4
–2
–33
–161
–46
–14
28
–193
–2
–2
Amortised cost
or cost
Gross
unrealised
gains
Gross
unrealised
Other-than-temporary
impairments
recognised in other
losses comprehensive income
10 915
6 575
1 444
4 206
3 038
2 551
2 179
2 086
10 189
43 183
27 538
3 141
73 862
693
214
248
841
494
570
223
56
788
4 127
3 084
157
7 368
–18
–10
–5
–1
–1
–13
–24
–20
–92
–35
–22
–149
–1
–1
Estimated
fair value
14 538
7 124
1 948
9 219
3 133
2 425
2 391
2 124
11 139
54 041
40 996
4 576
–20 450
79 163
Estimated
fair value
11 590
6 779
1 692
5 042
3 531
3 120
2 389
2 118
10 957
47 218
30 587
3 275
81 080
The “Other-than-temporary impairments recognised in other comprehensive income” column includes only securities with a credit-related
loss recognised in earnings. Subsequent recovery in fair value of securities previously impaired in other comprehensive income is also
presented in the “Other-than-temporary impairments recognised in other comprehensive income” column.
238
Swiss Re | Financial Report 2020
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 2019 and 2020.
2019
USD millions
Debt securities issued by governments
and government agencies:
US Treasury and other US government
corporations and agencies
US Agency securitised products
States of the United States and political
subdivisions of the states
United Kingdom
Germany
France
Canada
Japan
Other
Total
Corporate debt securities
Mortgage- and asset-backed securities
Reclassified to assets held for sale
Total
2020
USD millions
Debt securities issued by governments
and government agencies:
US Treasury and other US government
corporations and agencies
US Agency securitised products
States of the United States and political
subdivisions of the states
United Kingdom
Germany
France
Canada
Japan
Other
Total
Corporate debt securities
Mortgage- and asset-backed securities
Total
Less than 12 months
Unrealised
losses
Fair value
12 months or more
Unrealised
losses
Fair value
Total
Unrealised
losses
Fair value
2 357
1 842
39
1 297
669
340
863
443
1 492
9 342
2 562
730
–1 071
11 563
31
7
1
22
34
12
3
1
17
128
18
5
–8
143
97
654
30
83
17
16
62
2
315
1 276
531
404
–301
1 910
0
7
2
4
1
1
1
1
16
33
28
11
–20
52
2 454
2 496
69
1 380
686
356
925
445
1 807
10 618
3 093
1 134
–1 372
13 473
31
14
3
26
35
13
4
2
33
161
46
16
–28
195
Less than 12 months
Unrealised
losses
Fair value
12 months or more
Unrealised
losses
Fair value
Total
Unrealised
losses
Fair value
1 315
382
8
230
13
41
61
841
1 539
4 430
1 072
402
5 904
18
10
0
5
0
0
8
24
11
76
31
9
116
9
27
28
66
108
238
147
173
558
0
1
1
5
9
16
4
14
34
1 315
391
8
230
40
69
127
841
1 647
4 668
1 219
575
6 462
18
10
0
5
1
1
13
24
20
92
35
23
150
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
2019 and 2020, USD
million, respectively, of fixed income securities available-for-sale were callable.
million and USD
20 188
20 219
USD millions
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
Mortgage- and asset-backed securities with no fixed maturity
Reclassified to assets held for sale
Total fixed income securities available-for-sale
Amortised
cost or cost
7 294
27 559
15 994
37 865
3 761
–17 693
74 780
2019
Estimated
fair value
7 324
28 083
17 115
43 144
3 947
–20 450
79 163
Amortised
cost or cost
8 806
18 298
14 512
29 942
2 304
2020
Estimated
fair value
8 863
19 040
15 696
35 035
2 446
73 862
81 080
Swiss Re | Financial Report 2020
239
2020
1 907
31
1 938
4 899
2020
With-profit
Financial statements
Investments trading and at fair value through earnings
The carrying amounts of fixed income securities classified as trading and equity securities at fair value through earnings (excluding unit-
linked and with-profit business) as of 31 December were as follows:
USD millions
Debt securities issued by governments and government agencies
Mortgage- and asset-backed securities
Fixed income securities trading – non-participating business
Equity securities at fair value through earnings – non-participating business
2019
2 358
52
2 410
2 993
Investments held for unit-linked and with-profit business
The carrying amounts of investments held for unit-linked and with-profit business as of 31 December were as follows:
USD millions
Fixed income securities trading
Equity securities at fair value through earnings
Investment real estate
Other
Reclassified to assets held for sale
Total investments for unit-linked and with-profit business
Unit-linked
1 963
35 528
512
692
–38 175
520
2019
With-profit
2 717
2 078
200
3
–4 998
0
Unit-linked
463
463
0
Mortgage, policy and other loans, and investment real estate
As of 31 December, the carrying and respective fair values of investments in mortgage, policy and other loans, and investment real estate
(excluding unit-linked and with-profit business) were as follows:
USD millions
Policy loans
Mortgage loans
Other loans
Investment real estate
Carrying value1
50
2 104
2 314
2 674
2019
Fair value
50
2 144
2 376
4 706
Carrying value
43
1 410
1 862
2 602
2020
Fair value
43
1 458
1 906
5 118
1 Policy loans, mortgages and other loans include a total of USD 1 447 million which were reclassified to assets held for sale. Investment real estate of USD 146 million was reclassified to assets
held for sale.
Depreciation expense related to investment real estate was USD 61
Accumulated depreciation on investment real estate totalled USD 660
respectively. Investment real estate held by the Group includes residential and commercial investment real estate.
million and USD 779
million and USD 67
million for 2019 and 2020, respectively.
million as of 31 December 2019 and 2020,
Substantially all mortgage, policy and other loan receivables are secured by buildings, land or the underlying policies.
Maturity of lessor cash flows
As of 31 December 2020, the total undiscounted cash flows to be received from operating leases of investment real estate for the next five
years and thereafter were as follows:
USD millions
Less than one year
Between one year and two years
Between two years and three years
Between three years and four years
Between four years and five years
After five years
Total cash flows
Operating leases
203
182
158
125
97
412
1 177
The Group manages risk associated with the residual value of its leased properties through careful property selection as well as
diversification by geographical region and property type. Lease contracts for residential real estate in Switzerland and Germany are usually
open-ended. Cash flows for such contracts have been projected taking into consideration the average turnover rate in the region. Lease
contracts for residential real estate in the US with a lease term of one year or less have been excluded from the projected cash flows in the
table above. Rental income for those leases for the year ended 31 December 2019 and 2020 was USD 28 million and USD 27 million,
respectively.
240
Swiss Re | Financial Report 2020
Other financial assets and liabilities by measurement category
As of 31 December 2019 and 2020, ‘‘Other invested assets’’ and ‘‘Accrued expenses and other liabilities’’ by measurement category were
as follows:
2019
USD millions
Other invested assets
Derivative financial instruments
Reverse repurchase agreements
Securities lending/borrowing
Equity-accounted investments
Other
Reclassified to liabilities held for sale
Other invested assets
Accrued expenses and other liabilities
Derivative financial instruments
Repurchase agreements
Securities lending
Securities sold short
Other
Reclassified to liabilities held for sale
Accrued expenses and other liabilities
2020
USD millions
Other invested assets
Derivative financial instruments
Reverse repurchase agreements
Securities lending/borrowing
Equity-accounted investments
Other
Other invested assets
Accrued expenses and other liabilities
Derivative financial instruments
Repurchase agreements
Securities lending
Securities sold short
Other
Accrued expenses and other liabilities
1 Amounts do not relate to financial assets or liabilities.
Investments
measured at net
asset value as
Fair value practical expedient
Amortised
cost or cost
Equity-accounted
Not in scope1
Total
472
457
335
76
–60
1 280
692
458
1 764
–161
2 753
2 089
21
905
–445
2 570
678
115
1 653
–329
2 117
913
913
0
2 580
2 580
0
2 512
–191
2 321
0
472
2 089
478
2 915
1 894
–505
7 343
692
678
573
1 764
4 165
–681
7 191
Investments
measured at net
asset value as
Fair value practical expedient
Amortised
cost or cost
Equity-accounted
Not in scope1
Total
266
1 636
287
302
2 491
495
1 638
1 353
3 486
3 002
282
1 010
4 294
248
84
1 959
2 291
1 026
1 026
0
2 503
2 503
0
0
2 316
2 316
266
3 002
1 918
2 790
2 338
10 314
495
248
1 722
1 353
4 275
8 093
Swiss Re | Financial Report 2020
241
Financial statements
Offsetting of derivatives, financial assets and financial liabilities
Offsetting of derivatives, financial assets and financial liabilities as of 31 December was as follows:
2019
USD millions
Derivative financial instruments – assets
Reverse repurchase agreements
Securities borrowing
Total
Gross amounts of
recognised
financial assets
1 662
5 185
171
7 018
Amounts set-off
in the balance sheet
–1 184
–3 096
–150
–4 430
Net amounts of financial
Related financial
assets presented instruments not set-off
in the balance sheet
–2
–2 061
–20
–2 083
in the balance sheet
478
2 089
21
2 588
2019
USD millions
Derivative financial instruments – liabilities
Repurchase agreements
Securities lending
Total
Gross amounts of
recognised
financial liabilities
–1 750
–3 352
–1 145
–6 247
Amounts set-off
in the balance sheet
1 058
2 674
572
4 304
Net amounts of financial
Related financial
liabilities presented instruments not set-off
in the balance sheet
in the balance sheet
75
–692
653
–678
524
–573
1 252
–1 943
2020
USD millions
Derivative financial instruments – assets
Reverse repurchase agreements
Securities borrowing
Total
Gross amounts of
recognised
financial assets
1 609
4 945
292
6 846
Amounts set-off
in the balance sheet
–1 343
–1 943
–10
–3 296
Net amounts of financial
Related financial
assets presented instruments not set-off
in the balance sheet
–3
–3 002
–280
–3 285
in the balance sheet
266
3 002
282
3 550
2020
USD millions
Derivative financial instruments – liabilities
Repurchase agreements
Securities lending
Total
Gross amounts of
recognised
financial liabilities
–1 775
–1 891
–2 032
–5 698
Amounts set-off
in the balance sheet
1 280
1 643
310
3 233
Net amounts of financial
Related financial
liabilities presented instruments not set-off
in the balance sheet
in the balance sheet
303
–495
248
–248
1 652
–1 722
2 203
–2 465
Net amount
476
28
1
505
Net amount
–617
–25
–49
–691
Net amount
263
0
2
265
Net amount
–192
0
–70
–262
Collateral pledged or received between two counterparties with a master netting arrangement in place, but not subject to balance sheet
netting, is disclosed at fair value. The fair values represent the gross carrying value amounts at the reporting date for each financial
instrument received or pledged by the Group. Management believes that master netting agreements provide for legally enforceable set-off in
the event of default, which substantially reduces credit exposure. Upon occurrence of an event of default, the non-defaulting party may set
off the obligation against collateral received regardless if it has been offset on the balance sheet prior to the defaulting event. The net
amounts of the financial assets and liabilities presented on the balance sheet were recognised in “Other invested assets”, “Investments for
unit-linked and with-profit business” and “Accrued expenses and other liabilities”.
Assets pledged
As of 31 December 2019 and 2020, investments with a carrying value of USD
deposit with regulatory agencies in accordance with local requirements, of which USD 223
cash and cash equivalents. As of 31 December 2019 and 2020, investments with a carrying value of USD
USD
in subsidiaries, of which USD 485
million and USD 259
pledged include some instances where cash is legally restricted from usage or withdrawal.
million and USD
15 424
5 239
million, respectively, were placed on deposit or pledged to secure certain reinsurance liabilities, including pledged investments
million, respectively, were cash and cash equivalents. Cash and cash equivalents
million and USD 249
5 858
million, respectively, were on
million, respectively, were
14 659
million and
As of 31 December 2019 and 2020, securities of USD
under securities lending transactions and repurchase agreements on a fully collateralised basis. Corresponding liabilities of
USD
collateral that the Group has the right to sell or reuse.
million, respectively, were recognised in accrued expenses and other liabilities for the obligation to return
million, respectively, were transferred to third parties
million and USD
million and USD
18 686
13 787
1 970
1 251
As of 31 December 2019 and 2020, a real estate portfolio with a carrying value of USD 188
served as collateral for a credit facility, allowing the Group to withdraw funds up to CHF 500 million.
million and USD 200
million, respectively,
242
Swiss Re | Financial Report 2020
Collateral accepted which the Group has the right to sell or repledge
As of 31 December 2019 and 2020, the fair value of the equity securities, government and corporate debt securities received as collateral
million, respectively. Of this, the amount that was sold or repledged as of 31 December 2019 and
million and USD
was USD
5 477
2020 was USD
1 341
2 025
agreements and derivative transactions.
million, respectively. The sources of the collateral are securities borrowing, reverse repurchase
4 837
million and USD
Recognised gross liability for the obligation to return collateral (from repurchase agreements and securities lending)
As of 31 December 2019 and 2020, the gross amounts of liabilities related to repurchase agreements and securities lending by the class of
securities transferred to third parties and by the remaining maturity are shown below.
2019
USD millions
Repurchase agreements
Debt securities issued by governments and government agencies
Corporate debt securities
Total repurchase agreements
Securities lending
Debt securities issued by governments and government agencies
Corporate debt securities
Total securities lending
Gross amount of recognised liabilities for repurchase agreements and
securities lending
2020
USD millions
Repurchase agreements
Debt securities issued by governments and government agencies
Corporate debt securities
Total repurchase agreements
Securities lending
Debt securities issued by governments and government agencies
Corporate debt securities
Total securities lending
Gross amount of recognised liabilities for repurchase agreements and
securities lending
Overnight and
continuous
Up to 30 days
Remaining contractual maturity of the agreements
Greater than
90 days
30–90 days
Total
30
3
33
295
58
353
3 312
7
3 319
0
0
493
299
0
493
299
3 342
10
3 352
1 087
58
1 145
4 497
Overnight and
continuous
Up to 30 days
Remaining contractual maturity of the agreements
Greater than
90 days
30–90 days
Total
197
2
199
1 490
148
1 638
54
54
0
1 099
79
1 178
303
551
0
303
551
1 741
150
1 891
1 953
79
2 032
3 923
The programme is structured in a conservative manner with a clearly defined risk framework. Yield enhancement is conducted on a non-
cash basis, thereby taking no re-investment risk.
Swiss Re | Financial Report 2020
243
Financial statements
8 Fair value disclosures
Fair value, as defined by the Fair Value Measurements and Disclosures Topic, is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement date.
The Fair Value Measurements and Disclosures Topic requires all assets and liabilities that are measured at fair value to be categorised within
the fair value hierarchy. This three-level hierarchy is based on the observability of the inputs used in the fair value measurement. The levels of
the fair value hierarchy are defined as follows:
Level 1 inputs are unadjusted, quoted prices in active markets for identical assets or liabilities that the Group has the ability to access. Level 1
inputs are the most persuasive evidence of fair value and are to be used whenever possible. The types of instruments include most US
government and sovereign obligations, active listed equities, certain exchange-traded derivative instruments and most money market
securities.
Level 2 inputs are market-based inputs that are directly or indirectly observable, but not considered level 1 quoted prices. Level 2 inputs
consist of (i) quoted prices for similar assets or liabilities in active markets; (ii) quoted prices for identical assets or liabilities in non-active
markets (eg markets which have few transactions and where prices are not current or price quotations vary substantially); (iii) inputs other
than quoted prices that are observable (eg interest rates, yield curves, volatilities, prepayment speeds, credit risks and default rates); (iv)
inputs derived from, or corroborated by, observable market data; and (v) quoted prices provided by third party brokers. The types of
instruments that trade in markets that are not considered to be active include most government agency securities, investment-grade
corporate bonds, certain mortgage- and asset-backed products, certain exchange-traded derivative instruments, catastrophe bonds, less
liquid listed equities and state, municipal and provincial obligations.
Level 3 inputs are unobservable inputs. These inputs reflect the Group’s own assumptions about market pricing using the best internal and
external information available. 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 asset-backed securities (ABS). 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. 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.
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 fair values of assets are adjusted to incorporate the counterparty risk of non-performance. Similarly, the fair values of liabilities reflect the
risk of non-performance of the Group, captured by the Group’s credit spread. These valuation adjustments from assets and liabilities
measured at fair value using significant unobservable inputs are recognised in net realised gains and losses. For 2020, these adjustments
were not material. Whenever the underlying assets or liabilities are reported in a specific business segment, the valuation adjustment is
allocated accordingly. Valuation adjustments not attributable to any business segment are reported in Group items.
In certain situations, the Group uses inputs to measure the fair value of asset or liability positions that fall into different levels of the fair value
hierarchy. In these situations, the Group will determine the appropriate level based on the lowest level input that is significant to the
determination of the fair value.
Valuation techniques
US government securities typically have quoted market prices in active markets and are categorised as level 1 instruments in the fair value
hierarchy. Non-US government holdings are generally classified as level 2 instruments and are valued on the basis of the quotes provided by
pricing services, which are subject to the Group’s pricing validation reviews and pricing vendor challenge process. Valuations provided by
pricing vendors are generally based on the actual trade information as substantially all of the Group’s non-US government holdings are
traded in a transparent and liquid market.
Corporate debt securities mainly include US and European investment-grade positions, which are priced on the basis of quotes provided by
third party pricing vendors and first utilise valuation inputs from actively traded securities, such as bid prices, bid spreads to Treasury
securities, Treasury curves and same or comparable issuer curves and spreads. Issuer spreads are determined from actual quotes and traded
prices and incorporate considerations of credit/default, sector composition, and liquidity and call features. Where market data is not
available, valuations are developed based on the modelling techniques that utilise observable inputs and option-adjusted spreads and
incorporate considerations of the security’s seniority, maturity and the issuer’s corporate structure.
Values of mortgage- and asset-backed securities are obtained both from third party pricing vendors and through quoted prices, some of
which may be based on the prices of comparable securities with similar structural and collateral features. Values of certain ABS for which
there are no significant observable inputs are developed using benchmarks to similar transactions or indices. For both residential mortgage-
244
Swiss Re | Financial Report 2020
backed securities (RMBS) and commercial mortgage-backed securities (CMBS), cash flows are derived based on the transaction-specific
information, which incorporates priority in the capital structure, and are generally adjusted to reflect benchmark yields, market prepayment
data, collateral performance (default rates and loss severity) for specific vintage and geography, credit enhancements and ratings. For
certain RMBS and CMBS with low levels of market liquidity, judgements may be required to determine comparable securities based on the
loan type and deal-specific performance. CMBS terms may also incorporate lock-out periods that restrict borrowers from prepaying the loans
or provide disincentives to prepay and therefore reduce prepayment risk of these securities, compared to RMBS. The factors specifically
considered in valuation of CMBS include borrower-specific statistics in a specific region, such as debt service coverage and loan-to-value
ratios, as well as the type of commercial property. Mortgage- and asset-backed securities also includes debt securitised by credit card,
student loan and auto loan receivables. Pricing inputs for these securities also focus on capturing, where relevant, collateral quality and
performance, payment patterns and delinquencies.
The Group uses third party pricing vendor data to value agency securitised products, which mainly include collateralised mortgage
obligations (CMO) and mortgage-backed government agency securities. The valuations generally utilise observable inputs consistent with
those noted above for RMBS and CMBS.
Equity securities held by the Group for proprietary investment purposes are mainly classified in level 1. Securities classified in level 1 are
traded on public stock exchanges for which quoted prices are readily available.
The category “Other invested assets” includes the Group’s private equity and hedge fund investments which are made directly or via
ownership of funds. Valuation of direct private equity investments requires significant management judgement due to the absence of quoted
market prices and the lack of liquidity. Initial valuation is based on the acquisition cost, and is further refined based on the available market
information for the public companies that are considered comparable to the Group’s holdings in the private companies being valued, and the
private company-specific performance indicators, both historic and projected. Subsequent valuations also reflect business or asset
appraisals, as well as market transaction data for private and public benchmark companies and the actual companies being valued, such as
financing rounds and mergers and acquisitions activity. The Group’s holdings in private equity and hedge funds are generally valued utilising
net asset values (NAV), subject to adjustments, as deemed necessary, for restrictions on redemption (lock-up periods and amount limitations
on redemptions). These investments are included under investments measured at net asset value as a practical expedient.
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 interest rate derivatives primarily include interest rate swaps, futures, options, caps and floors and are valued based on the
cash flow discounting models which generally utilise as inputs observable market yield curves and volatility assumptions.
The Group’s OTC foreign exchange derivatives primarily include forward, spot and option contracts and are generally valued based on the
cash flow discounting models, utilising as main inputs observable foreign exchange forward curves.
The Group’s investments in equity derivatives primarily include OTC equity option contracts on single or baskets of market indices and equity
options on individual or baskets of equity securities, which are valued using internally developed models (such as the Black-Scholes type
option pricing model and various simulation models) calibrated with the inputs, which include underlying spot prices, dividend curves,
volatility surfaces, yield curves and correlations between underlying assets.
The Group’s OTC credit derivatives can include index and single-name credit default swaps. 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.
Swiss Re | Financial Report 2020
245
Financial statements
Assets and liabilities measured at fair value on a recurring basis
As of 31 December, the fair values of assets and liabilities measured on a recurring basis by level of input were as follows:
2019
USD millions
Assets
Fixed income securities held for proprietary
investment purposes
Debt securities issued by US government
and government agencies
US Agency securitised products
Debt securities issued by non-US
governments and government agencies
Corporate debt securities
Mortgage- and asset-backed securities
Fixed income securities backing unit-linked
and with-profit business
Equity securities held for proprietary
investment purposes
Equity securities backing unit-linked
and with-profit business
Short-term investments held for proprietary
investment purposes
Derivative financial instruments
Interest rate contracts
Foreign exchange contracts
Equity contracts
Credit contracts
Other contracts
Contracts backing unit-linked
and with-profit business
Investment real estate
Other invested assets
Funds held by ceding companies
Total assets at fair value
Liabilities
Derivative financial instruments
Interest rate contracts
Foreign exchange contracts
Equity contracts
Credit contracts
Other contracts
Contracts backing unit-linked
and with-profit business
Liabilities for life and health policy benefits
Accrued expenses and other liabilities
Total liabilities at fair value
Quoted prices in
active markets for
identical assets
and liabilities
(level 1)
Significant other
observable
inputs
(level 2)
Significant
unobservable
inputs
(level 3)
Impact of
netting1
Reclassified
to assets held
for sale
Total
14 057
86 270
1 696
–20 450
81 573
14 057
2 992
37 550
1 098
11
2
6
3
317
56 025
–5
–5
2 510
7 175
32 654
39 303
4 628
4 680
1
56
4 812
1 426
492
381
530
17
3
3
140
174
97 559
–1 280
–415
–296
–506
–63
3
1 693
–121
–5 283
–14 671
–375
16 446
7 175
27 374
26 325
4 253
–4 680
0
2 993
–37 086
520
225
–1 184
186
39
143
411
–142
–65
–8
–51
–6
–143
2 475
–1 184
–62 566
–465
–2
–20
–443
–91
1 058
161
50
1
111
–1
5 768
413
484
330
718
17
48
0
0
868
174
92 309
–531
–367
–295
–531
–63
–332
–1
–91
–2 222
–2 844
–340
–345
–1 882
–3 162
–556
1 058
161
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.
246
Swiss Re | Financial Report 2020
2020
USD millions
Assets
Fixed income securities held for proprietary
investment purposes
Debt securities issued by US government
and government agencies
US Agency securitised products
Debt securities issued by non-US
governments and government agencies
Corporate debt securities
Mortgage- and asset-backed securities
Equity securities held for proprietary
investment purposes
Equity securities backing unit-linked
and with-profit business
Short-term investments held for proprietary
investment purposes
Derivative financial instruments
Interest rate contracts
Foreign exchange contracts
Equity contracts
Credit contracts
Other contracts
Other invested assets
Funds held by ceding companies
Total assets at fair value
Liabilities
Derivative financial instruments
Interest rate contracts
Foreign exchange contracts
Equity contracts
Credit contracts
Other contracts
Liabilities for life and health policy benefits
Accrued expenses and other liabilities
Total liabilities at fair value
Quoted prices in
active markets for
identical assets
and liabilities
(level 1)
Significant other
observable
inputs
(level 2)
Significant
unobservable
inputs
(level 3)
Impact of
netting1
Total
11 264
70 571
1 183
11 264
4 899
463
6 846
5
4
1
551
24 028
–12
–10
–2
2 194
7 021
28 646
29 404
3 306
9 236
1 372
494
215
653
10
1 085
172
82 436
–1 422
–444
–410
–331
–237
1 183
232
–1 343
201
31
588
2 003
–1 343
1 280
–341
–2
–23
–316
–98
–891
–903
–2 099
–3 521
–439
1 280
83 018
13 458
7 021
28 646
30 587
3 306
4 899
463
16 082
266
494
215
858
10
32
2 224
172
107 124
–495
–446
–410
–364
–237
–318
–98
–2 990
–3 583
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.
Swiss Re | Financial Report 2020
247
Financial statements
Assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (level 3)
As of 31 December, the reconciliations of the fair values of assets and liabilities measured on a recurring basis using significant unobservable
inputs were as follows:
2019
USD millions
Assets and liabilities
Balance as of 1 January
Realised/unrealised gains/losses:
Included in net income1
Included in other comprehensive income2
Purchases
Issuances
Sales
Settlements
Transfers into level 3
Transfers out of level 3
Disposals
Impact of foreign exchange movements
Closing balance as of 31 December
Fixed
income
securities
Equity Derivative
assets
securities
Investment
real estate
Other
invested
assets
Total Derivative
liabilities
assets
Liabilities
for life
and health
policy
benefits
Total
liabilities
1 378
0
404
166
364
2 312
–517
–119
–636
4
73
417
–56
–82
–76
–151
16
16
–9
–37
–46
32
–4
120
–147
24
60
20
20
–2
2
–111
73
453
0
–113
–119
2
–76
38
1 696
2
225
7
143
7
411
54
2 475
–5
–465
0
–91
152
–4
0
–147
24
60
0
0
–5
–556
2
1 Fair value changes are reported in “Net realised investment gains/losses – non-participating business”.
Fair value changes from fixed income securities are reported in “Net unrealised investment gains/losses”. Fair value changes from liabilities for life and health policy benefits are reported in
“Credit risk of financial liabilities at fair value option”.
2020
USD millions
Assets and liabilities
Balance as of 1 January
Realised/unrealised gains/losses:
Included in net income1
Included in other comprehensive income2
Purchases
Issuances
Sales
Settlements
Transfers into level 3
Transfers out of level 3
Disposals
Impact of foreign exchange movements
Closing balance as of 31 December
Fixed
income
securities
Equity Derivative
assets
securities
Investment
real estate
Other
invested
assets
Total Derivative
liabilities
assets
Liabilities
for life
and health
policy
benefits
Total
liabilities
1 696
0
225
143
411
2 475
–465
–91
–556
79
–2
367
–7
–48
–945
43
1 183
14
1
–14
–134
4
0
–11
3
1
232
204
–204
0
–9
19
–47
211
3
588
85
–2
386
0
–68
–59
418
0
–1 283
51
2 003
–8
–8
1
–102
6
127
104
–3
–341
–98
–16
1
0
–102
6
127
0
0
104
–3
–439
2
1 Fair value changes are reported in “Net realised investment gains/losses – non-participating business”.
Fair value changes from fixed income securities are reported in “Net unrealised investment gains/losses”. Fair value changes from liabilities for life and health policy benefits are reported in
“Credit risk of financial liabilities at fair value option”.
248
Swiss Re | Financial Report 2020
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:
USD millions
Gains/losses included in net income for the period
Whereof change in unrealised gains/losses relating to assets and liabilities still held at the reporting date
2019
41
–45
2020
69
–16
Quantitative information about level 3 fair value measurements
Unobservable inputs for major level 3 assets and liabilities as of 31 December were as follows:
USD millions
Assets
Corporate debt securities
Infrastructure loans
Private placement corporate debt
Private placement credit tenant leases
Derivative equity contracts
OTC equity option referencing
correlated equity indices
Investment real estate
Liabilities
Derivative equity contracts
OTC equity option referencing
correlated equity indices
2019
2020
Fair value Fair value
Valuation technique
Unobservable input
Range (weighted average1)
1 693 1 183
1 147
504
42
186
186
201
201
701 Discounted cash flow model
Corporate spread matrix
440
42 Discounted cash flow model
Valuation spread
Credit spread
Illiquidity premium
84–526 bps (199 bps)
214–236 bps (112 bps)
125–150 bps (146 bps)
Proprietary option model
Correlation
–30–55% (30%)
143
–20
–20
–23
–23
Proprietary option model
Correlation
–30–95% (42%)
Other derivative contracts and liabilities for life
and health policy benefits
–534 –414
Variable annuity and fair valued
GMDB contracts
–311 –355 Discounted cash flow model
Risk margin
Volatility
Lapse
Mortality improvement
Withdrawal rate
4% (n/a)
12.8–63.8%
1.5–15%
0–1.5%
0–90%
Swap liability referencing
real estate investments
Weather contracts
–110
–76
–30
Proprietary option model
Risk margin
Correlation
Volatility (power/gas)
Volatility (temperature)
Index value (temperature)
6–11% (7.9%)
–49–45% (12.1%)
27–65% (56.4%)
34–385 (164) HDD/CAT2
441–7586 (2315)
HDD/CAT2
1 Unobservable inputs were weighted by the relative fair value of the instruments. For Derivative equity contracts, the weighted average correlation is derived by computing an absolute piecewise
correlation impact and is not weighted by the relative fair value.
2 Heating Degree Days (HDD); Cumulative Average Temperature (CAT).
Swiss Re | Financial Report 2020
249
Financial statements
Uncertainty of recurring level 3 measurements from the use of significant unobservable inputs
The significant unobservable input used in the fair value measurement of the Group’s infrastructure loans is valuation spread. A significant
increase (decrease) in this input in isolation would have resulted in a significantly lower (higher) fair value measurement. The significant
unobservable input used in the fair value measurement of the Group’s private placement corporate debt securities is credit spread. A
significant increase (decrease) in this input in isolation would have resulted in a significantly lower (higher) fair value measurement. The
significant unobservable input used in the fair value measurement of the Group’s private placement credit tenant leases is illiquidity
premium. A significant increase (decrease) in this input in isolation would have resulted in a significantly lower (higher) fair value
measurement.
The significant unobservable input used in the fair value measurement of the Group’s OTC equity option referencing correlated equity indices
is correlation. Where the Group is long correlation risk, a significant increase (decrease) in this input in isolation would have resulted in a
significantly higher (lower) fair value measurement. Where the Group is short correlation risk, a significant increase (decrease) in this input in
isolation would have resulted in a significantly lower (higher) fair value measurement.
The significant unobservable input used in the fair value measurement of the Group’s investment real estate and swap liability referencing
real estate investment is the rate used to discount future cash flows from property sales. A significant increase (decrease) in this input in
isolation would have resulted in a significantly lower (higher) fair value measurement.
The significant unobservable inputs used in the fair value measurement of the Group’s variable annuity and fair valued guaranteed minimum
death benefit (GMDB) contracts are: risk margin, volatility, lapse, mortality improvement rate and withdrawal rate. A significant increase
(decrease) in isolation in each of the following inputs: risk margin, volatility and withdrawal rate would have resulted in a significantly lower
(higher) fair value of the Group’s obligation. A significant increase (decrease) in isolation in lapse rate would, in general, have resulted in a
significantly higher (lower) fair value of the Group’s obligation due to the maturity of the contracts. Changes in the mortality improvement
rate impact the fair value of the Group’s obligation differently for living-benefit products, compared to death-benefit products. For the former,
a significant increase (decrease) in the mortality improvement rate (ie decrease (increase) in mortality) in isolation would have resulted in a
decrease (increase) in fair value of the Group’s liability. For the latter, a significant increase (decrease) in the mortality improvement rate in
isolation would have resulted in an increase (decrease) in fair value of the Group’s liability.
The significant unobservable inputs used in the fair value measurement of the Group’s weather contracts are risk margin, correlation,
volatility and index value. Where the Group has a long position, a significant increase (decrease) in the risk margin input in isolation would
have resulted in a significantly higher (lower) fair value measurement. Where the Group has a long volatility or correlation position, a
significant increase (decrease) in the correlation and volatility inputs would have resulted in a significantly higher (lower) fair value
measurement. Where the Group has a long index position, an increase (decrease) in the index value input in isolation would have resulted in
a significantly higher (lower) fair value measurement. Where the Group has a short position, a significant increase (decrease) in the risk
margin input in isolation would have resulted in a significantly lower (higher) fair value measurement. Where the Group has a short volatility
or correlation position, a significant increase (decrease) in the correlation and volatility inputs would have resulted in a significantly lower
(higher) fair value measurement. Where the Group has a short index position, an increase (decrease) in the index value input in isolation
would have resulted in a significantly lower (higher) fair value measurement.
250
Swiss Re | Financial Report 2020
Other invested assets measured at net asset value
Other invested assets measured at net asset value as of 31 December were as follows:
USD millions
Private equity funds
Hedge funds
Private equity direct
Real estate funds
Total
2019
Fair value
565
208
128
12
913
2020
Fair value
763
2
259
2
1 026
Unfunded
commitments
589
72
15
676
Redemption frequency
(if currently eligible)
non-redeemable
redeemable1
non-redeemable
non-redeemable
Redemption
notice period
n/a
45–95 days2
n/a
n/a
1 The redemption frequency varies by position.
2 Cash distribution can be delayed for an extended period depending on the sale of the underlyings.
The hedge fund investments employ a variety of strategies, including relative value and event-driven across various asset classes.
The private equity direct portfolio consists of equity and equity-like investments directly in other companies. These investments have no
contractual term and are generally held based on financial or strategic intent.
Private equity and real estate funds generally have limitations imposed on the amount of redemptions from the fund during the redemption
period due to illiquidity of the underlying investments. Fees may apply for redemptions or transferring of interest to other parties.
Distributions are expected to be received from these funds as the underlying assets are liquidated. The period of time over which the
underlying assets are expected to be liquidated is indeterminate as investees provide liquidation notices.
The redemption frequency of hedge funds varies depending on the manager as well as the nature of the underlying product. Additionally,
certain funds may impose lock-up periods and redemption gates as defined in the terms of the individual investment agreement.
Fair value option
The fair value option under the Financial Instruments Topic permits the choice to measure specified financial assets and liabilities at fair value
on an instrument-by-instrument basis. The Group elected the fair value option for positions in the following line items:
Other invested assets
The Group elected the fair value option for certain investments classified as equity method investees within other invested assets in the
balance sheet. The Group applied the fair value option, as the investments are managed on a fair value basis. The changes in fair value of
these elected investments are recorded in earnings.
Funds held by ceding companies
For operational efficiencies, the Group elected the fair value option for funds held by the cedent under three of its reinsurance agreements.
The assets are carried at fair value and changes in fair value are reported as a component of earnings.
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. The liability is carried at fair value and changes in fair
value attributable to instrument-specific credit risk are reported on other comprehensive income and all other changes in fair value are
reported as a component of earnings.
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 was carried at fair value
and changes in fair value were reported as a component of earnings. In the balance sheet and the following fair value disclosures, this item
was included under ”Liabilities held for sale” for the year ended 31 December 2019.
Swiss Re | Financial Report 2020
251
Financial statements
Assets and liabilities measured at fair value pursuant to election of the fair value option
Pursuant to the election of the fair value option for the items described, the balances as of 31 December were as follows:
USD millions
Assets
Other invested assets
of which at fair value pursuant to the fair value option
Funds held by ceding companies
of which at fair value pursuant to the fair value option
Liabilities
Liabilities for life and health policy benefits
of which at fair value pursuant to the fair value option
Liabilities held for sale
of which at fair value pursuant to the fair value option
2019
2020
10 314
287
10 726
172
–22 456
–98
7 343
335
9 472
174
–19 836
–91
–68 586
–110
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:
USD millions
Other invested assets
Funds held by ceding companies
Liabilities for life and health policy benefits
Liabilities held for sale
Total
2019
16
11
32
–10
49
2020
–24
6
–8
–26
Fair value changes from other invested assets and funds held by ceding companies are reported in “Net investment income –
non-participating business”. Fair value changes from the GMDB reserves are shown in “Life and health benefits”. Fair value changes from
accrued expenses and other liabilities are reported in “Net realised investment gains/losses – non-participating business“.
252
Swiss Re | Financial Report 2020
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:
2019
USD millions
Assets
Policy loans
Mortgage loans
Other loans
Investment real estate
Total assets
Liabilities
Debt
Total liabilities
2020
USD millions
Assets
Policy loans
Mortgage loans
Other loans
Investment real estate
Total assets
Liabilities
Debt
Total liabilities
Significant other
observable inputs
(level 2)
Significant
unobservable
inputs
(level 3)
50
2 144
2 376
4 563
9 133
0
Total
50
2 144
2 376
4 563
9 133
–10 639
–10 639
–3 565
–3 565
–14 204
–14 204
Significant other
observable inputs
(level 2)
Significant
unobservable
inputs
(level 3)
43
1 458
1 906
5 118
8 525
0
Total
43
1 458
1 906
5 118
8 525
–10 735
–10 735
–4 014
–4 014
–14 749
–14 749
Policy loans, other loans and certain mortgage loans are classified as level 3 measurements, as they do not have an active exit market. Some
of these positions need to be assessed in conjunction with the corresponding insurance business, whilst the fair value of some other
positions does not differ materially from the carrying amount. Considering these circumstances for these positions, the Group presents the
carrying amount as an approximation for the fair value. For certain commercial mortgage loans and infrastructure loans, which are included
in mortgage loans and other loans respectively, the fair value can be estimated using discounted cash flow models which are based on
discount curves and spread inputs that require management’s judgement.
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.
Debt positions, which are fair valued based on executable broker quotes or the discounted cash flow method using observable inputs, are
classified as level 2 measurements. Fair value of the majority of the Group’s level 3 debt positions is judged to approximate carrying value
due to the highly tailored nature of the obligation and short-notice termination provisions.
Swiss Re | Financial Report 2020
253
Financial statements
9 Derivative financial instruments
The Group uses a variety of derivative financial instruments including swaps, options, forwards, credit derivatives and exchange- traded
financial futures in its trading and hedging strategies, in line with the Group’s overall risk management strategy. The objectives include
managing exposure to price, foreign currency and/or interest rate risk on planned or anticipated investment purchases, existing assets or
liabilities, as well as locking in attractive investment conditions for future available funds.
The fair values represent the gross carrying value amounts at the reporting date for each class of derivative contract held or issued by the
Group. The gross fair values are not an indication of credit risk, as many over-the-counter transactions are contracted and documented under
ISDA master agreements or their equivalent. Management believes that such agreements provide for legally enforceable set-off in the event
of default, which substantially reduces credit exposure.
254
Swiss Re | Financial Report 2020
Fair values and notional amounts of derivative financial instruments
As of 31 December, the fair values and notional amounts of the derivatives outstanding were as follows:
Total derivative financial instruments
99 903
1 662
–1 750
2019
USD millions
Derivatives not designated as hedging instruments
Interest rate contracts
Foreign exchange contracts
Equity contracts
Credit contracts
Other contracts
Total
Derivatives designated as hedging instruments
Interest rate contracts
Foreign exchange contracts
Total
Amount offset
Where a right of set-off exists
Due to cash collateral
Total net amount of derivative financial instruments
2020
USD millions
Derivatives not designated as hedging instruments
Interest rate contracts
Foreign exchange contracts
Equity contracts
Credit contracts
Other contracts
Total
Derivatives designated as hedging instruments
Interest rate contracts
Foreign exchange contracts
Total
Notional amount
assets/liabilities
Fair value
assets
Fair value
liabilities
Carrying value
assets/liabilities
27 544
26 256
16 089
3 283
10 290
83 462
1 403
15 038
16 441
494
291
721
17
48
1 571
1
90
91
–395
–108
–531
–63
–443
–1 540
–22
–188
–210
–675
–509
478
675
383
–692
99
183
190
–46
–395
31
–21
–98
–119
–88
–214
Notional amount
assets/liabilities
Fair value
assets
Fair value
liabilities
Carrying value
assets/liabilities
21 315
27 311
21 583
9 755
10 128
90 092
3 990
18 258
22 248
485
195
858
10
32
1 580
9
20
29
–436
–186
–364
–237
–318
–1 541
–10
–224
–234
49
9
494
–227
–286
39
–1
–204
–205
Total derivative financial instruments
112 340
1 609
–1 775
–166
Amount offset
Where a right of set-off exists
Due to cash collateral
Total net amount of derivative financial instruments
–653
–690
266
653
627
–495
–229
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”. 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 2019 and 2020.
Swiss Re | Financial Report 2020
255
Financial statements
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:
USD millions
Derivatives not designated as hedging instruments
Interest rate contracts
Foreign exchange contracts
Equity contracts
Credit contracts
Other contracts
Total gains/losses recognised in income
20191
2020
–116
–123
–183
–51
112
–361
145
970
–114
–93
908
1 The Group has revised the scope of its non-hedging derivative activities. The revision had no impact on net income or shareholders' equity. Comparative information for 2019 has been adjusted
accordingly.
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 2019 and 2020, the following hedging relationships
were outstanding:
Fair value hedges
The Group enters into foreign exchange and interest rate swaps to reduce the exposure to foreign exchange and interest rate volatility for
certain fixed income securities and its issued long-term debt positions. These derivative instruments are designated as hedging instruments
in qualifying fair value hedges.
For the years ended 31 December, the gains and losses attributable to the hedged risks were as follows:
USD millions
Total amounts of income and expense
line items
Foreign exchange contracts
Gains/losses on derivatives
Gains/losses on hedged items
Amounts excluded from the effectiveness
assessment
Interest rate contracts
Gains/losses on derivatives
Gains/losses on hedged items
Net realised
investment
gains/losses — non-
participating business
Interest expenses
2019
Other comprehensive
income - Net
unrealised investment
gains/losses1
Net realised
investment
gains/losses — non-
participating business
2020
Other comprehensive
income - Net
unrealised investment
gains/losses1
Interest expenses
1 580
–589
3 375
1 730
–588
2 741
40
–40
–852
852
–2
–18
20
30
–30
1 Represents the net change in accumulated other comprehensive income, reflecting the revised presentation of gains/losses recorded in AOCI. Comparative information for 2019 has been
adjusted accordingly.
As of 31 December, the carrying values of the hedged assets and liabilities, and the cumulative amounts of fair value hedging adjustments
included therein, recognised in the balance sheet, were as follows:
USD millions
Assets
Fixed income securities available-for-sale
Liabilities
Long-term debt
Carrying value
9 555
2019
Cumulative basis
adjustment
2020
Cumulative basis
adjustment
Carrying value
13 083
–1 355
20
–3 968
–10
256
Swiss Re | Financial Report 2020
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. These derivative instruments were designated as cash flow hedging instruments, until the hedge was
discontinued in the second quarter of 2020.
For the years ended 31 December, the gains and losses recorded in accumulated other comprehensive income, and reclassified into income
were as follows:
USD millions
Total amounts of income and expense line items
Foreign exchange contracts
Gains/losses on derivatives
Net realised investment
gains/losses — non-
participating business
1 580
2019
Other comprehensive
income -
Cash flow hedges1
–9
Net realised investment
gains/losses — non-
participating business
1 730
2020
Other comprehensive
income -
Cash flow hedges1
2
–48
–9
152
2
1 Represents the net change in accumulated other comprehensive income, reflecting the revised presentation of gains/losses recorded in AOCI. Comparative information for 2019 has been
adjusted accordingly.
2 Includes a loss of USD 11 million that was reclassified into earnings, as a result of cash flow hedge discontinuance.
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.
As of 31 December 2019 and 2020, the Group recorded an accumulated net unrealised foreign currency remeasurement gain of
USD 1 895 million and USD 248 million, respectively, in “Other comprehensive income - Foreign currency translation“. 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 2019 and 2020 was approximately USD 987
is based on the positive market replacement cost assuming non-performance of all counterparties, excluding cash collateral.
million and USD 956 million, respectively. The maximum potential loss
Credit risk-related contingent features
Certain derivative instruments held by the Group contain provisions that require its debt to maintain an investment-grade credit rating. If the
Group’s credit rating were downgraded or no longer rated, the counterparties could request immediate payment, guarantee or an ongoing
full overnight collateralisation on derivative instruments in net liability positions.
The total fair value of derivative financial instruments containing credit risk-related contingent features amounted to USD 75
USD 71 million as of 31 December 2019 and 2020, respectively. For derivative financial instruments containing credit risk-related
contingent features, the Group posted collateral of nil and USD 48 million as of 31 December 2019 and 2020, respectively. In the event of a
reduction of the Group’s credit rating to below investment grade, a fair value of USD 25 million additional collateral would have had to be
posted as of 31 December 2020. The total equals the amount needed to settle the instruments immediately as of 31 December 2020.
million and
Swiss Re | Financial Report 2020
257
Financial statements
10 Acquisitions and disposals
Disposal of ReAssure Group Plc.
On the 22 July 2020, the Group completed the sale of ReAssure Group Plc. (ReAssure) to Phoenix Group Holdings Plc. (Phoenix), following
the receipt of all required regulatory and anti-trust approvals. The agreement to sell the subsidiary was entered into in the fourth quarter of
2019.
The principal products administered by ReAssure, formerly part of the Life Capital business segment, are long-term life and pension
products, permanent health insurance, critical illness products and retirement annuities.
Swiss Re received a cash payment of USD 1.6 billion, shares in Phoenix representing a 13.3% stake and is entitled to a seat on the Board of
Directors of Phoenix. ReAssure’s minority shareholder, MS&AD Insurance Group Holdings, Inc. received shares in Phoenix representing a
14.5% stake. Phoenix is not considered a related party of Swiss Re preceding or following the transaction.
The transaction resulted in a net loss of USD 245 million in the Life Capital business segment for the year 2020, which has been reflected in
the “Net realised investment gains/losses“ line in the income statement. In 2019, USD 139 million of the estimated loss was allocated
against the goodwill held by ReAssure in 2019, reducing its carrying amount to zero, and for the remainder of USD 91 million, an additional
liability was established within “Liabilities held for sale”. The Group reassessed goodwill based on the agreement to sell ReAssure to Phoenix.
For the year ended 31 December 2019 and for the period ended 22 July 2020, ReAssure reported a pre-tax income, including the loss on
sale, of USD 120 million and a pre-tax loss of USD 69 million, of which a net income of USD 32 million and a net loss of USD
were attributable to the Swiss Re Group, respectively.
million
113
The major classes of assets and liabilities held for sale as of 31 December 2019 and disposed on 22 July 2020 are listed below.
USD millions
Assets
Fixed income securities
Short-term and other investments
Investments for unit-linked and with-profit business
Cash and cash equivalents
Reinsurance recoverable
Deferred acquisition costs
Acquired present value of future profits
Other assets
Total Assets disposed
Liabilities
Unpaid claims and claim adjustment expenses
Liabilities for life and health policy benefits
Policyholder account balances
Accrued expenses and other liabilities
Total Liabilities disposed
2019
2020
20 450
2 240
43 173
2 729
3 134
657
680
1 376
74 439
497
22 624
41 459
4 006
68 586
19 797
2 287
37 885
4 171
2 031
595
468
1 752
68 986
512
21 300
36 177
4 430
62 419
Acquisition of Old Mutual Wealth Life Assurance Limited
On 31 December 2019, the Group through its ReAssure subsidiary acquired 100% of the UK closed book business of Quilter plc, consisting
of Old Mutual Wealth Life Assurance Limited and its subsidiary Old Mutual Wealth Pensions Trustees Limited, including around 300
employees. The business acquired provides pension schemes, protection products, investment solutions and savings offerings,
predominantly to the UK retail market.
The transaction was consistent with ReAssure’s strategy to grow its closed-book business and added approximately 0.2 million customer
policies, increasing ReAssure’s total policy count to 3.2 million. The acquisition was funded from ReAssure’s internal resources. The total
consideration paid was USD 591 million in cash. As the business was acquired by ReAssure, it was recognised as held for sale upon
acquisition and deconsolidated as part of the ReAssure assets and liabilities set out above on disposal.
258
Swiss Re | Financial Report 2020
11 Debt and contingent capital instruments
The Group enters into long- and short-term debt arrangements to obtain funds for general corporate use and specific transaction financing.
The Group defines short-term debt as debt having a maturity at the balance sheet date of not greater than one year and long-term debt as
having a maturity of greater than one year. For subordinated debt positions, maturity is defined as the first optional redemption date
(notwithstanding that optional redemption could be subject to regulatory consent). Interest expense is classified accordingly.
The Groupʼs debt as of 31 December was as follows:
USD millions
Senior operational debt
Contingent capital instruments classified as financial debt
Short-term debt
Senior financial debt
Senior operational debt
Subordinated financial debt
Subordinated operational debt
Contingent capital instruments classified as financial debt
Reclassified to liabilities held for sale
Long-term debt
Total carrying value
Total fair value
2019
185
185
2 809
244
5 993
1 918
494
–1 320
10 138
10 323
14 204
2020
153
153
2 919
95
6 147
1 927
496
11 584
11 737
14 749
billion (thereof
As of 31 December 2019 and 2020, operational debt, ie debt related to operational leverage, amounted to USD
USD 1.9 billion limited- or non-recourse) and USD
leverage is subject to asset/liability matching and is excluded from rating agency financial leverage calculations.
2.2
billion (thereof USD 1.9 billion limited- or non-recourse), respectively. Operational
2.2
Maturity of long-term debt
As of 31 December, long-term debt as reported above had the following maturities:
USD millions
Due in 2021
Due in 2022
Due in 2023
Due in 2024
Due in 2025
Due after 2025
Reclassified to liabilities held for sale
Total carrying value
2019
152
804
840
2 573
802
6 287
–1 320
10 138
2020
856
916
2 271
1 157
6 384
11 584
Swiss Re | Financial Report 2020
259
Financial statements
Senior long-term debt
Instrument
Senior notes
Senior notes
EMTN
Senior notes1
EMTN
Senior notes1
Senior notes
Payment undertaking agreements
Maturity
2022
2023
2024
2026
2027
2030
2042
Various
Total senior long-term debt as of 31 December 2020
Total senior long-term debt as of 31 December 2019
1 Assumed in the acquisition of GE Insurance Solutions.
Subordinated long-term debt
Issued in
2012
2016
2014
1996
2015
2000
2012
various
Currency
USD
EUR
CHF
USD
CHF
USD
USD
USD
Nominal in
millions
250
750
250
397
250
193
500
85
Interest rate
2.88%
1.38%
1.00%
7.00%
0.75%
7.75%
4.25%
various
Instrument
Subordinated fixed rate resettable callable loan note
Subordinated fixed-to-floating rate callable loan note
Subordinated fixed rate resettable callable loan note
Subordinated fixed rate reset step-up callable loan note
Subordinated fixed rate reset step-up callable loan note
Subordinated fixed rate reset step-up callable loan note
Subordinated private placement (amortising, limited recourse)
Perpetual subordinated fixed-to-floating rate callable loan note
Perpetual subordinated fixed spread callable note
Maturity
2035
2042
2044
2049
2050
2052
2057
Perpetual
Perpetual
Total subordinated long-term debt as of 31 December 2020
Total subordinated long-term debt as of 31 December 2019
Contingent capital instruments classified as long-term debt
Issued in
2020
2012
2014
2019
2019
2020
2007
2015
2019
Currency
SGD
EUR
USD
USD
EUR
EUR
GBP
EUR
USD
Nominal in
millions
350
500
500
1 000
750
800
1 409
750
1 000
Interest rate
3.13%
6.63%
4.50%
5.00%
2.53%
2.71%
6.16%
2.60%
4.25%
First call in
2025
2022
2024
2029
2030
2032
2025
2024
Book value
in USD millions
250
913
282
453
284
246
491
95
3 014
3 053
Book value
in USD millions
263
606
498
992
913
990
1 927
892
993
8 074
7 911
Maturity
Instrument
Senior unsecured exchangeable instrument with issuer stock
settlement
2024
Total contingent capital instruments classified as long-term debt as of 31 December 2020
Total contingent capital instruments classified as long-term debt as of 31 December 2019
2018
USD
500
3.25%
496
496
494
Issued in
Currency
Nominal in
millions
Interest rate
Book value
in USD millions
260
Swiss Re | Financial Report 2020
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:
USD millions
Senior financial debt
Senior operational debt
Subordinated financial debt1
Subordinated operational debt
Contingent capital instruments classified as financial debt
Total
2019
87
10
194
111
22
424
2020
88
7
263
112
17
487
1 The Group has revised the presentation of interest expense on subordinated financial debt to exclude the change in fair value of the hedged long-term debt positions in addition to the change in
fair value of the swap. The change has no impact on total interest expenses as shown in the income statement. Comparative information for 2019 has been amended accordingly.
The Group hedges the interest rate risk on some of its long-term debt positions. The net impact of the change in the fair value of the debt and
interest rate swap is reflected in the interest expense line in the income statement but not in the table above. For more details on the
hedging, please refer to Note 9 “Derivative financial instruments“.
Long-term debt issued in 2020
In June 2020, Swiss Re Finance (UK) Plc., a subsidiary of Swiss Re Ltd, issued 32-year guaranteed subordinated fixed rate reset step-up
callable notes, which are callable after 12 years. The notes have an aggregate face value of EUR 800 million, with a fixed coupon of 2.714%
until the first optional redemption date (4 June 2032). The notes are guaranteed on a subordinated basis by Swiss Re Ltd.
In July 2020, Swiss Re Finance (UK) Plc., a subsidiary of Swiss Re Ltd, issued 15-year guaranteed subordinated fixed rate reset callable
notes, which are callable after 5 years. The notes have an aggregate face value of SGD 350 million, with a fixed coupon of 3.125% until the
first optional redemption date (3 July 2025). The notes are guaranteed on a subordinated basis by Swiss Re Ltd.
Swiss Re | Financial Report 2020
261
Financial statements
12 Leases
As part of its normal business operations, the Group as a lessee enters into a number of lease agreements mainly for office space. Certain
lease agreements include rental payments adjusted periodically for inflation. Renewal or termination options that are reasonably certain of
exercise by the lessee are included in the lease term. The lease agreements do not contain any material residual value guarantees or material
restrictive covenants.
Lease liabilities and right-of-use assets
Lease liabilities and right-of-use assets for operating leases as of 31 December were as follows:
USD millions
Operating lease right-of-use assets
Operating lease liabilities
2019
485
531
2020
471
524
Operating lease right-of-use assets are included in “Other assets” and operating lease liabilities are included in “Accrued expenses and other
liabilities” on the balance sheet.
Maturity of lease liabilities
As of 31 December, the total undiscounted cash flows due to operating leases for the next five years and thereafter were as follows:
USD millions
Less than one year
Between one year and two years
Between two years and three years
Between three years and four years
Between four years and five years
After five years
Total undiscounted cash flows
Less imputed interest
Total lease liability
2019
89
77
69
61
55
239
590
–59
531
2020
90
80
73
63
51
232
589
–65
524
As of 31 December 2020, undiscounted sublease cash flows over the next eleven years were USD 39 million.
The discount rates used to determine the lease liability reflect the collateralised borrowing rates for the Group, where the underlying
collateral is assumed to be real estate.
The weighted average discount rate for operating leases as of 31 December 2019 and 2020 was 2.5% and 2.4%, respectively. The
weighted average remaining lease term for operating leases as of 31 December 2019 and 2020 was 8.9 years and 9.3 years, respectively.
Lease cost
The composition of total lease cost for all operating leases for the year ended 31 December was as follows:
USD millions
Fixed operating lease cost
Other lease cost1
Total operating lease cost
Less sublease income from operating leases
Total lease cost
1 “Other lease cost” includes variable lease cost.
2019
87
3
90
–9
81
2020
89
5
94
–10
84
Other information
For the year ended 31 December 2019 and 2020, cash paid for amounts included in the measurement of operating lease liabilities was
USD 91 million and USD 93 million, respectively. Right-of-use assets obtained in exchange for new operating lease liabilities in 2019 and
2020 were USD 68 million and USD 51 million, respectively.
262
Swiss Re | Financial Report 2020
13 Earnings per share
Earnings per share for the years ended 31 December were as follows:
USD millions (except share data)
Basic earnings per share
Net income/loss
Non-controlling interests
Net income/loss attributable to common shareholders
Weighted average common shares outstanding
Net income/loss per share in USD
Net income/loss per share in CHF¹
Effect of dilutive securities
Change in income available to common shares due to convertible debt
Change in average number of shares due to convertible debt
Change in average number of shares due to employee options
Diluted earnings per share
Net income assuming debt conversion and exercise of options
Weighted average common shares outstanding
Net income/loss per share in USD
Net income/loss per share in CHF¹
1 The translation from USD to CHF is shown for informational purposes only and has been calculated using the Group’s average exchange rates.
2019
2020
769
–42
727
295 660 059
2.46
2.46
–824
–54
–878
289 126 570
–3.04
–2.97
14
13 143 130
704 411
741
309 507 600
2.39
2.40
–3.04
–2.97
Dividends are declared in Swiss francs. During the years ended 31 December 2019 and 2020, the parent company of the Group
(Swiss
Ltd) paid dividends per share of CHF 5.60 and CHF 5.90, respectively.
Re
At the 2019 Annual General Meeting held on 17 April 2019, Swiss Re Ltd’s shareholders authorised a public share buyback programme
consisting of two tranches of each up to CHF 1 billion purchase value of Swiss Re Ltd’s own shares for cancellation purposes prior to the
2020 Annual General Meeting, the first tranche being conditional on obtaining all necessary legal and regulatory approvals and Board of
Directors approval and the second tranche being conditional on (in addition to obtaining all necessary legal and regulatory approvals and
Board of Directors approval) the 2019 development of the Group’s excess capital position and subject to the Group’s capital management
priorities.
The first tranche of the public share buyback programme approved by the 2019 Annual General Meeting was completed on
18 February 2020. The total number of shares repurchased amounted to 9.9 million, of which 8.2 million and 1.7 million shares were
2019 and between 1 January and 18 February 2020, respectively. As announced on 31 October 2019, the
repurchased as of 31
Board of Directors of Swiss Re Ltd decided not to launch the second tranche of the public share buyback programme approved by the 2019
Annual General Meeting.
December
On 17 April 2020, the 2020 Annual General Meeting resolved the cancellation of the 9.9 million repurchased shares by way of share capital
reduction. The share capital reduction was registered in the Commercial Register of the Canton of Zurich on 23 July 2020 and publication in
the Swiss Commercial Gazette occurred on 28 July 2020. Swiss Re Ltd’s shareholders authorised the SRL Board of Directors to repurchase
up to a maximum CHF 1 billion purchase value of Swiss Re Ltd’s own shares by way of a public share buyback programme for cancellation
purposes prior to the 2021 Annual General Meeting. At the post-AGM meeting, the Board of Directors decided that the share buyback
programme would not be launched.
Net of tax expense effects of debt conversion, totalling USD 14 million in 2020, and the potential impact of this debt conversion as well as
the issuance of employee options on the weighted average number of shares, of 14 303 549 shares, have not been included in the diluted
earnings per share calculation because the impact of such an inclusion was antidilutive.
Swiss Re | Financial Report 2020
263
Financial statements
14 Income taxes
The Group is generally subject to corporate income taxes based on the taxable net income in various jurisdictions in which it operates. The
components of the income tax expense were:
USD millions
Current taxes
Deferred taxes
Income tax expense/benefit
2019
496
–356
140
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:
USD millions
Income tax at the Swiss statutory tax rate of 21.0%
Increase (decrease) in the income tax charge resulting from:
Foreign income taxed at different rates
Impact of foreign exchange movements
Tax exempt income/dividends received deduction
Change in valuation allowance
Non-deductible expenses
Other income based taxes
Change in liability for unrecognised tax benefits including interest and penalties
Basis differences in subsidiaries
Intra-entity transfers
Other, net1
Total
1 Other, net includes tax return to tax provision adjustments from various jurisdictions.
2019
191
27
16
–142
–16
38
76
–42
1
20
–29
140
2020
398
–664
–266
2020
–229
–12
172
–181
–88
61
–36
–17
38
92
–66
–266
For the year ended 31 December 2020, the Group reported a tax benefit of USD 266 million on a pre-tax loss of USD 1 090 million,
compared to a charge of USD 140 million on a pre-tax income of USD 909 million for 2019. This translates into an effective tax rate in the
current and prior-year reporting periods of 24.4 % and 15.4%, respectively.
For the year ended 31 December 2020, the tax rate was largely driven by tax benefits from tax-exempt income and the release of valuation
allowance on deferred tax assets, partially offset by tax charges from intra-entity transfers and foreign currency translation differences
between statutory and US GAAP accounts. The tax rate in the year ended 31 December 2019 was largely driven by tax benefits from
effective settlement of tax audits and tax-exempt income, partially offset by tax charges from other income based taxes and non-deductible
expenses.
264
Swiss Re | Financial Report 2020
Deferred and other non-current taxes
The components of deferred and other non-current taxes were as follows:
USD millions
Deferred tax assets
Income accrued/deferred
Technical provisions
Unearned Premium Reserves
Pension provisions
Benefit on loss carryforwards
Currency translation adjustments
Unrealised gains in income
Investment valuation in income
Other
Reclassified to assets held for sale
Gross deferred tax asset
Valuation allowance
Unrecognised tax benefits offsetting benefits on loss carryforwards
Total deferred tax assets
Deferred tax liabilities
Investment valuation in income
Deferred acquisition costs
Technical provisions
Unrealised gains on investments
Foreign exchange provisions
Currency translation adjustments
Other
Reclassified to liabilities held for sale
Total deferred tax liabilities
Liability for unrecognised tax benefits including interest and penalties
Reclassified to liabilities held for sale
Total deferred and other non-current tax liabilities
2019
2020
238
519
318
303
2 446
316
651
269
774
–604
5 230
–505
1
4 726
–448
–1 036
–2 230
–1 443
–489
–156
–961
1 321
–5 442
–250
29
–5 663
312
756
322
295
2 982
522
232
182
869
6 472
–395
2
6 079
–240
–1 062
–1 818
–1 492
–790
–266
–883
–6 551
–189
–6 740
As of 31 December 2020, the aggregate amount of temporary differences associated with investment in subsidiaries, branches and
associates and interests in joint ventures, for which deferred tax liabilities have not been recognised amount to approximately
USD 3.4 billion. In the remote scenario in which these temporary differences were to reverse simultaneously, the resulting tax liabilities
would be very limited due to participation exemption rules.
As of 31 December 2020, the Group had USD 14 061 million net operating tax loss carryforwards, expiring as follows:
USD 6 million in 2021, USD 3 million in 2022, USD 7 million in 2023, USD 841 million in 2024, USD 7 495 million in 2025 and beyond,
and USD 5 709 million never expire.
As of 31 December 2020, the Group had capital loss carryforwards of USD 592 million that never expire.
For the year ended 31 December 2020, net operating tax losses of USD 1 596 million and net capital tax losses of USD 1 036 million were
utilised.
Income taxes paid in 2019 and 2020 were USD 611 million and USD 364 million, respectively.
Swiss Re | Financial Report 2020
265
Financial statements
Unrecognised tax benefits
A reconciliation of the opening and closing amount of gross unrecognised tax benefits (excluding interest and penalties) is as follows:
USD millions
Balance as of 1 January
Additions based on tax positions related to current year
Additions based on tax positions related to prior years
Reductions for tax positions of current year
Reductions for tax positions of prior years
Statute expiration
Settlements
Other (including foreign currency translation)
Reclassified to assets/liabilities held for sale
Balance as of 31 December
2019
257
38
8
–7
–83
–2
–16
–1
–24
170
2020
170
13
–6
16
–30
–5
–17
9
150
As of 31 December 2019 and 2020, the amount of gross unrecognised tax benefits within the tabular reconciliation that, if recognised,
would affect the effective tax rate were approximately USD 170 million and USD 150 million, respectively.
Interest and penalties related to unrecognised tax benefits are recorded in income tax expense. For the year ended 31 December 2019
such expenses were USD 5 million and for the year ended 31 December 2020 such benefits were USD 10 million. For the years ended
31 December 2019 and 2020, USD 55 million and USD 37 million, respectively, were accrued for the payment of interest (net of tax
benefits) and penalties. The accrued interest balance as of 31 December 2020 is included within the deferred and other non-current taxes
section reflected above and in the balance sheet.
The balance of gross unrecognised tax benefits as of 31 December 2020 presented in the table above excludes accrued interest and
penalties (USD 37 million).
During the year, certain tax positions and audits in the United Kingdom, Japan, Malaysia, United States and Switzerland were effectively
settled.
The Group continually evaluates proposed adjustments by taxing authorities. The Group believes that it is reasonably possible (more than
remote and less than likely) that the balance of unrecognised tax benefits could increase or decrease over the next 12 months due to
settlements or expiration of statutes. However, quantification of an estimated range cannot be made at this time.
The following table summarises jurisdictions and tax years that remain subject to examination:
Australia
Brazil
Canada
China
Colombia
Denmark
France
Germany
Hong Kong
India
Ireland
Israel
Italy
Japan
2014–2020
2014; 2016–2020
2012–2020
2010–2020
2016–2020
2015–2020
2018–2020
2017–2020
2014–2020
2004; 2010–2020
2016–2020
2016–2020
2016–2020
2013–2020
Korea
Luxembourg
Malaysia
Mexico
Netherlands
New Zealand
Nigeria
Singapore
Slovakia
South Africa
Spain
Switzerland
United Kingdom
United States
2013–2020
2016–2020
2016–2020
2016–2020
2015–2020
2014–2020
2016–2020
2014–2020
2016–2020
2015–2020
2016–2020
2016–2020
2008, 2013–2020
2017–2020
266
Swiss Re | Financial Report 2020
15 Benefit plans
Defined benefit pension plans and post-retirement benefits
The Group sponsors various funded defined benefit pension plans. Employer contributions to the plans are charged to income on a basis
which recognises the costs of pensions over the expected service lives of employees covered by the plans. The Group’s funding policy for
these plans is to contribute annually at a rate that is intended to maintain a level percentage of compensation for the employees covered. A
full valuation is prepared at least every three years.
The Group also provides certain healthcare and life insurance benefits for retired employees and their dependants. Employees become
eligible for these benefits when they become eligible for pension benefits.
The measurement date of these plans is 31 December for each year presented.
2019
USD millions
Benefit obligation as of 1 January
Service cost
Interest cost
Amendments
Actuarial gains/losses
Benefits paid
Employee contribution
Effect of settlement, curtailment and termination
Effect of foreign currency translation
Benefit obligation as of 31 December
Fair value of plan assets as of 1 January
Actual return on plan assets
Company contribution
Benefits paid
Employee contribution
Effect of settlement, curtailment and termination
Effect of foreign currency translation
Fair value of plan assets as of 31 December
Funded status
2020
USD millions
Benefit obligation as of 1 January
Service cost
Interest cost
Amendments
Actuarial gains/losses
Benefits paid
Employee contribution
Acquisitions/disposals/additions
Effect of settlement, curtailment and termination
Effect of foreign currency translation
Benefit obligation as of 31 December
Fair value of plan assets as of 1 January
Actual return on plan assets
Company contribution
Benefits paid
Employee contribution
Acquisitions/disposals/additions
Effect of settlement, curtailment and termination
Effect of foreign currency translation
Fair value of plan assets as of 31 December
Funded status
Swiss plan
3 832
99
29
Foreign plans
2 270
8
67
307
–59
32
–150
75
4 165
3 760
391
97
–59
32
–150
74
4 145
–20
297
–95
42
2 589
2 336
323
16
–95
53
2 633
44
Other benefits
319
3
7
–1
24
–16
4
340
0
16
–16
0
–340
Swiss plan
4 165
120
4
Foreign plans
2 589
8
47
Other benefits
340
4
5
226
–49
35
–161
410
4 750
4 145
220
104
–49
35
–161
408
4 702
–48
169
–84
–541
46
2 234
2 633
272
15
–84
–559
39
2 316
82
10
–17
18
360
0
17
–17
0
–360
Total
6 421
110
103
–1
628
–170
32
–150
121
7 094
6 096
714
129
–170
32
–150
127
6 778
–316
Total
7 094
132
56
0
405
–150
35
–541
–161
474
7 344
6 778
492
136
–150
35
–559
–161
447
7 018
–326
Swiss Re | Financial Report 2020
267
Financial statements
Amounts recognised in “Other assets” and “Accrued expenses and other liabilities” in the Group’s balance sheet as of 31 December were as
follows:
2019
USD millions
Non-current assets
Current liabilities
Non-current liabilities
Net amount recognised
2020
USD millions
Non-current assets
Current liabilities
Non-current liabilities
Net amount recognised
Swiss plan
–20
–20
Swiss plan
–48
–48
Foreign plans
242
–3
–195
44
Foreign plans
294
–3
–209
82
Other benefits
–17
–323
–340
Other benefits
–18
–342
–360
Amounts recognised in accumulated other comprehensive income, gross of tax, as of 31 December were as follows:
2019
USD millions
Net gain/loss
Prior service cost/credit
Total
2020
USD millions
Net gain/loss
Prior service cost/credit
Total
Swiss plan
818
–85
733
Swiss plan
832
–70
762
Foreign plans
441
2
443
Other benefits
13
–50
–37
Foreign plans
297
2
299
Other benefits
23
–35
–12
Components of net periodic benefit cost
The components of pension and post-retirement cost for the years ended 31 December were as follows:
Swiss plan
99
29
–93
Foreign plans
8
67
–88
Other benefits
3
7
35
–15
28
83
15
2
–2
–15
–7
Swiss plan
120
4
–102
Foreign plans
8
47
–61
Other benefits
4
5
66
–15
34
107
21
15
–15
–6
2019
USD millions
Service cost (net of participant contributions)
Interest cost
Expected return on assets
Amortisation of:
Net gain/loss
Prior service cost
Effect of settlement, curtailment and termination
Net periodic benefit cost
2020
USD millions
Service cost (net of participant contributions)
Interest cost
Expected return on assets
Amortisation of:
Net gain/loss
Prior service cost
Effect of settlement, curtailment and termination
Net periodic benefit cost
268
Swiss Re | Financial Report 2020
Total
242
–20
–538
–316
Total
294
–21
–599
–326
Total
1 272
–133
1 139
Total
1 152
–103
1 049
Total
110
103
–181
48
–30
28
78
Total
132
56
–163
87
–30
34
116
Other changes in plan assets and benefit obligations recognised in other comprehensive income for the years ended 31 December were as
follows:
2019
USD millions
Net gain/loss
Prior service cost/credit
Amortisation of:
Net gain/loss
Prior service cost
Effect of settlement, curtailment and termination
Exchange rate gain/loss recognised during the year
Total recognised in other comprehensive income, gross of tax
Total recognised in net periodic benefit cost and other comprehensive income,
gross of tax
2020
USD millions
Net gain/loss
Prior service cost/credit
Amortisation of:
Net gain/loss
Prior service cost
Effect of settlement, curtailment and termination
Impact of sale of ReAssure
Exchange rate gain/loss recognised during the year
Total recognised in other comprehensive income, gross of tax
Total recognised in net periodic benefit cost and other comprehensive income,
gross of tax
Swiss plan
10
Foreign plans
55
Other benefits
24
–1
–35
15
–26
–36
47
–15
3
43
45
2
15
40
33
Swiss plan
108
Foreign plans
–42
Other benefits
10
–66
15
–28
29
–21
–93
12
–144
136
–129
15
25
19
Total
89
–1
–48
30
–26
3
47
125
Total
76
0
–87
30
–28
–93
12
–90
26
The accumulated benefit obligation (the current value of accrued benefits excluding future salary increases) for pension benefits was
USD 6 687 million and USD 6 921 million as of 31 December 2019 and 2020, respectively.
Pension plans with a projected benefit obligation and an accumulated benefit obligation in excess of plan assets as of 31 December were as
follows:
USD millions
Projected benefit obligation
Fair value of plan assets
USD millions
Accumulated benefit obligation
Fair value of plan assets
2019
4 793
4 575
2019
619
430
2020
5 455
5 195
2020
5 413
5 195
Swiss Re | Financial Report 2020
269
Financial statements
Principal actuarial assumptions
Assumptions used to determine obligations at the end
of the year
Discount rate
Rate of compensation increase
Interest crediting rate
Assumptions used to determine net periodic pension
costs for the year ended
Discount rate
Expected long-term return on plan assets
Rate of compensation increase
Interest crediting rate
Assumed medical trend rates at year end
Medical trend – initial rate
Medical trend – ultimate rate
Year that the rate reaches
the ultimate trend rate
Swiss plan
Foreign plans weighted average
Other benefits weighted average
2019
2020
2019
2020
2019
2020
0.1%
1.8%
1.5%
0.8%
2.5%
1.8%
1.5%
0.0%
1.8%
1.8%
0.1%
2.5%
1.8%
1.8%
2.1%
2.9%
1.6%
2.6%
1.5%
2.1%
1.1%
2.1%
3.0%
3.7%
3.0%
2.1%
2.9%
2.9%
2.2%
1.5%
2.1%
2.1%
4.4%
3.6%
4.3%
3.6%
2023
2024
The expected long-term rates of return on plan assets are based on long-term expected inflation, interest rates, risk premiums and targeted
asset category allocations. The estimates take into consideration historical asset category returns.
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 2019 and
2020 was as follows:
Asset category
Equity securities
Debt securities
Real estate
Other
Total
Swiss plan allocation
Foreign plans allocation
2019
2020
Target allocation
2019
2020
Target allocation
26%
41%
18%
15%
100%
26%
37%
18%
19%
100%
23%
46%
23%
8%
100%
8%
76%
0%
16%
100%
5%
75%
0%
20%
100%
6%
86%
0%
8%
100%
Actual asset allocation is determined by a variety of current economic and market conditions and considers specific asset class risks.
Equity securities include Swiss Re shares of USD 3 million (0.04% of total plan assets) and USD 2 million (0.03% of total plan assets) as of
31 December 2019 and 2020, respectively.
The Groupʼs pension plan investment strategy is to match the maturity profiles of the assets and liabilities in order to reduce the future
volatility of pension expense and funding status of the plans. This involves balancing investment portfolios between equity and fixed income
securities. Tactical allocation decisions that reflect this strategy are made on a quarterly basis.
270
Swiss Re | Financial Report 2020
Assets measured at fair value
For a description of the different fair value levels and valuation techniques see Note 8 “Fair value disclosures”.
Certain items reported as pension plan assets at fair value in the following table are not within the scope of Note 8, namely two positions:
real estate and an insurance contract.
Real estate positions classified as level 1 and level 2 are exchange-traded real estate funds where a market valuation is readily available.
Real estate reported on level 3 is property owned by the pension funds. These positions are accounted for at the capitalised income value.
The capitalisation based on sustainable recoverable earnings is conducted at interest rates that are determined individually for each property,
based on the property’s location, age and condition. If properties are intended for disposal, the estimated selling costs and taxes are
recognised in provisions. Sales gains or losses are allocated to income from real estate when the contract is concluded.
The fair value of the insurance contract is based on the fair value of the assets backing the contract.
As of 31 December, the fair values of pension plan assets were as follows:
2019
USD millions
Assets
Fixed income securities:
Government debt securities
Corporate debt securities
RMBS/CMBS/ABS
Equity securities
Real estate
Other assets
Cash and cash equivalents
Total plan assets
2020
USD millions
Assets
Fixed income securities:
Government debt securities
Corporate debt securities
RMBS/CMBS/ABS
Equity securities
Real estate
Other assets
Cash and cash equivalents
Total plan assets
Fair value
Quoted prices in
active markets
for identical
assets (level 1)
Significant other
observable
inputs (level 2)
Significant
unobservable
inputs (level 3)
Investments
measured
at net asset value as
practical expedient
50
1 082
4
198
1 334
1 576
2 011
13
205
174
11
756
3 979
767
698
698
Fair value
Quoted prices in
active markets
for identical
assets (level 1)
Significant other
observable
inputs (level 2)
Significant
unobservable
inputs (level 3)
Investments
measured
at net asset value as
practical expedient
60
1 209
4
119
1 392
1 521
1 891
9
122
56
11
861
1 155
3 599
872
1 155
Total
1 626
2 022
13
1 287
760
872
198
6 778
Total
1 581
1 902
9
1 331
865
1 211
119
7 018
Swiss Re | Financial Report 2020
271
Financial statements
Assets measured at fair value using significant unobservable inputs (level 3)
For the years ended 31 December, the reconciliation of fair value of pension plan assets using significant unobservable inputs were as
follows:
2019
USD millions
Balance as of 1 January
Realised/unrealised gains/losses:
Relating to assets still held at the reporting date
Relating to assets sold during the period
Purchases, issuances and settlements
Transfers in and/or out of level 3
Impact of foreign exchange movements
Closing balance as of 31 December
2020
USD millions
Balance as of 1 January
Realised/unrealised gains/losses:
Relating to assets still held at the reporting date
Relating to assets sold during the period
Purchases, issuances and settlements
Transfers in and/or out of level 3
Impact of foreign exchange movements
Closing balance as of 31 December
Real estate
721
Other assets
10
20
2
13
756
1
11
Real estate
756
Other assets
11
19
12
74
861
–1
1
11
Total
731
21
0
2
0
13
767
Total
767
18
0
12
0
75
872
Expected contributions and estimated future benefit payments
The employer contributions expected to be made in 2021 to the defined benefit pension plans are USD 127 million and to the post-
retirement benefit plan are USD 18 million.
As of 31 December 2020, the projected benefit payments, which reflect expected future service, not adjusted for transfers in and for
employees’ voluntary contributions, are as follows:
USD millions
2021
2022
2023
2024
2025
Years 2026–2030
Swiss plan
240
233
226
228
222
1 095
Foreign plans
83
87
89
91
93
486
Other benefits
18
18
18
19
19
93
Total
341
338
333
338
334
1 674
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 2019 and 2020 was
USD 86 million and USD 84 million, respectively.
272
Swiss Re | Financial Report 2020
16 Share-based payments
As of 31 December 2019 and 2020, the Group had the share-based compensation plans as described below.
The total compensation cost for share-based compensation plans recognised in net income was USD 30 million and USD 44 million in 2019
and 2020, respectively. The related tax benefit was USD 6 million and USD 9 million, respectively.
Restricted shares
The Group granted 51 036 and 21 709 restricted shares to selected employees in 2019 and 2020, respectively. In addition,
37 593 and 47 984 shares were delivered to members of the Board of Directors during 2019 and 2020, respectively, which are generally
not subject to forfeiture risk.
A summary of the movements in shares relating to outstanding awards granted under the restricted share plans for the year ended
31 December 2020 is as follows:
Non-vested at 1 January
Granted
Forfeited
Vested
Outstanding as of 31 December
1 Equal to the market price of the shares at grant.
Weighted average
grant date fair value in CHF1
91
79
92
90
87
Number of shares
238 125
69 693
–3 212
–71 103
233 503
Swiss Re | Financial Report 2020
273
Financial statements
Leadership Performance Plan
The Leadership Performance Plan (LPP) awards are expected to be settled in shares, and the requisite service as well as the maximum
contractual term are three years. For LPP 2017, LPP 2018, LPP 2019 and LPP 2020 awards, an additional two-year holding period applies
for all members of the Group EC and other key executives. At grant date, LPP 2017, LPP 2018 and LPP 2019 awards were split equally into
two underlying components of Performance Share Units (PSUs). The ROE PSUs are measured against a return on equity performance
condition and will vest within a range of 0–100%. The TSR PSUs are based on relative total shareholder return, measured against a pre-
defined group of peers and will vest within a range of 0–200%. At grant date, LPP 2020 was split equally into three underlying components
of PSUs. The ENW PSUs, being the third component, are measured against ENW growth performance and will vest within a range of
0-100%. The fair values of all components are determined separately, based on stochastic models.
The fair value assumptions in the grant valuations include market estimates for dividends and the risk-free rate based on the average of the
10-year US Treasury bond taken monthly over each year in the performance period, resulting in risk-free rates ranging between 1.5% and
3.1% for all outstanding LPP awards.
For the year ended 31 December 2020, the outstanding units were as follows:
ROE PSU
Non-vested at 1 January
Granted
Forfeited
Vested
Outstanding as of 31 December
Grant date fair value in CHF
TSR PSU
Non-vested at 1 January
Granted
Forfeited
Vested
Outstanding as of 31 December
Grant date fair value in CHF
ENW PSU
Non-vested at 1 January
Granted
Forfeited
Vested
Outstanding as of 31 December
Grant date fair value in CHF
LPP 2017
446 794
LPP 2018
317 069
LPP 2019
314 151
–13 864
–17 121
LPP 2020
215 458
–7 532
303 205
70.18
297 030
78.22
207 926
78.81
–10 337
–436 457
47.41
609 090
256 939
302 567
–14 091
–594 999
34.78
–11 243
–16 498
352 827
–12 334
245 696
86.62
286 069
81.25
340 493
48.12
199 497
–6 974
192 523
85.17
Unrecognised compensation cost
As of 31 December 2020, the total unrecognised compensation cost (net of forfeitures) related to non-vested, share-based compensation
awards was USD 52 million and the weighted average period over which that cost is expected to be recognised is 1.9 years.
The number of shares authorised for the Group’s share-based payments to employees was 3 660 142 and 3 004 148 as of
31 December 2019 and 2020, respectively. The Group’s policy is to ensure that sufficient treasury shares are available at all times to settle
future share-based compensation plans.
Global Share Participation Plan
Swiss Re has a Global Share Participation Plan, which is a share purchase plan available to employees of companies within the Group. Swiss
Re makes a financial contribution to participants in the plan, by matching the commitment that they make during the plan cycle with
additional Swiss Re shares.
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 2019 and 2020, Swiss Re contributed USD 12 million and
USD 11 million to the plans and authorised 169 772 and 178 571 shares as of 31 December 2019 and 2020, respectively.
274
Swiss Re | Financial Report 2020
17 Compensation, participations and loans of members of
governing bodies
The disclosure requirements under Swiss Law in respect of compensation and loans to the members of the Board of Directors and of the
Group Executive Committee, as well as closely related persons, are detailed in the Compensation Report on pages 140–146 of the Financial
Report of the Swiss Re Group.
The disclosure requirements under Swiss Law in respect of participations of members of the Board of Directors and the Group Executive
Committee, as well as closely related persons, are detailed on pages 304–305 of the Annual Report of Swiss Re Ltd.
Swiss Re | Financial Report 2020
275
Financial statements
18 Related parties
The Group defines the following as related parties to the Group: subsidiaries of Swiss Re Ltd, entities in which the Group has
significant influence, pension plans, members of the Board of Directors (BoD) and the Group Executive Committee (EC) and their
close family members, and entities which are directly and indirectly controlled by members of governing bodies of the Group and
their close family members.
As part of the consolidation process, transactions between Swiss Re Ltd and subsidiaries are eliminated in consolidation and are
not disclosed in the notes.
Contributions made to defined benefit pension plans and post-retirement benefit plans are disclosed in Note 15 ‘‘Benefit plans’’.
Plan assets of the defined benefit pension plans include Swiss Re common stock of USD 3 million (0.04% of total plan assets) and
USD 2 million (0.03% of total plan assets) as of 31 December 2019 and 2020, respectively.
The total number of shares, options and related instruments held by members of the BoD and the Group EC and persons closely related to,
amounts to less than 1% of the shares issued by Swiss Re Ltd. None of the members of the BoD and the Group EC has any significant
business connection with Swiss Re Ltd or any of its Group companies. The Board member Susan L. Wagner is also a board member of
BlackRock, Inc. BlackRock, Inc. acts as external asset manager for the Group. The Board member Joachim Oechslin is a senior advisor to
Credit Suisse Group AG. Swiss Re has a banking relationship with Credit Suisse. It is also a credit provider, and a named dealer under
Swiss Re‘s Debt Issuance Programme.
Share in earnings and dividends received from equity-accounted investees for the years ended 31 December, were as follows:
USD millions
Share in earnings of equity-accounted investees
Dividends received from equity-accounted investees
2019
387
104
2020
–51
124
276
Swiss Re | Financial Report 2020
19 Commitments and contingent liabilities
As a participant in limited and other investment partnerships, the Group commits itself to making available certain amounts of investment
funding, callable by the partnerships for periods of up to ten years. The total commitments remaining uncalled as of 31 December 2020
were USD 1 781 million.
The Group has entered into various real estate construction contracts. The commitments under the contracts amount to USD 127 million
over the next six 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.
Legal proceedings
In the normal course of business operations, the Group is involved in various claims, lawsuits and regulatory matters. In the opinion of
management, the resolution of these matters is not expected to have a material adverse effect on the Group’s business, consolidated
financial position, results of operations or cash flows.
Swiss Re | Financial Report 2020
277
Financial statements
20 Significant subsidiaries and equity investees
Share capital (millions)
Affiliation in % as of
31.12.2020
Method of
consolidation
EUR
GBP
GBP
GBP
CHF
CHF
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
CHF
GBP
GBP
USD
GBP
GBP
45
100
0
3
0
12
5
6
0
105
350
0
13 772
182
0
0
0
100
0
0
1
0
0
10
0
0
0
34
0
1
60
0
2
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
Europe
Germany
Swiss Re Germany GmbH, Munich
Jersey
Swiss Re Finance Holdings (Jersey) Limited, St Helier
Swiss Re Finance (Jersey) Limited, St Helier
Swiss Re Finance Midco (Jersey) Limited, St Helier
Liechtenstein
Elips Life AG, Vaduz
Elips Versicherungen AG, Vaduz
Luxembourg
iptiQ Life S.A., Luxembourg
Swiss Pillar Investments Europe SARL, Luxembourg
Swiss Re Europe Holdings S.A., Luxembourg
Swiss Re Europe S.A., Luxembourg
Swiss Re Finance (Luxembourg) S.A., Luxembourg
Swiss Re Funds (Lux) I, Senningerberg1
Swiss Re International SE, Luxembourg
Netherlands
elipsLife EMEA Holding B.V., Hoofddorp
Swiss Re Life Capital EMEA Holding B.V., Hoofddorp
Switzerland
Swiss Pillar Investments Ltd, Zurich
Swiss Re Corporate Solutions Ltd, Zurich
Swiss Re Direct Investments Company Ltd, Zurich
Swiss Re Investments Company Ltd, Zurich
Swiss Re Investments Ltd, Zurich
Swiss Re Life Capital Ltd, Zurich
Swiss Re Life Capital Management Ltd, Zurich
Swiss Re Nexus Reinsurance Company Ltd, Zurich
Swiss Re Management Ltd, Adliswil
Swiss Re Principal Investments Company Ltd, Zurich
Swiss Re Reinsurance Holding Company Ltd, Zurich
Swiss Reinsurance Company Ltd, Zurich
United Kingdom
IptiQ Holdings Limited, London
Swiss Re Finance (UK) Plc., London
Swiss Re Capital Markets Limited, London
Swiss Re Life Capital Regions Holding Ltd, London
Swiss Re Services Limited, London
1 Net asset value instead of share capital.
278
Swiss Re | Financial Report 2020
Americas and Caribbean
Brazil
Swiss Re Brasil Resseguros S.A., Sao Paulo
Swiss Re Corporate Solutions Brasil Seguros S.A., Sao Paulo
Cayman Islands
FWD Group Ltd, Grand Cayman
SRE HL PE 1 LP, George Town
SREH HL PE 1 LP, George Town
SRZ HL PE 1 LP, George Town
Colombia
Compañía Aseguradora de Fianzas S.A. Confianza, Bogota
United States
First Specialty Insurance Corporation, Jefferson City
iptiQ Americas Inc., Wilmington
Lumico Life Insurance Company, Jefferson City
North American Capacity Insurance Company, Manchester
North American Elite Insurance Company, Manchester
North American Specialty Insurance Company, Manchester
Pecan Re Inc., Colchester
Pillar RE Holdings LLC, Wilmington
SR Corporate Solutions America Holding Corporation, Wilmington
SRE HL PE 1 (Master) LP, Wilmington
SREH HL PE 1 (Master) LP, Wilmington
SRZ HL PE 1 (Master) LP, Wilmington
Swiss Re America Holding Corporation, Wilmington
Swiss Re Capital Markets Corporation, New York
Swiss Re Corporate Solutions Global Markets Inc., New York
Swiss Re Financial Markets Corporation, Wilmington
Swiss Re Financial Products Corporation, Wilmington
Swiss Re Life & Health America Holding Company, Wilmington
Swiss Re Life & Health America Inc., Jefferson City
Swiss Re Life Capital Americas Holding Inc., Wilmington
Swiss Re Management (US) Corporation, Wilmington
Swiss Re Property & Casualty America Inc., Kansas City
Swiss Re Risk Solutions Corporation, Wilmington
Swiss Re Treasury (US) Corporation, Wilmington
Swiss Reinsurance America Corporation, Armonk
Washington Insurance Corporation, Jefferson City
Westport Insurance Corporation, Jefferson City
Wing Re Inc., Jefferson City
Wing Re II Inc., Jefferson City
Share capital (millions)
Affiliation in % as of
31.12.2020
Method of
consolidation
BRL
BRL
USD
EUR
EUR
USD
295
318
1
156
213
190
100
60
15
100
100
100
COP
234 203
51
USD
USD
USD
USD
USD
USD
USD
USD
USD
EUR
EUR
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
5
0
0
4
4
5
5
0
0
155
213
190
0
0
0
0
0
0
4
0
0
1
0
0
10
4
6
0
0
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
f
f
e
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
Swiss Re | Financial Report 2020
279
Financial statements
Africa
South Africa
Swiss Re Africa Limited, Cape Town
Asia-Pacific
Australia
Swiss Re Australia Ltd, Sydney
Swiss Re Life & Health Australia Limited, Sydney
China
Swiss Re Corporate Solutions Insurance China Ltd, Shanghai
Singapore
Swiss Re Asia Holding Pte. Ltd., Singapore
Swiss Re Asia Pte. Ltd., Singapore
Swiss Re Principal Investments Company Asia Pte. Ltd., Singapore
Share capital (millions)
Affiliation in % as of
31.12.2020
Method of
consolidation
ZAR
2
100
AUD
AUD
845
980
100
100
CNY
569
100
USD
USD
USD
0
3 002
0
100
100
100
f
f
f
f
f
f
f
Significance is defined by the total assets of the subsidiaries and the carrying value of the equity investees in relation to the total assets of the
Group. The threshold is set at 0.05%.
Method of consolidation
f
e
full
equity
280
Swiss Re | Financial Report 2020
21 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.
When analysing whether the entity is a VIE, the Group mainly assesses if (1) the equity is sufficient to finance the entity’s activities without
additional subordinated financial support, (2) the equity holders have the right to make significant decisions affecting the entity’s operations
and (3) the holders of the voting rights substantively participate in the gains and losses of the entity.
When one of these criteria is not met, the entity is considered a VIE and is assessed for consolidation under the VIE section of the
Consolidation Topic.
The party that has a controlling financial interest is called a primary beneficiary and consolidates the VIE. The party is deemed to have a
controlling financial interest if it has both:
the power to direct the activities of the VIE that most significantly impact the entity’s economic performance; and
the obligation to absorb the entity’s losses that could potentially be significant to the VIE or the right to receive benefits from the entity that
could potentially be significant to the VIE.
For all its variable interests in VIEs, the Group assesses whether it has a controlling financial interest in these entities and, thus, is the primary
beneficiary. The Group identifies the activities that most significantly impact the entity’s performance and determines whether the Group has
the power to direct those activities. In conducting the analysis, the Group considers the purpose, the design and the risks that the entity was
designed to create and pass through to its variable interest holders. Additionally, the Group assesses if it has the obligation to absorb losses
or if it has the right to receive benefits of the VIE that could potentially be significant to the entity. If both criteria are met, the Group has a
controlling financial interest in the VIE and consolidates the entity.
The Group monitors changes to the facts and circumstances of the existing involvement with legal entities to determine whether they require
reconsideration of the entity’s designation as a VIE or voting interest entity. For VIEs, the Group regularly reassesses the primary beneficiary
determination.
Insurance-linked securitisations
The insurance-linked securitisations transfer pre-existing insurance risk to investors through the issuance of insurance-linked securities. In
insurance-linked securitisations, the securitisation vehicle assumes the insurance risk from a sponsor through insurance or derivative
contracts. The securitisation vehicle generally retains the issuance proceeds as collateral, which consists of investment-grade securities. The
Group does not have potentially significant variable interest in these vehicles and therefore is not a primary beneficiary.
Typically, the variable interests held by the Group arise through ownership of insurance-linked securities, in which case the Group’s
maximum loss equals the principal amount of the securities held by the Group.
Life and health funding vehicles
The Group participates in certain structured transactions that retrocede longevity and mortality risks to captive reinsurers with an aim to
provide regulatory capital credit to a transaction sponsor through the creation of funding notes by a separate funding vehicle which is
generally considered a VIE. The Group’s participation in these transactions is generally limited to providing contingent funding support via a
financial contract with a funding vehicle, which represents a potentially significant variable interest in the funding vehicle. The Group does
not have power to direct activities of the funding vehicles and therefore is not a primary beneficiary of the funding vehicles in these
transactions. The Group’s maximum exposure in these transactions equals either the total contract notional or outstanding balance of the
funding notes issued by the vehicle, depending on the specific contractual arrangements.
Swaps in trusts
The Group provides interest rate and foreign exchange risk hedges to certain asset securitisation trusts which qualify as VIEs. As the Group’s
involvement is limited to interest rate and foreign exchange derivatives, it does not have the power to direct any activities of the trusts and
therefore does not qualify as primary beneficiary of any of these trusts. These activities are in run-off.
Debt financing vehicles
The Group consolidates a debt-financing vehicle created to collateralise reinsurance coverage provided by the Group. The Group manages
the asset portfolio in the vehicle and absorbs the variability of the investment return of the vehicle’s portfolio, thereby satisfying both criteria
for a controlling financial interest: power over activities most significant to the vehicle’s economic performance and significant economic
interest.
Swiss Re | Financial Report 2020
281
Financial statements
Investment vehicles
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.
The Group is a passive investor in structured securitisation vehicles issuing residential and commercial mortgage-backed securities (RMBS
and CMBS, respectively) and other asset-backed securities (ABS). The Group’s investments in RMBS, CMBS and other ABS are passive in
nature and do not obligate the Group to provide any financial or other support to the issuer entities. By design, RMBS, CMBS and ABS
securitisation entities are not adequately capitalised and therefore considered VIEs. The Group is not the primary beneficiary, because it does
not have power to direct most significant activities. These investments are accounted for as available-for-sale as described in the investment
note and not included in the tables on the following pages.
The Group consolidates an investment vehicle, because the Group holds the entire interest in the entity and makes investment decisions
related to the entity. The investment vehicle is a VIE because it is structured as an umbrella company comprised of multiple sub-funds. The
majority of the investments held in this vehicle are accounted for as available-for-sale and are disclosed in the investment note and not
included in the tables on the following pages.
Investment vehicles for unit-linked business
Additionally, the Group invests on behalf of the policyholders as a passive investor in a variety of investment funds across various
jurisdictions. By design, many of these funds meet a VIE definition. While the Group may have a potentially significant variable interest in
some of these entities due to its share of the fund’s total net assets, in most cases it does not have power over the fund’s investment
decisions or unilateral kick-out rights relative to the decision maker.
The Group is not exposed to losses in the aforementioned investment vehicles, as the investment risk is borne by the policyholder.
Senior commercial mortgage and infrastructure loans
The Group also invests in structured commercial mortgage and infrastructure loans, which are held for investment.
The commercial mortgage loans are made to non-recourse special purpose entities collateralised with commercial real estate. The entities
are adequately capitalised and generally structured as voting interest entities. Occasionally, the borrower entities can be structured as limited
partnerships where the limited partners do not have kick-out or participating rights, which results in the VIE designation.
The infrastructure loans are made to non-recourse special purpose entities collateralised with infrastructure project assets. Some borrower
entities may have insufficient equity investment at risk, which results in the VIE designation.
The Group does not have power over the activities most significant to the aforementioned borrower entities designated as VIEs and therefore
does not consolidate them.
The Group’s maximum exposure to loss from its investments equals the loan outstanding amount.
Other
The Group consolidates a vehicle providing reinsurance to its members, because it serves as a decision maker over the entity’s investment
and underwriting activities, as well as provides retrocession for the majority of the vehicle’s insurance risk and receives performance-based
fees. Additionally, the Group is obligated to provide the vehicle with loans in case of a deficit. The vehicle is a VIE, primarily because its total
equity investment at risk is insufficient and the members lack decision-making rights.
The Group did not provide financial or other support to any VIEs during 2020 that it was not previously contractually required to provide.
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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:
USD millions
Fixed income securities available-for-sale
Investment real estate
Short-term investments
Investments for unit-linked and with-profit business
Cash and cash equivalents
Accrued investment income
Premiums and other receivables
Funds held by ceding companies
Deferred acquisition costs
Deferred tax assets
Other assets
Reclassified to assets held for sale
Total assets
Unpaid claims and claim adjustment expenses
Unearned premiums
Funds held under reinsurance treaties
Reinsurance balances payable
Deferred and other non-current tax liabilities
Accrued expenses and other liabilities
Long-term debt
Reclassified to liabilities held for sale
Total liabilities
2019
3 423
143
260
654
49
27
31
1
3
182
15
–812
3 976
55
12
4
21
152
129
1 918
–114
2 177
2020
3 807
59
20
30
35
1
5
191
14
4 162
59
16
4
22
166
18
1 926
2 211
The assets of the consolidated VIEs may only be used to settle obligations of these VIEs and to settle any investors’ ownership liquidation
requests. There is no recourse to the Group for the consolidated VIEs’ liabilities. The assets of the consolidated VIEs are not available to the
Group’s creditors.
Swiss Re | Financial Report 2020
283
Financial statements
Non-consolidated VIEs
The following table shows the total assets and liabilities on the Group’s balance sheet related to VIEs in which the Group held a variable
interest but was not the primary beneficiary as of 31 December:
USD millions
Fixed income securities available-for-sale
Equity securities at fair value through earnings
Policy loans, mortgages and other loans
Other invested assets
Investments for unit-linked and with-profit business
Funds held by ceding companies
Reclassified to assets held for sale
Total assets
Unpaid claims and claim adjustment expenses
Accrued expenses and other liabilities
Total liabilities
2019
1 187
113
1 735
2 160
17 131
–17 590
4 736
43
43
2020
1 084
100
1 518
2 359
145
25
5 231
19
52
71
The following table shows the Group’s assets, liabilities and maximum exposure to loss related to VIEs in which the Group held a variable
interest but was not the primary beneficiary as of 31 December:
USD millions
Insurance-linked securitisations
Life and health funding vehicles
Swaps in trusts
Investment vehicles
Investment vehicles for unit-linked business
Senior commercial mortgage and infrastructure loans
Other
Reclassified to held for sale
Total
2019
Maximum
exposure to
loss1
627
2 300
–2
2 174
2 318
–607
–2
Total
liabilities
43
43
Total assets
598
22
83
2 174
17 131
2 318
–17 590
4 736
2020
Maximum
exposure to
loss1
381
2 377
–2
2 435
2 047
–2
Total
liabilities
52
19
71
Total assets
545
20
14
2 435
145
2 047
25
5 231
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.
The assets and liabilities for the swaps in trusts represent the positive and negative fair values of the derivatives the Group has entered into
with the trusts.
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285
Report of the statutory auditor
to the General Meeting of Swiss Re Ltd
Zurich
Report of the statutory auditor on the consolidated financial statements
As statutory auditor, we have audited the accompanying consolidated financial statements of Swiss Re Ltd and its
subsidiaries (the ‘Group’), which comprise the income statement and statement of comprehensive income for the year
ended 31 December 2020, the balance sheet as at 31 December 2020 and the statement of shareholders’ equity and
the statement of cash flows for the year then ended, and notes to the Group financial statements (pages 182 to 284).
Board of Directors’ responsibility
The Board of Directors is responsible for the preparation of the consolidated financial statements in accordance with
accounting principles generally accepted in the United States of America (US GAAP) and the requirements of Swiss law.
This responsibility includes designing, implementing and maintaining an internal control system relevant to the
preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making
accounting estimates that are reasonable in the circumstances.
Auditor’s responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted
our audit in accordance with Swiss law, Swiss Auditing Standards and auditing standards generally accepted in the
United States of America (US GAAS). Those standards require that we plan and perform the audit to obtain reasonable
assurance whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated
financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks
of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers the internal control system relevant to the Group’s preparation of the consolidated
financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the Group’s internal control system. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made, as
well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements of the Group for the year ended 31 December 2020 present fairly,
in all material respects, the financial position, the results of operations and the cash flows in accordance with accounting
principles generally accepted in the United States of America (US GAAP) and comply with Swiss law.
Other Matter
Accounting principles generally accepted in the United States of America (US GAAP) requires that the supplementary
information based on the requirements of ASU 2015-09, Disclosures about Short-Duration Contracts, on pages 223 to
231 be presented to supplement the consolidated financial statements. Such information, although not part of the
consolidated financial statements, is required by the Financial Accounting Standards Board, which considers it an
essential part of financial reporting for placing the consolidated financial statements in an appropriate operational,
economic, or historical context. We have applied certain limited procedures to the required supplementary information in
accordance with auditing standards generally accepted in the United States of America (US GAAS), which consisted of
inquiries of the Group about the methods of preparing the information and comparing the information for consistency
with the Group’s responses to our inquiries, the consolidated financial statements and other knowledge we obtained
during our audit of the consolidated financial statements. We do not express an opinion or provide any assurance on the
supplementary information because the limited procedures do not provide us with sufficient evidence to express an
opinion or provide any assurance.
PricewaterhouseCoopers Ltd, Birchstrasse 160, Postfach, CH-8050 Zurich, Switzerland
Telefon: +41 58 792 44 00, Telefax: +41 58 792 44 10, www.pwc.ch
PricewaterhouseCoopers Ltd is a member of the global PricewaterhouseCoopers network of firms, each of which is a separate and independent legal entity.
286
Swiss Re | Financial Report 2020
Report on key audit matters based on the circular 1/2015 of the Federal Audit
Oversight Authority
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
consolidated financial statements of the current period. These matters were addressed in the context of our audit of the
consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters.
Unobservable or interpolated inputs used for the valuation of certain level 2 and 3 investments
Key audit matter
How our audit addressed the 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 equity investments
Derivatives
Insurance-related financial products
We assessed and tested the design and operating
effectiveness of selected relevant controls around the
valuation models for level 2 and 3 investments, including
the Group’s independent price verification process. We
also tested the Group’s data integrity and change
management controls relating to the valuation models.
In relation to the matters set out opposite, our substantive
testing procedures included the following:
Challenging the Group’s methodology and
assumptions, in particular, the yield curves,
discounted cash flows, perpetual growth rates and
liquidity premiums used in the valuation models;
comparing these assumptions against appropriate
benchmarks; and investigating significant differences.
Engaging our own valuation specialists to perform
independent valuations of selected level 2 and 3
investments.
Based on the work performed, we determined the Group’s
conclusions with regard to the valuation of these
investments to be reasonable.
2 Swiss Re Ltd | Report of the statutory auditor to the General Meeting
Swiss Re | Financial Report 2020
287
Valuation of Property & Casualty (‘P&C’) loss reserves
Key audit matter
How our audit addressed the key audit matter
The valuation of P&C loss reserves within the unpaid
claims and claim adjustment expenses financial statement
line item involves a high degree of subjectivity and
complexity. Reserves for losses and loss adjustment
expenses represent estimates of future payments of
reported and unreported claims for losses and related
expenses at a given date.
The Group uses a range of actuarial methodologies and
methods to estimate these reserves. P&C loss reserves
require significant judgment relating to certain factors and
assumptions. Among the most significant reserving
assumptions are the a-priori loss ratios, which typically
drive the estimates of P&C loss reserves for the most
recent contract years. Other key factors and assumptions
include but are not limited to changes in exposure and
business mix as well as inflation trends, claim emergence
trends, and legal or regulatory decisions.
In particular, loss reserves for ‘long tail’ lines of business
(for example, Liability, US Asbestos and Environmental,
Motor and Workers’ Compensation portfolios) generally
require more judgment to estimate. This is due to the
protracted period over which claims may be reported
and/or settled as well as the fact that claim settlements are
often less frequent but of higher magnitude.
Moreover, losses from natural catastrophe, significant man-
made and COVID-19 pandemic events cannot be modelled
using traditional actuarial methodologies or available
proprietary models, which increases the degree of
judgment needed in establishing reserves for these events.
The ongoing nature of the COVID-19 pandemic and
additional complexity because of unresolved contract
coverage issues, notably on property lines, required
particular focus and judgment by management.
We assessed and tested the design and operating
effectiveness of selected relevant controls relating to the
application of the actuarial methodology, data collection
and analysis, as well as the processes for determining the
assumptions used by the Group in the valuation of P&C
loss reserves.
In relation to the matters set out opposite, our substantive
testing procedures included involving our PwC internal
actuarial specialists, as appropriate, to perform the
following:
Testing the completeness and accuracy of underlying
data utilised by the Group’s actuaries in estimating
P&C loss reserves; this includes applying IT audit
techniques to validate the claims triangles used by
management to develop reserving estimates.
Performing independent projections of selected
portfolios. For these portfolios, we compared our
calculations of projected reserves with those of the
Group taking into account the available corroborating
and contrary evidence and challenging the Group’s
assumptions as appropriate.
Testing the reasonableness of the methodology and
assumptions for further selected portfolios by
comparing the methodologies and assumptions
adopted by the Group with recognised actuarial
practices and by applying our industry knowledge and
experience.
Assessing the process and related judgments of the
Group in relation to natural catastrophes and other
large losses, including using our industry knowledge
to assess the reasonableness of market loss
estimates and other significant assumptions.
Challenging the process followed and related
judgments of the Group in relation to COVID-19
pandemic losses to assess the reasonableness of loss
estimates.
Where there was significant estimation uncertainty,
performing sensitivity tests to determine the impact of
selected key assumptions.
Evaluating the appropriateness of any significant
adjustments made by the Group to P&C loss reserve
estimates.
Based on the work performed, we determined the Group’s
conclusions with regard to the valuation of P&C loss
reserves to be reasonable.
3 Swiss Re Ltd | Report of the statutory auditor to the General Meeting
288
Swiss Re | Financial Report 2020
Valuation of actuarially determined liabilities for Life & Health (‘L&H’) policy benefits
Key audit matter
How our audit addressed the key audit matter
The Group’s valuation of actuarially determined liabilities
for L&H policy benefits involves complex judgments about
future events affecting the business.
Actuarial assumptions selected by the Group, including
mortality, morbidity, longevity, and persistency, may result
in material impacts on the valuation of liabilities for L&H
policy benefits. The methodology and methods used can
also have a material impact on the valuation of actuarially
determined liabilities for L&H policy benefits. In addition,
the impact of the COVID-19 pandemic required additional
management judgment, particularly over shorter-term
mortality assumptions.
The valuation of actuarially determined liabilities for L&H
policy benefits depends on the use of complex models. The
Group continues to migrate actuarial data and models from
legacy systems and/or spreadsheets to new actuarial
modelling systems. At the same time, the Group is
validating models to ensure that new models are fit for use.
Moving from one modelling platform to another is a
complex and time-consuming process, frequently taking
several years. Any resulting adjustments to the liabilities for
L&H policy benefits need to be assessed in terms of
appropriateness and classified as a change in estimate or
as an out-of-period adjustment.
Furthermore, on a regular basis, the Group enters into
large and/or structured transactions which often have
material or complex financial reporting and reserving
consequences. The reserving for such transactions is
subject to increased risk of error due to the non-routine
nature of transactions and the judgmental nature of
reserving.
We assessed and tested the design and operating
effectiveness of selected relevant controls relating to the
application of actuarial methodology, data collection and
analysis, as well as the processes for determining the
assumptions used by the Group in the valuation of
actuarially determined liabilities for L&H policy benefits.
In relation to the matters set out opposite, our substantive
testing procedures included involving our PwC internal
actuarial specialists, as appropriate, to perform the
following, which are applicable for the valuation of both
standard and large and/or structured transactions:
Testing the completeness and accuracy of the
underlying data by vouching against the source
documentation.
Testing the migration of actuarial data from legacy
systems and/or spreadsheets to the new actuarial
systems for completeness and accuracy.
Performing independent model validation procedures,
including detailed testing of models, independent
recalculations and back testing.
Testing the Group’s methodology and methods,
focusing on changes to L&H actuarial methodology
and methods during the year, by applying our industry
knowledge and experience to check whether the
methodology and methods are consistent with
recognised actuarial practices and reporting
requirements.
Testing the reasonableness of L&H assumptions by
applying our industry knowledge and experience to
check whether the assumptions are consistent with
recognised actuarial practices and industry trends.
Challenging the process followed and related
judgments of the Group in relation to COVID-19
pandemic losses to assess the reasonableness of loss
estimates.
Evaluating the appropriateness of the recognition,
accounting, valuation, and disclosures for large and/or
structured transactions.
Based on the work performed, we determined the Group’s
conclusions with regard to the valuation of actuarially
determined liabilities for L&H policy benefits to be
reasonable.
4 Swiss Re Ltd | Report of the statutory auditor to the General Meeting
Swiss Re | Financial Report 2020
289
Valuation of deferred tax assets and completeness and valuation of uncertain tax positions
Key audit matter
How our audit addressed the key audit matter
The Group operates in various countries and is subject to
income taxes in those jurisdictions. The assessment of the
valuation of deferred tax assets, resulting from net
operating losses and temporary differences, and provisions
for uncertain tax positions is based on complex calculations
and depends on sensitive and judgmental assumptions
made by the Group. These include, amongst others, future
profitability and local fiscal regulations and developments.
Changes in those estimates may have a material impact
(through income tax expense) on the Group’s results.
We assessed and tested the design and operating
effectiveness of selected relevant controls related to the
valuation of deferred tax assets and selected relevant
controls in place to determine the completeness of the
uncertain tax items and the Group’s assessment of the
items for recognition and valuation.
In relation to the matters set out opposite, our substantive
testing procedures included the following:
Involving our own tax specialists to critically review the
Group’s ‘more likely than not’ tax assessments and to
evaluate the Group’s judgments and estimates of the
probabilities and the amounts.
Assessing the feasibility of the Group’s tax planning
measures, including the assessment of forecasted
taxable income and any relevant tax rulings that
impact the recoverability of deferred tax assets
resulting from net operating losses.
Assessing how the Group considered new information
or changes in tax law or case law and assessing the
Group’s judgment of how these impact the Group’s
position or measurement of the required provision.
Examining tax audit documentation to validate the
appropriateness of releases of uncertain tax
provisions.
Evaluating the appropriateness of the Group’s
assessment of completeness of uncertain tax
positions.
Examining material movements within uncertain tax
positions in each jurisdiction.
Based on the work performed, we determined the Group’s
assessments of the valuation of deferred tax assets and
the completeness and valuation of uncertain tax positions
to be reasonable.
Report on other legal requirements
We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and
independence (article 728 CO and article 11 AOA) and that there are no circumstances incompatible with our
independence.
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 consolidated financial statements according to the
instructions of the Board of Directors.
We recommend that the consolidated financial statements submitted to you be approved.
PricewaterhouseCoopers Ltd
Roy Clark
Audit expert
Auditor in charge
Zurich, 17 March 2021
Jasmine Chang
5 Swiss Re Ltd | Report of the statutory auditor to the General Meeting
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Swiss Re | Financial Report 2020
291
Financial statements
Group financial years 2011–2020
USD millions
Income statement
Revenues
Premiums earned
Fee income
Net investment income
Net realised investment gains/losses
Other revenues
Total revenues
Expenses
Claims and claim adjustment expenses
Life and health benefits
Return credited to policyholders
Acquisition costs
Other operating costs and expenses
Total expenses
Income/loss before income tax expense
Income tax expense/benefit
Net income/loss before attribution of non-controlling interests
Income/loss attributable to non-controlling interests
Net income/loss after attribution of non-controlling interests
Interest on contingent capital instruments, net of tax
Net income/loss attributable to common shareholders
Balance sheet
Assets
Investments
Other assets
Assets held for sale
Total assets
Liabilities
Unpaid claims and claim adjustment expenses
Liabilities for life and health policy benefits
Unearned premiums
Other liabilities
Long-term debt
Liabilities held for sale
Total liabilities
Shareholders’ equity
Non-controlling interests
Total equity
Earnings per share in USD
Earnings per share in CHF
2011
2012¹
2013
21 300
876
5 469
388
50
28 083
–8 810
–8 414
–61
–4 021
–3 902
–25 208
2 875
–77
2 798
–172
2 626
2 626
24 661
785
5 302
2 688
188
33 624
–7 763
–8 878
–2 959
–4 548
–3 953
–28 101
5 523
–1 125
4 398
–141
4 257
–56
4 201
28 276
542
4 735
3 325
24
36 902
–9 655
–9 581
–3 678
–4 895
–4 268
–32 077
4 825
–312
4 513
–2
4 511
–67
4 444
162 224
63 675
152 812
68 691
150 075
63 445
225 899
221 503
213 520
64 878
39 044
8 299
65 850
16 541
63 670
36 117
9 384
62 020
16 286
61 484
36 033
10 334
57 970
14 722
194 612
187 477
180 543
29 590
34 002
32 952
1 697
31 287
7.68
6.79
24
34 026
11.85
11.13
25
32 977
12.97
12.04
1 The Group updated its balance sheet presentation of deferred tax assets and liabilities. Deferred tax assets and liabilities are presented on a gross basis as per the first quarter 2013. The
comparative period has been adjusted accordingly and is consistent with the relevant income tax disclosure in the notes to the financial statements in the prior year.
292
Swiss Re | Financial Report 2020
2014
2015
2016
2017
2018
2019
2020
30 756
506
4 992
1 059
34
37 347
–10 577
–10 611
–1 541
–6 515
–3 876
–33 120
4 227
–658
3 569
3 569
–69
3 500
29 751
463
4 236
1 220
44
35 714
–9 848
–9 080
–1 166
–6 419
–3 882
–30 395
5 319
–651
4 668
–3
4 665
–68
4 597
32 691
540
4 740
5 787
28
43 786
–12 564
–10 859
–5 099
–6 928
–3 964
–39 414
4 372
–749
3 623
3
3 626
–68
3 558
33 119
586
4 702
4 048
32
42 487
–16 730
–11 083
–3 298
–6 977
–3 874
–41 962
525
-132
393
5
398
–67
331
33 875
586
5 077
–2 530
39
37 047
–14 855
–11 769
1 033
–6 919
-3 987
–36 497
550
–69
481
–19
462
–41
421
143 987
60 474
137 810
58 325
155 016
60 049
161 897
60 629
147 302
60 268
204 461
196 135
215 065
222 526
207 570
57 954
33 605
10 576
53 670
12 615
55 518
30 131
10 869
55 033
10 978
57 355
41 176
11 629
59 402
9 787
66 795
42 561
11 769
56 959
10 148
67 446
39 593
11 721
51 581
8 502
168 420
162 529
179 349
188 232
178 843
37 974
620
5 175
5 515
30
49 314
–18 683
–13 087
–4 633
–7 834
–4 168
–48 405
909
–140
769
–42
727
40 321
449
3 503
–972
37
43 338
–19 838
–13 929
1 760
–8 236
–4 185
–44 428
–1 090
266
–824
–54
–878
727
–878
103 746
60 382
74 439
238 567
72 373
19 836
13 365
23 232
10 138
68 586
207 530
120 693
61 929
182 622
81 258
22 456
13 309
26 757
11 584
155 364
35 930
33 517
35 634
34 124
27 930
29 251
27 135
111
36 041
10.23
9.33
89
33 606
13.44
12.93
82
35 716
10.72
10.55
170
34 294
1.03
1.02
797
28 727
1.37
1.34
1 786
31 037
2.46
2.46
123
27 258
–3.04
–2.97
Swiss Re | Financial Report 2020
293
Financial statements
Annual Report
Swiss Re Ltd
Swiss Re Ltd (the Company), domiciled in Zurich, Switzerland, is the ultimate holding company of the Swiss Re Group (the Group).
Its principal activity is the holding of investments in Swiss Re Group companies.
Income statement
Net income for 2020 amounted to CHF 1 573 million (2019: CHF 932 million).
Revenues were mainly driven by cash dividends from subsidiaries and affiliated companies of CHF 3 658 million, trademark licence fees
of CHF 416 million, interest on loans with subsidiaries and affiliated companies of CHF 75 million, and commitment fees of CHF 67 million.
Expenses were mainly driven by valuation adjustments to the carrying amount of investments in subsidiaries and affiliated companies
totalling CHF 1 982 million. These valuation adjustments were recognised to reflect the substance reduction caused by dividend payments
funded by proceeds from sale of significant investments. Expenses were also driven by administrative expenses of CHF 310 million.
Assets
Total assets increased from CHF 24 247 million as of 31 December 2019 to CHF 25 104 million as of 31 December 2020.
Current assets increased by CHF 1 786 million to CHF 4 713 million as of 31 December 2020, mainly driven by an increase in receivables
from subsidiaries and affiliated companies, partially offset by a decrease in loans to subsidiaries and affiliated companies.
Non-current assets decreased by CHF 929 million to CHF 20 391 million as of 31 December 2020, mainly driven by a decrease in
investments in subsidiaries and affiliated companies partially offset by an increase in loans to subsidiaries and affiliated companies.
Liabilities
Total liabilities increased from CHF 1 447 million as of 31 December 2019 to CHF 2 619 million as of 31 December 2020.
Short-term liabilities decreased by CHF 428 million to CHF 502 million as of 31 December 2020, mainly driven by a decrease in loans
from subsidiaries and affiliated companies.
Long-term liabilities increased by CHF 1 600 million to CHF 2 117 million as of 31 December 2020, mainly due to loan agreements with
Swiss Re Finance (UK) plc.
Shareholders’ equity
Shareholders’ equity decreased from CHF 22 800 million as of 31 December 2019 to CHF 22 485 million as of 31 December 2020,
mainly due to dividends to shareholders of CHF 1 705 million and share buyback programme of CHF 184 million partially offset by net
income of CHF 1 573 million.
Share capital decreased by CHF 1 million to CHF 32 million as of 31 December 2020 and legal profit reserves decreased by
CHF 998 million to CHF 4 314 million as of 31 December 2020 resulting from the cancellation of own shares.
Own shares (directly held by the Company) decreased by CHF 817 million to CHF 1 073 million as of 31 December 2020 due to share buyback
programme of CHF 184 million offset by the cancellation of own shares of CHF 1 000 million and net sale of own shares of CHF 1 million.
Coronavirus
The global spread of the novel coronavirus and the disease it causes (“COVID-19”), and the actions taken to slow the spread of the
pandemic, have had an adverse impact on communities, social and business interactions, economic activity and economies across the
globe. After significant contractions in 2020, the global economy is expected to experience a protracted and uneven recovery in 2021.
As the COVID-19 crisis continues, the ultimate toll of the pandemic in terms of lives lost, societal dislocations, business activity, economic
growth, broader costs to society and industry losses remains highly uncertain. The Swiss Re Group will continue to monitor pandemic-
related developments and their impact on its operations and its investments.
294
Swiss Re | Financial Report 2020
Income statement
Swiss Re Ltd
For the years ended 31 December
CHF millions
Revenues
Investment income
Trademark licence fees
Other revenues
Total revenues
Expenses
Administrative expenses
Investment expenses
Other expenses
Total expenses
Income before income tax expense
Income tax expense
Net income
The accompanying notes are an integral part of Swiss Re Ltd’s financial statements.
Notes
2019
2020
2
3
2
2 629
407
41
3 077
–143
–1 893
–105
–2 141
936
–4
932
3 832
416
9
4 257
–310
–2 072
–299
–2 681
1 576
–3
1 573
Swiss Re | Financial Report 2020
295
Financial statements
Balance sheet
Swiss Re Ltd
As of 31 December
Assets
CHF millions
Current assets
Cash and cash equivalents
Short-term investments
Receivables from subsidiaries and affiliated companies
Other receivables and accrued income
Loans to subsidiaries and affiliated companies
Total current assets
Non-current assets
Loans to subsidiaries and affiliated companies
Investments in subsidiaries and affiliated companies
Total non-current assets
Total assets
The accompanying notes are an integral part of Swiss Re Ltd’s financial statements.
Notes
2019
2020
4
2
5
0
48
703
16
2 160
2 927
0
55
2 615
26
2 017
4 713
911
20 409
21 320
1 241
19 150
20 391
24 247
25 104
296
Swiss Re | Financial Report 2020
Liabilities and shareholders’ equity
CHF millions
Liabilities
Short-term liabilities
Payables to subsidiaries and affiliated companies
Other liabilities and accrued expenses
Loans from subsidiaries and affiliated companies
Total short-term liabilities
Long-term liabilities
Provisions
Debt
Total long-term liabilities
Total liabilities
Shareholders’ equity
Share capital
Legal reserves from capital contributions
Other legal capital reserves
Legal capital reserves
Legal profit reserves
Reserve for own shares (indirectly held by subsidiaries)
Voluntary profit reserves
Retained earnings brought forward
Net income for the financial year
Own shares (directly held by the Company)
Total shareholders’ equity
Notes
2019
2020
149
152
629
930
33
484
517
264
128
110
502
–
2 117
2 117
1 447
2 619
33
192
0
192
5 312
17
18 200
4
932
–1 890
22 800
32
192
0
192
4 314
16
17 431
–
1 573
–1 073
22 485
7
8
10
9
Total liabilities and shareholders’ equity
24 247
25 104
The accompanying notes are an integral part of Swiss Re Ltd’s financial statements.
Swiss Re | Financial Report 2020
297
Financial statements
Notes
Swiss Re Ltd
1 Significant accounting principles
Basis of presentation
The financial statements are prepared in accordance with Swiss Law.
Time period
The financial year 2020 comprises the accounting period from 1 January 2020 to 31 December 2020.
Use of estimates in the preparation of annual accounts
The preparation of the annual accounts requires management to make estimates and assumptions that affect the reported amounts of
assets, liabilities, revenues and expenses as well as the related disclosures. Actual results could differ from these estimates.
Foreign currency translation
Assets and liabilities denominated in foreign currencies are converted into Swiss francs at year-end exchange rates, with the exception of
participations, which are reported in Swiss francs at historical exchange rates. Income and expenses in foreign currencies are converted
into Swiss francs using the exchange rate prevailing at the date of transaction. Until the end of the financial year 2019, income and
expenses were converted into Swiss francs using the average exchange rates for the reporting year.
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.
Short-term investments
Short-term investments contain investments with an original maturity between three months and one year. Such investments are carried
at cost, less necessary and legally permissible depreciation.
Receivables from subsidiaries and affiliated companies/ Other receivables
These assets are generally carried at nominal value. Value adjustments are recorded where the expected recovery value is lower than the
nominal value.
Receivables from subsidiaries and affiliated companies/ Other receivables also include derivative financial instruments. Derivative financial
instruments which have an observable market price and are traded in an active and liquid market are recorded at market value.
Accrued income
Accrued income consists of both other expenditures incurred during the financial year but relating to a subsequent financial year, and
revenues relating to the current financial year but receivable in a subsequent financial year.
Loans to subsidiaries and affiliated companies
Loans to subsidiaries and affiliated companies are carried at nominal value. Value adjustments are recorded where the expected recovery
value is lower than the nominal value.
Investments in subsidiaries and affiliated companies
These assets are carried at cost less necessary value adjustments to reflect other than temporary decreases in the value in use. As of
year-end 2020 a group valuation approach is applied for the Company’s investments in subsidiaries and affiliated companies, when the
facts and circumstances indicate that the investments are to be seen as an economical unit.
Payables to subsidiaries and affiliated companies/ Other liabilities
These liabilities are generally carried at nominal value.
Payables to subsidiaries and affiliated companies/ Other liabilities also include derivative financial instruments. Derivative financial
instruments which have an observable market price and are traded in an active and liquid market are recorded at market value.
Accrued expenses
Accrued expenses consist of both income received before the balance sheet date but relating to a subsequent financial year, and
charges relating to the current financial year but payable in a subsequent financial year.
298
Swiss Re | Financial Report 2020
Loans from subsidiaries and affiliated companies
Loans from subsidiaries and affiliated companies are carried at nominal value.
Provisions
Provisions contain provision for currency fluctuation and provision for taxation.
As of 2020, the provision for currency fluctuation comprises the net effect of foreign exchange gains and losses arising from the
revaluation of the balance sheet at year-end. Until the end of the financial year 2019, the provision for currency fluctuation comprised the
net effect of foreign exchange gains and losses arising from the yearly revaluation of the opening balance sheet and the translation
adjustment of the income statement from average to closing exchange rates at year-end. These net impacts are recognised in the income
statement over a period of up to three years. Where the provision for currency fluctuation is insufficient to absorb net foreign exchange
losses for the financial year, the provision for currency fluctuation is reduced to zero and the excess foreign exchange loss is recognised in
the income statement.
The provision for taxation represents an estimate of taxes payable in respect of the reporting year.
Debt
Debt is held at redemption value.
Other legal capital reserves
Other legal capital reserves reflect gains and losses from sale of own shares (directly held by the Company).
Reserve for own shares (indirectly held by subsidiaries)
Reserve for own shares is accounted for at the book value of those shares in the statutory financial statements of the respective subsidiary.
Own shares (directly held by the Company)
Own shares are carried at cost and presented as a deduction in shareholders’ equity.
Foreign exchange transaction gains and losses
Foreign exchange gains and losses arising from foreign exchange transactions are recognised in the income statement and reported in
other expenses or other revenues, respectively.
Dividends from subsidiaries and affiliated companies
Dividends from subsidiaries and affiliated companies are recognised as investment income in the year in which they are declared.
Trademark licence fees
Trademark licence fees are charged by the Company to its direct and indirect subsidiaries and their branches that benefit from the use
of the Swiss Re brand.
Capital and indirect taxes
Capital and indirect taxes related to the financial year are included in other expenses. Value-added taxes are included in the respective
expense lines in the income statement.
Income tax expense
As of 1 January 2020, due to the abolishment of the holding company exemption on a cantonal/ communal level as part of the Swiss Tax
Reform, Swiss Re Ltd is subject to ordinary income taxation at cantonal/ communal and federal level. In 2019, as a holding company
incorporated in Switzerland, Swiss Re Ltd was exempt from income taxation at cantonal/ communal level.
Dividends from subsidiaries and affiliated companies are indirectly exempt from income taxation (participation relief).
Subsequent events
Subsequent events for the current reporting period have been evaluated up to 17 March 2021. This is the date on which the financial
statements are available to be issued.
Swiss Re | Financial Report 2020
299
Financial statements
Notes Swiss Re Ltd
2 Investment income and expenses
CHF millions
Cash dividends from subsidiaries and affiliated companies
Realised gains on sale of investments
Valuation adjustments on derivative financial instruments 1
Income from short-term investments
Income from loans to subsidiaries and affiliated companies
Investment management income
Other interest revenues
Investment income
CHF millions
Realised losses on sale of investments
Valuation adjustments on derivative financial instruments 1
Valuation adjustments on investments in subsidiaries and affiliated companies
Investment management expenses
Other interest expenses
Investment expenses
2019
2 230
155
35
1
131
0
77
2 629
2019
157
14
1 702
1
19
1 893
2020
3 658
5
24
0
75
0
70
3 832
2020
13
32
1 982
0
45
2 072
1 The derivative financial instruments are included in Receivables from subsidiaries and affiliated companies and Payables to subsidiaries and affiliated companies.
As of 31 December 2020, the Company’s assets for derivative financial instruments carried at market value amounted to CHF 155 millions
(2019: CHF 101 millions).
3 Administrative expenses and personnel information
Swiss Re Ltd receives management and other services from Swiss Re Management Ltd and Swiss Reinsurance Company Ltd and has no
employees of its own.
4 Securities lending
As of 31 December 2020, securities of CHF 53.0 million (2019: CHF 47.1 million) were lent to Group companies under securities lending
agreements. As of 31 December 2020 and 2019, there were no securities lent to third parties.
300
Swiss Re | Financial Report 2020
5 Investments in subsidiaries and affiliated companies
As of 31 December 2020 and 2019, Swiss Re Ltd held directly the following investments in subsidiaries and affiliated companies:
As of 31 December 2020
Swiss Reinsurance Company Ltd
Swiss Re Corporate Solutions Ltd
Swiss Re Life Capital Ltd1
Swiss Re Principal Investments Company Ltd
Swiss Re Management Ltd
Swiss Re Insurance-Linked Investment Management AG2
Swiss Re Finance (UK) plc3
As of 31 December 2019
Swiss Reinsurance Company Ltd
Swiss Re Corporate Solutions Ltd
Swiss Re Life Capital Ltd
Swiss Re Investments Holding Company Ltd
Swiss Re Principal Investments Company Ltd
Swiss Re Management Ltd
Swiss Re Specialised Investments Holdings (UK) Ltd
Domicile
Zurich
Zurich
Zurich
Zurich
Zurich
Zurich
London
Domicile
Zurich
Zurich
Zurich
Zurich
Zurich
Zurich
London
Currency
CHF
CHF
CHF
CHF
CHF
CHF
GBP
Currency
CHF
CHF
CHF
CHF
CHF
CHF
GBP
Share capital (millions)
34.4
100.0
0.1
0.1
0.1
1.5
1.0
Share capital (millions)
34.4
100.0
0.1
0.1
0.1
0.1
1.0
Affiliation in %
100
100
100
100
100
100
100
Affiliation in %
100
100
100
100
100
100
100
Voting interest in %
100
100
100
100
100
100
100
Voting interest in %
100
100
100
100
100
100
100
1 On 22 July 2020, the Group completed the sale of ReAssure Group Plc a subsidiary of Swiss Re Life Capital Ltd, to Phoenix Group Holdings Plc. Detailed information is included in Note 10
“Acquisitions and disposals” on page 258 in the notes to the Group’s 2020 financial statements.
2 New direct subsidiary, registered 16 October 2020.
3 Swiss Re Specialised Investments Holdings (UK) Ltd was renamed to Swiss Re Finance (UK) plc.
Further disclosures in respect of investments in significant indirect subsidiaries and affiliated companies are detailed in Note 20
“Significant subsidiaries and equity investees” on pages 278 to 280 in the notes to the Group’s 2020 financial statements, where the
voting interests are equal to the affiliations disclosed.
6 Commitments
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 2019 and 2020, no notes have been issued under the facilities.
An overview of the subordinated debt facilities is provided in the following table:
Instrument
Dated subordinated fixed-to-floating rate callable notes facility
Dated subordinated fixed rate callable notes facility
Dated subordinated fixed-to-floating rate callable notes facility
Perpetual subordinated fixed spread callable notes facility
Issued in
2015
2016
2016
2017
1 Until first optional redemption date.
2 First optional redemption date in 2022 and every five years thereafter.
Currency
USD
USD
USD
USD
Nominal value
in millions
700
400
800
750
Commitment fee
(paid on undrawn
amount)
3.53%
3.92%
3.67%
2.77%
Interest rate
on issued
notes
5.75%1
6.05%1
5.625%1
4.625%1
Facility first
termination
date
2025
2031
2027
2022
Issued notes’
scheduled
maturity date
2050
2056
2052
Perpetual2
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 2019 and 2020, the facilities were undrawn.
An overview of the subordinated funding facilities is provided in the following table:
Instrument
Subordinated funding facility Swiss Reinsurance Company Ltd
Subordinated funding facility Swiss Reinsurance Company Ltd
Subordinated funding facility Swiss Reinsurance Company Ltd
Borrower
Issued in Currency
USD
USD
USD
2015
2016
2016
Nominal value
in millions
700
400
800
Total commitment fee
calculated and paid on
nominal value
5.80%
6.10%
5.68%
Reimbursement
fee paid on
undrawn amount
2.22%
2.13%
1.95%
Net commitment
fee paid on
undrawn amount Maturity
3.58% 2030
3.97% 2036
2032
3.73%
Swiss Re | Financial Report 2020
301
Financial statements
Notes Swiss Re Ltd
7 Debt
As of 31 December 2020, Swiss Re Ltd had outstanding debt of CHF 442 million (2019: CHF 484 million).
Instrument
Convertible debt
Issued in
2018
Currency
USD
Nominal
in millions
500
Interest rate
3.25%
Maturity
2024
Book value
CHF millions
442
8 Change in shareholders’ equity
CHF millions
Shareholders’ equity 1.1.2020
Allocations relating to the dividend paid
Dividend for the financial year 2019
Net income for the financial year
Share buyback programme 20191
Share cancellation1
Other movements in own shares
Shareholders’ equity 31.12.2020
CHF millions
Shareholders’ equity 1.1.2019
Allocations relating to the dividend paid
Dividend for the financial year 2018
Net income for the financial year
Share buyback programme 2018
Share cancellation
Share buyback programme 2019
Other movements in own shares
Shareholders’ equity 31.12.2019
Share capital
33
Legal capital
reserves2
192
Legal profit
reserves
5 312
Reserves for
own shares
17
–1
32
–999
1
4 314
192
–1
16
Share capital
34
Legal capital
reserves
192
Legal profit
reserves
6 294
Reserves for
own shares
18
Voluntary
profit reserves
18 200
936
–1 705
Retained
earnings
brought
forward
4
–4
Net income
for the
financial year
932
–932
1 573
17 431
0
1 573
Voluntary
profit reserves
16 797
3 077
–1 674
Retained
earnings
brought
forward
4
Net income
for the
financial year
3 077
–3 077
932
–1
–16
–983
33
16
192
1
5 312
–1
17
18 200
4
932
Total
shareholders’
equity
22 800
0
–1 705
1 573
–184
0
1
22 485
Total
shareholders’
equity
24 470
0
–1 674
932
–111
0
–816
–1
22 800
Own shares
–1 890
–184
1 000
1
–1 073
Own shares
–1 946
–111
1 000
–816
–17
–1 890
1 At the 155th Annual General Meeting held on 17 April 2019, the Group’s shareholders authorised the Board of Directors to repurchase up to a maximum CHF 1 billion purchase value of the
Group’s own shares prior to the 2020 Annual General Meeting through a public share buyback programme for cancellation purposes. The buyback programme was completed on
18 February 2020. The total number of shares repurchased amounted to 9.9 million, of which 8.2 million and 1.7 million shares were repurchased by 31 December 2019 and between
1 January and 18 February 2020, respectively. On 17 April 2020, the 156th Annual General Meeting resolved the cancellation of the repurchased 9.9 million shares by way of share capital
reduction. The shares were cancelled on 28 July 2020, after completion of the procedure in respect of a share capital reduction as set forth in Article 732 et seqq of the Swiss Code of
Obligations.
2 Under the new provision applicable as of 1 January 2020 (Article 4a paragraph 4 VstG), legal reserves from capital contributions need to be used for share buyback programmes. With the
share buyback programme completed on 18 February 2020, the CHF 0.7 million legal reserves that have been previously confirmed by the Swiss Federal Tax Administration were fully used.
Consequently, the Board of Directors proposes at the Annual General Meeting to reclassify the full amount of legal reserves from capital contributions into voluntary profit reserves.
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Swiss Re | Financial Report 2020
9 Own shares (directly and indirectly held by the Company)
Number of own shares
Own shares held by subsidiaries
Own shares held by Swiss Re Ltd directly
Opening balance own shares
Purchase of own shares1
Sale of own shares 2
Share buyback programme (154th AGM 2018)3
Share buyback programme (155th AGM 2019)4
Cancellation of shares bought back
Own shares as of 31 December
1 Purchased at average price of CHF 74.56 (2019: CHF 98.75).
2 Sold at average price of CHF 73.99 (2019: CHF 98.03).
3 Purchased at average price of CHF 94.98.
4 Purchased at average price of CHF 110.56 (2019: CHF 98.99).
10 Major shareholders
2019
197 194
38 378 130
38 575 324
1 111 638
–1 125 758
1 164 319
8 239 000
–11 214 761
36 749 762
2020
169 772
36 579 990
36 749 762
484 557
–474 412
–
1 668 398
–9 907 398
28 520 907
As of 31 December 2020, there was one shareholder with a participation exceeding the 3% threshold of Swiss Re Ltd’s share capital:
Shareholder
BlackRock, Inc
Number of shares
15 995 446
% of voting rights and share capital1
5.04
Creation of the obligation to notify
31 December 2020
1 The percentage of voting rights is calculated at the date the obligation was created and notified.
Further information in respect of major shareholders are detailed in “Group structure and shareholders” on page 84 of the Group’s 2020
financial report.
In addition, Swiss Re Ltd held, as of 31 December 2020, directly and indirectly 28 520 907 (2019: 36 749 762) own shares, representing
8.98% (2019: 11.22%) of voting rights and share capital. Swiss Re Ltd cannot exercise the voting rights of own shares held.
11 Release of undisclosed reserves
In 2020 and 2019, no net undisclosed reserves were released.
12 Contingent liabilities
Swiss Re Ltd has issued guarantees to its subsidiaries and affiliated companies in support of their business activities by securing their
overall capital positions or specific transactions. As of 31 December 2020, the Company has guaranteed CHF 2 130 million
(2019: CHF 0 million) of which no amount was utilised as of 31 December 2020 and 2019, respectively.
Swiss Re | Financial Report 2020
303
Financial statements
Notes Swiss Re Ltd
13 Share ownership, options and related instruments of
governing bodies
This section is in line with Articles 663c para. 3 and 959c para. 2 cif. 11 of the Swiss Code of Obligations, which require disclosure of
shareholdings, options and related instruments held by members of the Board of Directors and Group Executive Committee (Group EC) at
the end of the reporting year and of share-based compensation for the Board of Directors during the reporting year. Further disclosures
in respect of shareholding and compensation for the members of the Board of Directors and the Group EC, and persons closely related, are
detailed in the Compensation Report on pages 140–145 of the Financial Report of the Swiss Re Group.
Share ownership
The number of shares held as of 31 December were:
Members of the Group EC
Christian Mumenthaler, Group Chief Executive Officer
Urs Baertschi, CEO Reinsurance EMEA /Regional President EMEA
Andreas Berger, CEO Corporate Solutions
Anette Bronder, Group Chief Operating Officer
John R. Dacey, Group Chief Financial Officer
Nigel Fretwell, Group Chief Human Resources Officer
Guido Fürer, Group Chief Investment Officer
Hermann Geiger, Group Chief Legal Officer
Russell Higginbotham, CEO Reinsurance Asia/Regional President Asia
Jonathan Isherwood, CEO Reinsurance Americas/Regional President Americas
Thierry Léger, Group Chief Underwriting Officer
Moses Ojeisekhoba, CEO Reinsurance
Patrick Raaflaub, Group Chief Risk Officer
Edouard Schmid, former Chairman Swiss Re Institute & Group Chief Underwriting Officer1
J. Eric Smith, former CEO Reinsurance Americas/Regional President Americas2
Total
1 The number of shares held on 31 August 2020 when Edouard Schmid stepped down from the Group EC was 31 935.
2 The number of shares held on 13 August 2020 when J. Eric Smith stepped down from the Group EC was 25 355.
Members of the Board of Directors
Walter B. Kielholz, Chairman1
Renato Fassbind, Vice Chairman, Lead Independent Director, Chair Audit and Nomination Committees
Raymond K.F. Ch’ien, member
Sergio P. Ermotti, member2
Karen Gavan, member3
Trevor Manuel, former member4
Joachim Oechslin, member2
Deanna Ong, member2
Jay Ralph, member
Joerg Reinhardt, member
Eileen Rominger, former member4
Philip K. Ryan, member, Chair Finance and Risk Committee
Sir Paul Tucker, member
Jacques de Vaucleroy, member, Chair Compensation Committee
Susan L. Wagner, member, Chair Investment Committee
Larry Zimpleman, member
Total
2019
75 305
546
34
0
29 809
12 272
53 983
49 318
4 662
n/a
56 167
40 704
16 590
31 794
25 262
396 446
2 019
423 878
31 143
21 345
n/a
2 803
7 065
n/a
n/a
3 299
25 684
1 997
15 693
5 403
4 835
13 920
1 997
559 062
2020
83 157
1 371
125
135
30 346
12 436
54 203
49 756
8 546
51 196
56 343
40 831
24 063
n/a
n/a
412 508
2 020
399 005
35 513
18 067
874
4 587
n/a
1 263
1 166
4 950
27 300
n/a
18 871
7 125
7 511
17 125
3 745
547 102
1 Walter B. Kielholz reported in the reporting period the purchase of 300 call options for a total of 30 000 shares, if exercised. For further details, please refer to:
www.swissre.com/investors/shares/management-transactions
2 Elected to Swiss Re’s Board of Directors at the AGM of 17 April 2020.
3 Shareholdings include 2 500 American Depository Receipts (ADRs), equivalent to 625 shares.
4 Term of office expired after the completion of the AGM of 17 April 2020 and did not stand for re-election.
304
Swiss Re | Financial Report 2020
Share-based compensation
The share-based compensation for the members of the Board of Directors for 2019 and 2020 was:
Members of the Board of Directors
Walter B. Kielholz, Chairman
Renato Fassbind, Vice Chairman, Lead Independent Director, Chair Audit and
Nomination Committees
Raymond K.F. Ch’ien, member
Sergio P. Ermotti, member3
Karen Gavan, member
Trevor Manuel, former member4
Joachim Oechslin, member3
Deanna Ong, member3
Jay Ralph, member
Joerg Reinhardt, member
Eileen Rominger, former member4
Philip K. Ryan, member, Chair Finance and Risk Committee
Sir Paul Tucker, member
Jacques de Vaucleroy, member, Chair Compensation Committee
Susan L. Wagner, member, Chair Investment Committee
Larry Zimpleman, member
Total
2019
Fees in blocked shares1
2020
Fees in blocked shares1
(CHF thousands) Number of shares2
16 355
1 520
(CHF thousands) Number of shares2
20 127
1 520
330
130
n/a
120
140
n/a
n/a
110
118
110
240
130
198
238
110
3 494
3 550
1 399
n/a
1 291
1 507
n/a
n/a
1 184
1 269
1 184
2 582
1 399
2 129
2 560
1 184
37 593
330
130
60
133
47
87
80
123
122
37
240
130
202
242
130
3 613
4 370
1 722
874
1 784
494
1 263
1 166
1 651
1 616
388
3 178
1 722
2 676
3 205
1 748
47 984
1 Represents the portion (40%) of the total fees for the members of the Board of Directors that is delivered in Swiss Re Ltd shares, with a four-year blocking period.
2 The number of shares is calculated by dividing the portion (40%) of the total fees with the average closing price of the shares on the SIX Swiss Exchange during the ten trading days preceding
the AGM less the amount of any dividend resolved by such AGM.
3 Elected to Swiss Re’s Board of Directors at the AGM of 17 April 2020.
4 Term of office expired after the completion of the AGM of 17 April 2020 and did not stand for re-election.
Vested options
For the years ended 31 December 2019 and 2020, neither the members of the Board of Directors nor the members of the Group EC
held any vested options granted or allocated by Swiss Re.
Swiss Re | Financial Report 2020
305
Financial statements
Proposal for allocation of disposable profit
The Board of Directors proposes to the Annual General Meeting to be held in Zurich on 16 April 2021 to approve the following allocations
and dividend payment:
CHF millions
Retained earnings brought forward
Net income for the financial year
Disposable profit
Allocation to voluntary profit reserves
Retained earnings after allocation
CHF millions
Voluntary profit reserves brought forward
Allocation from retained earnings
Reclassification of legal reserves from capital contributions3
Ordinary dividend payment out of voluntary profit reserves
Voluntary profit reserves after allocation and dividend payment
2019
4
932
936
–936
–
2019
18 200
936
–
–1 7051
17 431
2020
–
1 573
1 573
–1 573
–
2020
17 431
1 573
192
–1 7052
17 491
1 Since the Board of Directors’ proposal for allocation of disposable profit, included in the Annual Report 2019, the number of registered shares eligible for dividend, at the dividend payment
date of 23 April 2020, decreased due to the share buyback programme of 1 668 398 shares and transfer of 3 811 shares for employee participation purposes from not eligible to eligible for
dividend. This resulted in a lower dividend of CHF 10 million, compared to the Board of Directors’ proposal, and higher voluntary profit reserves by the same amount.
2 The Board of Directors’ proposal to the Annual General Meeting of 16 April 2021 is based on the number of shares eligible for dividend as of 31 December 2020. The actual dividend payment
will depend on the number of shares eligible for dividend as of 19 April 2021.
3 Under the new provision applicable as of 1 January 2020 (Article 4a paragraph 4 VstG), legal reserves from capital contributions need to be used for share buyback programmes. As of
31 December 2020, Swiss Re Ltd has no legal reserves from capital contributions that can be distributed exempt from Swiss withholding tax and, for Swiss resident shareholders holding the
shares in private wealth, exempt from Swiss income taxes. Therefore, the full amount of legal reserves from capital contributions is proposed to be reclassified into voluntary profit reserves.
Dividend
If the Board of Directors’ proposal for allocations and dividend payment is accepted, an ordinary dividend of CHF 5.90 per share will be
paid on 22 April 2021 from voluntary profit reserves.
Share structure per 31 December 2020
Eligible for dividend1
Not eligible for dividend
Total shares issued
Number of registered shares
288 976 399
28 520 907
317 497 306
Nominal capital in CHF
28 897 640
2 852 091
31 749 731
1 The Board of Directors’ proposal to the Annual General Meeting of 16 April 2021 is based on the number of shares eligible for dividend as of 31 December 2020. The actual dividend payment
will depend on the number of shares eligible for dividend as of 19 April 2021.
Zurich, 17 March 2021
306
Swiss Re | Financial Report 2020
Report of the statutory auditor
to the General Meeting of Swiss Re Ltd
Zurich
Report of the statutory auditor on the financial statements
As statutory auditor, we have audited the accompanying financial statements of Swiss Re Ltd (the ‘Company’), which
comprise the income statement, balance sheet and notes (pages 295 to 305), for the year ended 31 December 2020.
Board of Directors’ responsibility
The Board of Directors is responsible for the preparation of the financial statements in accordance with the requirements
of Swiss law and the Company’s Articles of Association. This responsibility includes designing, implementing and
maintaining an internal control system relevant to the preparation of financial statements that are free from material
misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying
appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.
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.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of
material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the
auditor considers the internal control system relevant to the Company’s preparation of the financial statements in order
to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the Company’s internal control system. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall
presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements for the year ended 31 December 2020 comply with Swiss law and the
Company’s Articles of Association.
PricewaterhouseCoopers Ltd, Birchstrasse 160, Postfach, CH-8050 Zürich, Switzerland
Telefon: +41 58 792 44 00, Telefax: +41 58 792 44 10, www.pwc.ch
PricewaterhouseCoopers Ltd is a member of the global PricewaterhouseCoopers network of firms, each of which is a separate and independent legal entity.
Swiss Re | Financial Report 2020
307
Report on key audit matter based on the circular 1/2015 of the Federal Audit
Oversight Authority
A key audit matter is a matter that, in our professional judgment, was of most significance in our audit of the financial
statements of the current period. The matter was addressed in the context of our audit of the financial statements as a
whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter.
Impairment assessment of investments in subsidiaries and affiliated companies
Key audit matter
How our audit addressed the key audit matter
The Company applies either individual valuations, or when
the facts and circumstances indicate that the investments
are to be seen as an economic unit, group valuations of
investments in subsidiaries and affiliated companies in
accordance with Swiss law.
The impairment assessments of investments in
subsidiaries and affiliated companies are based on the
selected valuation method that reflects specific
characteristics of the investment and corresponding
assumptions as model inputs.
The impairment assessment is considered a key audit
matter due to the considerable judgment in the
assumptions and adjustments applied to the valuation
method as well as the materiality of this account to the
Company’s financial statements.
In relation to the matter set out opposite, our substantive
testing procedures included the following:
•
•
•
Assessing whether the group valuation approach
(where applied) is appropriate.
Evaluating the method used by the Company to
determine a market value.
Assessing whether the assumptions used are
reasonable.
• Understanding changes in the approach and
discussing them with the Company to ensure they are
in accordance with our own expectations based on our
knowledge of the business and industry.
Based on the work performed, we consider the methods
and assumptions used by the Company to assess the
recoverability of investments in subsidiaries and affiliated
companies to be reasonable.
Report on other legal requirements
We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and
independence (article 728 CO and article 11 AOA) and that there are no circumstances incompatible with our
independence.
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.
We further confirm that the proposal for allocation of disposable profit (page 306) complies with Swiss law and the
Company’s Articles of Association. We recommend that the financial statements submitted to you be approved.
PricewaterhouseCoopers Ltd
Roy Clark
Audit expert
Auditor in charge
Zürich, 17 March 2021
Michael Stämpfli
Audit expert
2 Swiss Re Ltd | Report of the statutory auditor to the General Meeting
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309
General information
Headquartered in Zurich,
Switzerland, Swiss Re has
operations across the globe.
Our success is built on our
solid client relationships, capital
strength and risk knowledge
company approach. We make
the world more resilient.
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Contents
Glossary
Cautionary note on forward-looking
statements
Note on risk factors
Contacts
Corporate calendar
312
318
320
328
329
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311
General information
Glossary
Acquisition costs
That portion of an insurance premium which represents the cost of obtaining the insurance
business: it includes the intermediaries’ commission, the company’s sales expense and
other related expenses.
Asset-backed securities
Securities backed by notes or receivables against financial assets such as auto loans,
credit cards, royalties, student loans and insurance profits.
Asset-liability management (ALM)
Management of an insurance business in a way that coordinates investment-related
decisions on assets and liabilities. Specifically, the ongoing process of formulating,
implementing, monitoring and revising investment strategies related to assets and liabilities
in an attempt to achieve financial objectives, while managing exposure to financial market
risks, such as interest rates, credit spreads and currency movements.
Aviation insurance
Insurance of accident and liability risks, as well as hull damage, connected with the
operation of aircraft.
Benchmark investment result
Book value per share
Business interruption
Capacity
Catastrophe bonds
Cession
Claim
Claims and benefits
Includes changes in the economic value of liabilities (as represented by the replicating
portfolio) as a result of movements in risk-free discount rates, the passage of time, changes
in credit spreads, changes in equity prices or changes in the economic value of embedded
options and guarantees.
The ratio of ordinary shareholders’ equity to the number of common shares entitled
to dividend.
Insurance covering the loss of earnings resulting from, and occurring after, destruction of
property; also known as “loss of profits” or “business income protection insurance”.
Maximum amount of risk that can be accepted in insurance. Capacity also refers to the
amount of insurance coverage allocated to a particular policyholder or in the marketplace
in general.
Securities used by insurance and reinsurance companies to transfer peak insurance risks,
including natural catastrophes, to the capital markets. Catastrophe bonds help to spread
peak exposures (see insurance-linked securities).
Insurance that is reinsured: the passing of the insurer’s risks to the reinsurer against
payment of a premium. The insurer is referred to as the ceding company or cedent.
Demand by an insured for indemnity under an insurance contract.
Claims and benefits in the EVM income statement represent the present value of all
estimated future claims and benefits on contracts written during the year. Changes in
estimates of claims and benefits payable on contracts written in prior years are reflected
in previous years’ business profit, along with changes in other underwriting cash flows
relating to previous years.
Claims handling
Activities in connection with the investigation, settlement and payment of claims from the
time of their occurrence until settlement.
Claims incurred and claim
adjustment expenses
All claims payments plus the adjustment in the outstanding claims provision of a business
year and claim adjustment expenses.
Claims ratio
Coinsurance
Combined ratio
Sum of claims paid and change in the provisions for unpaid claims and claim adjustment
expenses in relation to premiums earned.
Arrangement by which a number of insurers and/or reinsurers share a risk.
The ratio is a combination of the non-life claims ratio and the expense ratio.
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Commission
Commutation
Cover
Credit insurance
Credit spreads
Remuneration paid by the insurer to its agents, brokers or intermediaries, or by the reinsurer to
the insurer, for costs in connection with the acquisition and administration of insurance business.
The termination of a reinsurance contract by agreement of the parties on the basis of one or
more lump sum payments by the reinsurer which extinguish its liability under the contract.
The payment made by the reinsurer commonly relates to incurred losses under the contract.
Insurance and reinsurance protection of one or more specific risk exposures based on a
contractual agreement.
Insurance against financial losses sustained through the failure, for commercial reasons,
of policyholders’ clients to pay for goods or services supplied to them.
Difference in yield between a fixed income security which has default risk and one which
is considered to be risk-free, such as U.S. Treasury securities.
Directors’ and officers’ liability
insurance (D&O)
Liability insurance for directors and officers of an entity, providing cover for their personal
legal liability towards shareholders, creditors, employees and others arising from wrongful
acts such as errors and omissions.
Disability insurance
Insurance against the incapacity to exercise a profession as a result of sickness or other infirmity.
Earnings per share (EPS)
Economic net worth
EVM
EVM capital
EVM profit
Expense ratio
Portion of a company’s profit allocated to each outstanding share of common stock. Earnings
per share is calculated by dividing net income by the weighted average number of common
shares outstanding during the period.
Economic net worth (ENW) is defined as the difference between the market-consistent value
of assets and liabilities. ENW is an economic measure of shareholders’ equity and the
starting point in determining available capital under the Swiss Solvency Test (SST).
Economic Value Management (EVM) is Swiss Re Group’s proprietary integrated economic
valuation and accounting framework for planning, pricing, reserving, and steering our
business.
EVM capital is the capital required to support uncertainty related to estimated cash flows
arising from existing underwriting and investment activities.
EVM profit is a risk-adjusted measure of performance that can be compared across all
business activities.
Sum of acquisition costs and other operating costs and expenses, in relation to premiums
earned.
G-SIIs
Globally systemically important insurers.
Gross outperformance
Defined as the difference between the mark-to-market investment result and the
benchmark investment result.
Gross underwriting result –
new business
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.
Guaranteed minimum death benefit
(GMDB)
A feature of variable annuity business. The benefit is a predetermined minimum amount
that the beneficiary will receive upon the death of the insured.
Health insurance
Generic term applying to all types of insurance indemnifying or reimbursing for losses
caused by bodily injury or sickness or for expenses of medical treatment necessitated by
sickness or accidental bodily injury.
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General information
Glossary
Incurred but not reported (IBNR)
Provision for claims incurred but not reported by the balance sheet date. In other words, it
is anticipated that an event will affect a number of policies, although no claims have been
made so far, and is therefore likely to result in liability for the insurer.
Insurance-linked securities (ILS)
Security for which the payment of interest and/or principal depends on the occurrence or
severity of an insurance event. The underlying risk of the security is a peak or volume
insurance risk.
Layer
Liability insurance
Life insurance
Longevity risk
Marine insurance
Mark-to-market
Mark-to-market investment result
Market value margin
Motor insurance
Net outperformance
Net reinsurance assets
Net underwriting result –
new business
Section of cover in a non-proportional reinsurance programme in which total coverage is
divided into a number of consecutive layers starting at the retention or attachment point of
the ceding company up to the maximum limit of indemnity. Individual layers may be placed
with different insurers or reinsurers.
Insurance for damages that a policyholder is obliged to pay because of bodily injury or
property damage caused to another person or entity based on negligence, strict liability or
contractual liability.
Insurance that provides for the payment of a sum of money upon the death of the insured,
or upon the insured surviving a given number of years, depending on the terms of the
policy. In addition, life insurance can be used as a means of investment or saving.
The risk to which a pension fund or life insurance company could be exposed as a result of
higher-than-expected payout ratios. Increasing life expectancy trends among policyholders
and pensioners can result in payout levels that are higher than originally expected.
Line of insurance which includes coverage for property in transit (cargo), means of
transportation (except aircraft and motor vehicles), offshore installations and valuables, as
well as liabilities associated with marine risks and professions.
Adjustment of the book value or collateral value of a security, portfolio or account to current
fair market value.
Includes net investment income, realised gains and losses and changes in unrealised gains
and losses reported under the accounting principles generally accepted in the United
States of America (US GAAP). In addition, it includes changes in market value of investment
positions carried at amortised cost under US GAAP. It excludes the following US GAAP
items: investment income from cedants, unit-linked and with-profit business and certain
loans as well as minority interest and depreciation on real estate.
The market value margin (MVM) represents the minimum cost of holding capital after the
one-year SST period until the end of a potential run-off period.
Line of insurance which offers coverage for property, accident and liability losses involving
motor vehicles.
Defined as the gross outperformance after deducting the actual costs incurred by
managing our actual investment portfolio in excess of the internal fee paid by underwriting
for the purchase and maintenance of the investment portfolio replicating the best-estimate
liability and backing the associated capital requirements.
Receivables related to deposit accounting contracts (contracts which do not meet risk
transfer requirements) less payables related to deposit contracts.
Net underwriting result from new business is defined as the gross underwriting result from
new business net of the present value of internal expenses allocated to new business but
before taxes and capital costs.
Non-life insurance
All classes of insurance business excluding life insurance.
Non-proportional reinsurance
Form of reinsurance in which coverage is not in direct proportion to the original insurer’s
loss; instead the reinsurer is liable for a specified amount which exceeds the insurer’s
retention; also known as “excess of loss reinsurance”.
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Operating margin ratio
The operating margin is calculated as operating result divided by total operating revenues.
The operating result is before interest expenses, taxes and net realised gains/losses.
Operating revenues
Premiums earned plus net investment income plus other revenues.
Operational risk
Premium
Premiums and fees
Risk arising from failure of operational processes, internal procedures and controls leading
to financial loss.
The payment, or one of the periodical payments, a policyholder agrees to make for an
insurance policy.
Premiums and fees in the EVM income statement represent the present value of all
estimated future premiums and fees on contracts written during the year. Gross premiums
and fees represent premiums and fees before external retrocessions. Gross premiums and
fees in the EVM income statement of the business segments also exclude retrocessions to
other segments of the Group.
Premiums earned
Premiums an insurance company has recorded as revenues during a specific accounting
period.
Premiums written
Premiums for all policies sold during a specific accounting period.
Present value of future profits (PVFP)
Intangible asset primarily arising from the purchase of life and health insurance companies
or portfolios.
Principal Investments and Acquisitions
Principal Investments and Acquisitions is a unit of Swiss Re that manages all strategic
acquisition activities of the Group as well as a portfolio of minority holdings in primarily
insurance and insurance-related businesses with the goal of generating long-term value.
Product liability insurance
Insurance covering the liability of the manufacturer or supplier of goods for damage caused
by their products.
Professional indemnity insurance
Liability insurance cover which protects professional specialists such as physicians,
architects, engineers, lawyers, accountants and others against third-party claims arising
from activities in their professional field; policies and conditions vary according to profession.
Profit margin
Property insurance
Proportional reinsurance
Provision for capital costs
Profit margin is calculated for new business, previous years’ business and investment
activities. The new business profit margin is the ratio of new business profit/loss to EVM
capital allocated to new business over the lifetime of the business. The previous years’
business profit margin is the ratio of previous years’ business profit/loss to EVM capital
allocated to previous years’ business in the current year. Investment profit margin is the
ratio of investment profit/loss to EVM capital allocated to investment activities in the
current year. These ratios can be used to compare profitability across all underwriting and
investment activities on a consistent, risk-adjusted basis.
Collective term for fire and business interruption insurance as well as burglary, fidelity
guarantee and allied lines.
Form of reinsurance arrangement in which the premiums earned and the claims incurred of
the cedent are shared proportionally by the cedent and the reinsurer.
Frictional capital costs provide compensation to shareholders for agency costs, costs for
potential financial distress and regulatory (illiquidity) costs. Frictional capital costs include
risk capital costs and funding costs. Risk capital costs are charged at 4.5% of eligible
economic capital which consists of ENW and eligible hybrid debt. Funding costs are
charged or credited at the legal entity level depending on the liquidity the respective legal
entity uses or generates. In addition, the provision for capital costs includes an allowance
for double taxation on the risk free return on capital allocated to underwriting activities.
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General information
Glossary
Quota share reinsurance
Reinsurance
Reserves
Retention
Retrocession
Form of proportional reinsurance in which a defined percentage of the premiums earned
and the claims incurred by the cedent in a specific line is reinsured for a given period.
Quota share reinsurance arrangements represent a sharing of business in a fixed ratio
or proportion.
Insurance which lowers the risk carried by primary insurance companies. Reinsurance
includes various forms such as facultative, financial, non-proportional, proportional, quota
share, surplus and treaty reinsurance.
Amount required to be carried as a liability in the financial statements of an insurer or
reinsurer to provide for future commitments under outstanding policies and contracts.
Amount of risk which the policyholder or insurer does not insure or reinsure but keeps for
its own account.
Amount of the risk accepted by the reinsurer which is then passed on to other reinsurance
companies.
Return on equity
Net income as a percentage of time-weighted shareholders’ equity.
Return on investments
Risk
Risk management
Running yield
Securitisation
Solvency II
SST risk-bearing capital
SST target capital
Stop-loss reinsurance
Investment-related operating income as a percentage of invested assets. Invested assets
include investments, securities in transit, certain financial liabilities and exclude policy
loans, cash and cash equivalents, as well as assets related to securities lending, repurchase
agreements and collateral balances.
Condition in which there is a possibility of injury or loss; also used by insurance
practitioners to indicate the property insured or the peril insured against.
Management tool for the comprehensive identification and assessment of risks based on
knowledge and experience in the fields of natural sciences, technology, economics and
statistics.
Net investment income on long-term fixed income positions and loan investments,
including coupon income and amortisation, as a percentage of the average market value of
the long-term fixed income portfolio and carrying value of loan investments.
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.
Regulatory framework for EU re/insurance solvency rules. Solvency II is a comprehensive,
economic and risk-based regulation and includes prudential requirements on solvency
capital, risk modelling, supervisory control and disclosure.
The SST risk-bearing capital (SST RBC) is the amount of capital that is available to protect
the policyholders of an entity in case of a large and unexpected adverse event.
Amount of capital that is required to support the risks assumed by an entity. It is based on
the entity’s total risk.
Form of reinsurance that protects the ceding insurer against an aggregate amount of claims
over a period, in excess of either a stated amount or a specified percentage of estimated
benefit costs. An example of this is employer stop-loss (ESL) coverage, which is used by US
companies to cap losses on self-funded group health benefit programmes. The stop-loss
can apply to specific conditions or aggregate losses.
Surety insurance
Sureties and guarantees issued to third parties for the fulfilment of contractual liabilities.
Surplus reinsurance
Form of proportional reinsurance in which risks are reinsured above a specified amount.
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Swiss Solvency Test (SST)
An economic and risk-based insurance regulation, similar to the objectives of Solvency II to
which all insurance and reinsurance companies writing business in Switzerland are subject.
Tail VaR
See “Value at risk”.
Top-down investment strategy approach
An investment strategy process which analyses trends in the global economy and the
associated impact on financial markets to assess the overall financial market outlook as well
as their implications for various asset classes and risk exposures.
Total contribution to ENW
Total contribution to ENW is the total return generated for shareholders and includes the
release of capital costs. Total contribution to ENW is therefore not a risk-adjusted
performance measure.
Total leverage ratio
Treaty reinsurance
Underwriting result
Unearned premium
Unit-linked policy
US GAAP
Value at risk (VaR)
With-profit policy
Total on-balance sheet senior and subordinated debt and contingent capital, including
drawn LOCs, divided by total capitalisation.
Participation of the reinsurer in certain sections of the insurer’s business as agreed by
treaty, as opposed to single risks.
Premiums earned less the sum of claims paid, change in the provision for unpaid claims
and claim adjustment expenses and expenses (acquisition costs and other operating costs
and expenses).
Part of written premium (paid or owed) which relates to future coverage and for which
services have not yet been provided; this is carried in an unearned premium reserve and
may be refundable if the contract is cancelled before expiry.
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.
United States generally accepted accounting principles.
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.
An insurance contract that has additional amounts added to the sum insured, or paid/
credited separately to the policyholder as a bonus, which result from a share of the profit
generated by the with-profits insurance funds, including these funds’ interests in other
blocks of business.
Some of the terms included in the glossary are explained in more detail in Note 1 to the
Group financial statements.
Swiss Re uses some of the term definitions provided by the glossary of the International
Association of Insurance Supervisors (IAIS).
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General information
Cautionary note on
forward-looking statements
Certain statements and illustrations
contained herein are forward-looking.
These statements (including as to plans,
objectives, targets, and trends) and
illustrations provide current expectations of
future events based on certain assumptions
and include any statement that does not
directly relate to a historical fact or current
fact.
Forward-looking statements typically are
identified by words or phrases such as
“anticipate”, “assume”, “believe”, “continue”,
“estimate”, “expect”, “foresee”, “intend”,
“may increase”, “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 or acts
of war;
• mortality, morbidity and longevity
experience;
• the cyclicality of the reinsurance sector;
• central bank intervention in the financial
markets, trade wars or other protectionist
measures relating to international trade
arrangements, adverse geopolitical
events, domestic political upheavals or
other developments that adversely impact
global economic conditions;
• increased volatility of, and/or disruption in,
global capital and credit markets;
• 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;
• the Group’s inability to realise amounts on
sales of securities on the Group’s balance
sheet equivalent to their values recorded
for accounting purposes;
• the Group’s inability to generate sufficient
investment income from its investment
portfolio, including as a result of
fluctuations in the equity and fixed income
markets, the composition of the
investment portfolio or otherwise;
• changes in legislation and regulation, or
the interpretations thereof by regulators
and courts, affecting the Group or its
ceding companies, including as a result of
comprehensive reform or shifts away from
multilateral approaches to regulation of
global operations;
• the lowering or loss of one of the financial
strength or other ratings of one or more
companies in the Group, and
developments adversely affecting its
ability to achieve improved ratings;
• uncertainties in estimating reserves,
including differences between actual
claims experience and underwriting and
reserving assumptions;
• policy renewal and lapse rates;
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• 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;
• legal actions or regulatory investigations
or actions, including in respect of industry
requirements or business conduct rules
of general applicability;
• 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, and the overall impact of
changes in tax regimes on the Group’s
business model;
• changes in accounting estimates or
assumptions that affect reported amounts
of assets, liabilities, revenues or expenses,
including contingent assets and liabilities;
• changes in accounting standards,
practices or policies;
• strengthening or weakening of foreign
currencies;
• reforms of, or other potential changes to,
benchmark reference rates;
• failure of the Group’s hedging
arrangements to be effective;
• significant investments, acquisitions or
dispositions, and any delays, unforeseen
liabilities or other costs, lower-than-
expected benefits, impairments, ratings
action or other issues experienced in
connection with any such transactions;
• extraordinary events affecting the Group’s
clients and other counterparties, such
as bankruptcies, liquidations and other
credit-related events;
• changing levels of competition;
• the effects of business disruption due to
terrorist attacks, cyberattacks, natural
catastrophes, public health emergencies,
hostilities or other events;
• limitations on the ability of the Group’s
subsidiaries to pay dividends or make
other distributions; and
• operational factors, including the efficacy
of risk management and other internal
procedures in anticipating and managing
the foregoing 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.
This communication is not intended to be a
recommendation to buy, sell or hold
securities and does not constitute an offer
for the sale of, or the solicitation of an offer
to buy, securities in any jurisdiction,
including the United States. Any such offer
will only be made by means of a prospectus
or offering memorandum, and in
compliance with applicable securities laws.
Swiss Re | Financial Report 2020
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General information
Note on risk factors
The operations, investments and other activities of Swiss Re Ltd (“Swiss Re”) and its
subsidiaries (collectively, the “Group”) are subject to a range of risks that could adversely
impact the Group’s business, financial condition, results of operations, liquidity and
cash flows.
Coronavirus
The global spread of the novel coronavirus and the disease it causes (“COVID-19”), and
the actions taken to slow the spread of the pandemic, have had an adverse impact on
communities, social and business interactions, economic activity and economies across
the globe. After significant contractions in 2020, the global economy is expected to
experience a protracted and uneven recovery in 2021. The impact of the pandemic on
recovery of individual economies will be affected by their respective capacities to absorb
shocks and the fiscal responses of their governments, and more broadly by continuing
uncertainties over the impact of new strains of the virus and the effectiveness of vaccines
against new strains, the timeline for the rollout of vaccination programs, the duration of
immunity and resulting restrictions on mobility. Despite the impact of the pandemic on the
global economy, the global insurance markets (as measured by premium growth) were less
severely impacted in 2020 than expected (although the life market was more adversely
affected than the non-life market) and premium growth is expected to recover, alongside
recovery of the global economy, in 2021 and 2022, supported by rate hardening. Growth
is expected to be led by China and, to a lesser extent, by other markets in Asia, aided in the
case of life business by greater awareness of the importance post-pandemic of mortality
and health coverage, as well as digital insurance penetration.
For the Group, in Property & Casualty Reinsurance, the COVID-19 crisis (in particular the
impact on businesses and business activity) had the greatest impact on event cancellation,
non-damage business interruption covers, and credit and surety. In Life & Health
Reinsurance, the COVID-19 crisis had the greatest impact on mortality exposures. The
majority of losses were incurred in the second and fourth quarters, largely driven by
business closings and excess mortality, and reported 2020 losses continue to reflect high
levels of incurred but not reported (IBNR) reserves.
The COVID-19 crisis prompted regulatory actions, including regulatory guidance in a
number of US states in respect of temporary policyholder leniency, and legislative
proposals in respect of policy exclusions and retroactive business interruption coverage.
Legal challenges have been brought in a variety of jurisdictions, including, most notably,
test cases brought in the United Kingdom by the Financial Conduct Authority, in respect of
which the UK Supreme Court largely found on appeal, by the insurance company parties,
in favour of holders of business interruption insurance policies, and in Australia, where a
Court of Appeal also found in favour of policyholders. Legal actions on a range of
pandemic-related claims are likely to continue in a number of jurisdictions.
The COVID-19 crisis continues, and the ultimate toll of the pandemic in terms of lives lost,
societal dislocations, business activity, economic growth, broader costs to society and
industry losses remains highly uncertain. Many pandemic-related developments interact
with long-term trends and outlooks, including the impact of persistent low yields on the
insurance industry. It also remains to be seen how public-private partnership initiatives may
evolve to address future pandemics.
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General impact of adverse market conditions
Swiss Re’s operations as well as its investment returns are subject to conditions in the
financial markets and macroeconomic factors, which are outside of its control. Financial,
credit and foreign exchange markets are experiencing continued periods of volatility
reflecting a range of political, geopolitical, economic and other uncertainties, some
of the more significant of which are inter-related. Further adverse developments or the
continuation of adverse trends that, in turn, have a negative impact on financial markets
and economic conditions, could limit the Group’s ability to access the capital markets and
bank funding markets, could adversely affect the ability of counterparties to meet their
obligations to the Group and could adversely affect the confidence of the ultimate buyers
of insurance and reinsurance. Any of the foregoing factors, developments and trends could
have an adverse effect on the Group’s investment results, which in the current extremely
low interest rate environment could have a material adverse effect on the Group’s overall
results, make it difficult to determine the value of certain assets in the Group’s portfolio,
make it more difficult to acquire suitable investments to meet its risk and return criteria
and otherwise have a material adverse effect on its business and operations.
Regulatory changes
Swiss Re and its subsidiaries operate in a highly regulated environment, which continues to
change over time. The regulatory regimes to which members of the Group are subject have
changed significantly in recent years and are expected to continue to evolve. While some
regulation is national in scope, the global nature of the Group’s business means that its
operations are subject in effect to a patchwork of global, national and regional standards.
Swiss Re and its subsidiaries are subject to group supervision and Swiss Re’s subsidiaries
are also subject to applicable regulation in each of the jurisdictions in which they conduct
business, particularly Switzerland, the United States, the United Kingdom, Luxembourg
and Germany. The Group and its Swiss regulated entities and branches are subject to the
Swiss Solvency Test and, through its legal entities and branches organised in the European
Economic Area (“EEA”) and the United Kingdom, Solvency II (which going forward as
between the EEA and the UK could diverge).
While certain regulatory processes are designed in part to foster convergence and
achieve recognition of group supervisory schemes, the Group continues to face risks of
extra-territorial application of regulations, particularly as to group supervision and group
solvency requirements. In addition, regulators in jurisdictions beyond those where the
Group has core operations increasingly are playing a far greater oversight role, requiring
more localised resources and, despite a predominantly local focus, also raise issues of a
cross-border nature. Furthermore, evolving regulatory schemes and requirements may
be inconsistent or may conflict with each other, thereby subjecting the Group, particularly
in light of the increasing focus on legal entities in isolation, to higher compliance and legal
costs, as well as the possibility of higher operational, capital and liquidity costs.
Swiss Re | Financial Report 2020
321
On the international level, certain large insurance companies were designated as global
systemically important insurers (“G-SIIs”) and reinsurance companies faced potential
designation as G-SIIs. While further designations have been suspended until 2022, the
determination to discontinue G-SII designations altogether will only be made in 2022,
based on an assessment of progress made by the International Association of Insurance
Supervisors (“IAIS”), in establishing a new holistic framework for systemic risk that was
adopted in November 2019 and implemented as of the beginning of 2020. The new
framework embraces an enhanced set of policy measures targeted at the exposures and
activities that can lead to systemic risks from the insurance sector as a whole. The Group
cannot predict what additional regulatory changes will be implemented as the IAIS
systemic risk process evolves and what any such changes may mean for how the Group is
structured in any particular jurisdiction and how aspects of its business may be affected.
Moreover, the Group cannot predict whether the Financial Stability Board will endorse the
new IAIS holistic framework or retain the existing G-SII approach, or what regulatory
changes may apply in the future to ceding companies in the context of broader
designations of reinsurers as systemically important.
In addition, large internationally active insurance groups (“IAIGs”), which is a designation
compiled by the IAIS as identified by group-wide supervisors, may become subject to a
risk-based group-wide global insurance capital standard (“ICS”). ICS Version 2.0 was
adopted in November 2019, and is expected to take effect in 2025, following a five-year
confidential reporting period during which no supervisory action will be taken on the basis
of the monitoring. In November 2019, the IAIS also adopted the Common Framework for
the Supervision of Internationally Active Insurance Groups (“ComFrame”), as well as some
changes to a number of Insurance Core Principles (“ICPs”) – guidance and standards on
supervision of insurers and which apply to insurance companies regardless of size and
international exposures. ComFrame strengthens ICP requirements for IAIGs and proposes
that the group-wide supervisor, in consultation with the host supervisors, should exercise
discretion in requiring IAIGs to submit resolution plans. Swiss Re expects that it will be
classified as an IAIG.
The Group cannot predict which legislative and/or regulatory initiatives will be enacted or
promulgated, what the scope and content of these initiatives ultimately will be, when they
will be effective and what the implications will be for the industry, in general, and for the
Group, in particular. The Group may be subject to changes in views of its regulators in
respect of the models that the Group uses for capital and solvency purposes, and could be
adversely affected if, for example, it is required to use standard models rather than internal
models. Generally, legal and regulatory changes could have a material impact on the
Group’s business. Notwithstanding the departure of the United Kingdom from the EU single
market and customs union, continued uncertainty regarding the ways in which the future
relationship between the United Kingdom and the European Union will evolve could also
impact the legislative and/or regulatory regimes to which the Group is subject (including
Solvency II), both in the United Kingdom and in the European Union.
Regulatory changes also could occur in areas of broader application, such as competition
policy and tax laws. For example, changes in tax laws, or the interpretation of the tax laws
or tax regulations in jurisdictions in which the Group does business, or withdrawals of tax
rulings in jurisdictions such as Switzerland that have issued such rulings to Swiss Re, could
increase the taxes the Group pays, or impact the attractiveness of products offered by the
Group, the Group’s investment activities or the value of deferred tax assets. These changes,
or inconsistencies between the various regimes that apply to the Group, could increase the
costs of doing business (including due to increased capital requirements), reduce access to
liquidity, limit the scope of current or future business or affect the competitive balance, or
could make reinsurance less attractive to primary insurers
General information
Note on risk factors
322
Swiss Re | Financial Report 2020
Market risk
Volatility and disruption in the global financial markets could expose the Group to
significant financial and capital markets risk, including changes in interest rates, credit
spreads, equity prices and foreign currency exchange rates, which may adversely impact
the Group’s financial condition, results of operations, liquidity and capital position. The
Group’s exposure to interest rate risk is primarily related to the market price and cash flow
variability associated with changes in interest rates. In general, low interest rates continue
to pose significant challenges to the insurance and reinsurance industries, with earnings
capacity under stress unless lower investment returns can be offset by lower combined
ratios or higher returns from other asset classes, which in a soft market cycle is a challenge.
Exposure to credit spreads primarily relates to market price and cash flow variability
associated with changes in credit spreads. When credit spreads widen, the net unrealised
loss position of the Group’s investment portfolio can increase, as could other-than-
temporary impairments.
The Group is exposed to changes in the level and volatility of equity prices, as well as the
value of securities or instruments that derive their value from a particular equity security, a
basket of equity securities or a stock index. The Group is also subject to equity price risk to
the extent that the values of life-related benefits under certain products and life contracts,
most notably variable annuity contracts, are wholly or partially exposed, directly and/or
indirectly, to market fluctuations, including equity prices. To the extent market values fall,
the financial exposure on guarantees related to these contracts would increase to the
extent this exposure is not hedged. While the Group has an extensive hedging programme
covering its existing variable annuity business, certain risks cannot be hedged, including
actuarial, basis and correlation risks. Exposure to foreign exchange risk arises from changes
in spot prices, forward prices and volatilities of currency rates.
These risks can have a significant effect on investment returns and market values of
securities positions, which in turn may affect both the Group’s results of operations and
financial condition. The Group continues to focus on asset-liability management for its
investment portfolio, but pursuing even this strategy has its risks – including a possible
mismatch between investments and liability benchmarks – that in turn can lead to
reinvestment risk. The Group seeks to manage the risks inherent in its investment portfolio
by repositioning the portfolio from time to time, as needed, and to reduce risk and
fluctuations through the use of hedges and other risk management tools.
Credit risk
If the credit markets were to deteriorate, the Group could experience losses. Changes in
the market value of the underlying securities and other factors impacting their price could
give rise to market value losses. The Group could also face write-downs in other areas of
its portfolio, including other structured instruments, and the Group and its counterparties
could face difficulties in valuing credit-related instruments. Differences in opinion with
respect to valuations of credit-related instruments could result in legal disputes among the
Group and its counterparties as to their respective obligations, the outcomes of which are
difficult to predict and could be material. The Group is also subject to credit and other risks
in its credit business, including reliance on banks that underwrite and monitor facilities in
which the Group participates and potential default by borrowers under those facilities.
Swiss Re | Financial Report 2020
323
General information
Note on risk factors
Liquidity risks
The Group’s business requires, and its clients expect, that it has sufficient capital and
sufficient liquidity to meet its re/insurance obligations, and that this would continue to be
the case following the occurrence of any foreseeable event or series of events, including
extreme catastrophes, that would trigger insurance or reinsurance coverage obligations.
The Group’s uses of funds include, among other things, its obligations arising in its
insurance and reinsurance businesses (including claims and other payments as well as
insurance provision repayments due to portfolio transfers, securitisations and commutations),
which may include large and unpredictable claims (including catastrophe claims),
funding of capital requirements and operating costs, payment of principal and interest on
outstanding indebtedness and funding of acquisitions. The Group also has unfunded
capital commitments in its private equity and hedge fund investments, which could result
in funding obligations at a time when it is subject to liquidity constraints. In addition, the
Group has potential collateral requirements in connection with a number of reinsurance
arrangements, the amounts of which may be material and the meeting of which could
require the Group to liquidate cash equivalents or other securities.
The Group manages liquidity and funding risks by focusing on the liquidity stress that is
likely to result from extreme capital markets scenarios or from extreme loss events or
combinations of the two. Generally, the ability to meet liquidity needs could be adversely
impacted by factors that the Group cannot control, such as market dislocations or
interruptions, adverse economic conditions, severe disruption in the financial and
worldwide credit markets and the related increased constraints on the availability of credit;
changes in interest rates, foreign exchange rates and credit spreads; or by perceptions
among market participants of the extent of the Group’s liquidity needs.
Unexpected liquidity needs (including to meet collateral calls) could require the Group to
increase levels of indebtedness or to liquidate investments or other assets. Should the
Group require liquidity at a time when access to bank funding and the capital markets is
limited, it may be unable to secure new sources of funding. The Group’s ability to meet
liquidity needs through asset sales may be constrained by market conditions and the
related stress on valuations. In addition, the Group’s ability to meet liquidity needs through
the incurrence of debt may be limited by constraints on the general availability of credit in
the case of bank funding, and adverse market conditions, in the case of capital markets
debt. Failure to meet covenants in lending arrangements could further constrain access to
liquidity. The Group’s ability to meet liquidity needs may also be constrained by regulatory
requirements that require regulated entities to maintain or increase regulatory capital, or
that restrict intra-group transactions, the timing of dividend payments from subsidiaries or
the fact that certain assets may be encumbered or are otherwise not tradeable. Finally,
any adverse ratings action against the Group could trigger a need for further liquidity
(for example, by triggering termination provisions or margin calls/collateral delivery
requirements in contracts to which Swiss Re is a party) at a time when the Group’s ability
to obtain liquidity from external sources is limited by such ratings action. See also
“Risks relating to credit rating downgrades.”
324
Swiss Re | Financial Report 2020
Counterparty risks
The Group is exposed to the risk of defaults, or concerns about defaults, by its
counterparties. Issuers or borrowers whose securities or loans the Group holds, trading
counterparties, counterparties under swaps and other derivative contracts, clearing agents,
clearing houses and other financial intermediaries may default on their obligations to
the Group due to bankruptcy, insolvency, lack of liquidity, adverse economic conditions,
operations failure, fraud or other reasons, which could also have a material adverse effect
on the Group. The Group has increased its allocation to higher return-generating strategies,
including high-quality corporate debt and some alternative assets, which tend to also be
subject to potentially greater counterparty risk.
The Group could also be adversely affected by the insolvency of, or other credit constraints
affecting, counterparties in its insurance and 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 relating to credit rating downgrades
Ratings are an important factor in establishing the competitive position of reinsurance
companies. Third-party rating agencies assess and rate the financial strength of reinsurers
and insurers, such as Swiss Re. These ratings are intended to measure a company’s ability
to repay its obligations and are based upon criteria established by the rating agencies.
Ratings may be solicited or unsolicited and may be revised downward or revoked at the
sole discretion of the rating agencies.
The Group’s ratings reflect the current opinion of the relevant rating agencies. One or
more of the Group’s ratings could be downgraded or withdrawn in the future. In addition,
unsolicited ratings may also be downgraded or withdrawn, such as a downgrade in April
2020 of unsolicited insurer financial strength and long-term issuer default ratings assigned
to various entities within the Group. Rating agencies may increase the frequency and scope
of ratings reviews, revise their criteria or take other actions that may negatively impact the
Group’s ratings and/or the ratings of its legal entities, which it cannot predict. In addition,
changes to the process or methodology of issuing ratings, or the occurrence of events or
developments affecting the Group, could adversely affect the Group’s existing ratings or
make it more difficult for the Group to achieve improved ratings which it would otherwise
have expected.
As claims paying and financial strength ratings are key factors in establishing the
competitive position of reinsurers, a decline in Swiss Re’s ratings and/or the ratings of its
key rated legal entities could make reinsurance provided by the Group less attractive to
clients relative to reinsurance from competitors with similar or stronger ratings. A decline in
ratings could also cause the loss of clients who are required by policy or regulation to
purchase reinsurance only from reinsurers with certain ratings. Certain larger reinsurance
and derivative contracts may contain terms that would allow the ceding companies or
counterparties to terminate the contract if the Group’s ratings or those of its subsidiaries are
downgraded beyond a certain threshold. Furthermore, ratings directly impact the
availability and terms of unsecured financing (potentially impacting the Group’s ability to
rollover existing facilities or obtain new facilities) and declines in the Group’s ratings or the
ratings of legal entities within the Group could also 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.
Swiss Re | Financial Report 2020
325
Legal and regulatory risks
In the ordinary course of business, the Group is involved in lawsuits, arbitrations and
other formal and informal dispute resolution procedures, the outcomes of which determine
the Group’s rights and obligations under insurance, reinsurance or other contractual
agreements. From time to time, the Group may institute, or be named as a defendant in,
legal proceedings, and the Group may be a claimant or respondent in arbitration
proceedings. These proceedings could involve coverage or other disputes with ceding
companies, disputes with parties to which the Group transfers risk under reinsurance
arrangements, disputes with other counterparties or other matters. The Group cannot
predict the outcome of any of the foregoing, which could be material for the Group.
The Group could in the future be involved in investigations and regulatory proceedings,
which could result in adverse judgments, settlements, fines and other outcomes. These
investigations and proceedings could relate to insurance or reinsurance matters, or could
involve 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 litigation or enforcement actions arising from
potential employee misconduct, including non-compliance with internal policies and
procedures, negligence 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 natural catastrophes, such as hurricanes, cyclones,
tornadoes, windstorms, hail storms, wildfires, floods and earthquakes, as well as extreme
space weather events such as solar storms and geomagnetic activity, and man-made
disasters, such as acts of terrorism, cyberattacks and other disasters such as explosions,
industrial accidents and fires, as well as pandemics) are inherently unpredictable in terms
of both their frequency and severity and have exposed, and may continue to 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 (including, in particular, social inflation), which trends may potentially be
exacerbated by the COVID-19 crisis; macro developments giving rise to emerging risks,
such as climate change and technological developments (including greater exposure to
cyber risks (where accumulation risk is yet to be fully understood), which could have a
range of consequences from operational disruption, to loss of proprietary or customer data,
to greater regulatory burdens and potential liability); 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, including its information technology
networks and systems. Any of the foregoing, as well as 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.
General information
Note on risk factors
326
Swiss Re | Financial Report 2020
Use of models; accounting matters
The Group is subject to risks relating to the preparation of estimates and assumptions
that its management uses, for example, as part of its risk models as well as those that affect
the reported amounts of assets, liabilities, revenues and expenses in the Group’s financial
statements (such as assumptions related to the Group’s capital requirements and
anticipated liabilities), including assumed and ceded business. For example, the Group
estimates premiums pending receipt of actual data from ceding companies, which actual
data could deviate from the estimates (and could be adversely affected if premiums turn
out to be lower, while claims stay the same). In addition, particularly with respect to large
natural catastrophes, it may be difficult to estimate losses, and preliminary estimates
may be subject to a high degree of uncertainty and change as new information becomes
available. Deterioration in market conditions could have an adverse impact on assumptions
used for financial reporting purposes, which could affect possible impairment of present
value of future profits, fair value of assets and liabilities, deferred acquisition costs or
goodwill. Moreover, regulators could require the use of standard models instead of
permitting the use of internal models. To the extent that management’s estimates or
assumptions prove to be incorrect, it could have a material impact on underwriting results
(in the case of risk models) or on reported financial condition or results of operations
(in the case of accounting judgments), and such impact could be material.
The Group’s results may be impacted by changes in accounting standards, or changes in
the interpretation of accounting standards. Changes in accounting standards could impact
future reported results or require restatement of past reported results. The Group’s results
may also be impacted if regulatory authorities take issue with any conclusions the Group
may reach in respect of accounting matters.
The Group uses non-GAAP financial measures in its external financial reporting. These
measures are not prepared in accordance with US GAAP or any other comprehensive set
of accounting rules or principles and should not be viewed as a substitute for measures
prepared in accordance with US GAAP. Moreover, these may be different from, or
otherwise inconsistent with, non-GAAP financial measures used by other companies.
These measures have inherent limitations, are not required to be uniformly applied and
are not audited.
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 report”). Financial information included in the EVM
report contains non-GAAP financial measures. The EVM principles differ significantly from
US GAAP and, accordingly, the Group’s results prepared in accordance with US GAAP will
differ from its EVM results, and those differences could be material. The Group’s annual
EVM results can be more volatile than the US GAAP results because, among others, assets
and liabilities are measured on a market consistent basis, profit recognition on new
contracts is recognised at inception rather than over the life time of the contract, and life
and health actuarial assumptions are on a best estimate basis as opposed to generally
being locked-in. The Group’s EVM financial statements should not be viewed as a
substitute for the Group’s US GAAP financial statements.
Risks related to the Swiss Re corporate structure
Swiss Re is a holding company, a legal entity separate and distinct from its subsidiaries,
including Swiss Reinsurance Company Ltd. As a holding company with no operations of its
own, Swiss Re is dependent upon dividends and other payments from its direct and
indirect operating subsidiaries. The Group is in the process of streamlining its legal entity
structure, with the expectation that, over time, its structure will continue to evolve. In the
future it may, for example, elect again to partner with minority investors or may elect
otherwise to dispose of interests in Group businesses or portions thereof, or to grow
through acquisitions. To the extent it undertakes acquisitions, it is subject to the risks
inherent in acquiring and integrating new operations.
Swiss Re | Financial Report 2020
327
General information
Contacts
Swiss Re has 81 office locations in 29 countries. For a full list of our office
locations and service offerings, please visit www.swissre.com
Investor Relations
Telephone +41 43 285 4444
investor_relations@swissre.com
Media Relations
Telephone +41 43 285 7171
media_relations@swissre.com
Share Register
Telephone +41 43 285 6810
share_register@swissre.com
Head office
Swiss Re Ltd
Mythenquai 50/60, P.O. Box,
8022 Zurich, Switzerland
Telephone +41 43 285 2121
Americas
Armonk
175 King Street
Armonk, NY 10504
Telephone +1 914 828 8000
Kansas City
1200 Main Street
Kansas City, MO 64105
Telephone +1 816 235 3703
New York
1301 Avenue of the Americas
New York, NY 10019
Telephone +1 212 317 5400
Los Angeles
777 South Figueroa Street
Los Angeles, CA 90071
Telephone +1 213 457 6190
Toronto
150 King Street West
Toronto, Ontario M5H 1J9
Telephone +1 416 408 0272
Mexico City
Avenida Insurgentes Sur 1898
Torre Siglum
Colonia Florida, Del Alvaro Obregon
México City 01030
Telephone +52 55 5322 8400
São Paulo
Avenida Brigadeiro Faria Lima 3064
Itaim Bibi
São Paulo, SP 01451-001
Telephone +55 11 3073 8000
328
Swiss Re | Financial Report 2020
Europe
(incl. Middle East and Africa)
Zurich
Mythenquai 50/60
8022 Zurich
Telephone +41 43 285 2121
London
30 St Mary Axe
London
EC3A 8EP
Telephone +44 20 7933 3000
Munich
Arabellastrasse 30
81925 Munich
Telephone +49 89 3844 1200
Cape Town
Block B
The Boulevard Office Park
Searle Street
Woodstock
Cape Town, 7925
Telephone +27 21 469 8400
Madrid
Torre Europa
Paseo de la Castellana, 95
28046 Madrid
Telephone +34 91 598 1726
Paris
11–15, rue Saint-Georges
75009 Paris
Telephone +33 1 43 18 30 00
Rome
Via di San Basilio, 72
00187 Rome
Telephone +39 06 323931
Asia-Pacific
Singapore
Asia Square Tower 2
12 Marina View
Singapore 018961
Telephone +65 6532 2161
Hong Kong
Central Plaza
18 Harbour Road
Wanchai
Hong Kong
Telephone +852 2827 4345
Sydney
Tower Two
International Towers Sydney
200 Barangaroo Avenue
Sydney, NSW 2000
Telephone +61 2 8295 9500
Beijing
China Life Financial Centre
23 Zhenzhi Road
Chaoyang District
Beijing 100026
Telephone +86 10 6563 8888
Tokyo
Marunouchi Nijubashi Building
3-2-3 Marunouchi
Tokyo 100-0005
Telephone +81 3 5219 7800
Mumbai
One BKC Plot no. C-66, G-Block
Bandra Kurla Complex
Bandra (East)
Mumbai 400 051
Telephone +91 22 6661 2121
Corporate calendar
2021
16 April 2021
157th Annual General Meeting
30 April 2021
First quarter 2021 key financial data
30 July 2021
Half-year 2021 results
29 October 2021
Nine months 2021 key financial data
Swiss Re | Financial Report 2020
329
©2021 Swiss Re. All rights reserved.
Title:
Financial Report 2020
Design:
Superunion, London
Swiss Re Corporate Real Estate & Services/
Media Production, Zurich
Photography:
Braschler/Fischer
Deniz Kenber
Fredi Lienhardt
Geri Krischker
Getty Images, Shutterstock
Marc Wetli
Printing:
Multicolor Print AG, Baar
This report is printed on sustainably
produced paper and is climate neutral.
The wood used comes from forests
certified to 100% by the Forest
Stewardship Council (FSC).
Original version in English.
The Annual Report 2020 is also available
in German. The web version of the
Annual Report 2020 is available at:
reports.swissre.com
Order no: 1490793_21_en
03/21, 1850 en
Swiss Re Ltd
Mythenquai 50/60
P.O. Box
8022 Zurich
Switzerland
Telephone +41 43 285 2121
www.swissre.com