The role of Swiss Re’s Control Functions (defined as Risk Management, Group Internal Audit and Compliance) in compensation matters is well established. Their activities include providing management with information on risk and control awareness.

Control assessment of Group and business functions

The Compensation Committee continues to focus on the link between compensation and risk awareness. The Control Functions provide the Group CEO and the Compensation Committee with assessments and information regarding risk and control-related behaviour and performance. This information is collected from all Control Functions and combined into a Group report that covers each business function.

Control assessment of Key Risk Takers

Key Risk Takers are defined as individuals who, by the nature of their role, can materially commit or control Swiss Re’s resources, or influence its risk profile. 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.

Swiss Re has identified 140 positions that qualify as Key Risk Takers, including the members of the Group EC, GMB and other roles with significant risk authority. The increase of Key Risk Takers from 125 positions in 2012 to 140 in 2013 was mainly driven by newly created functions (eg in high growth markets) and internal reorganisations.

The Control Functions together with senior management review the list of Key Risk Takers on an annual basis.

Influence of the control assessment on compensation

The control assessment provides additional input to determining the Group API pool. It also influences the API pool that is ultimately allocated to each business function.

Since Key Risk Takers are responsible for managing substantial risk, their performance in this task needs to be assessed. The Control Functions assess the risk performance of each Key Risk Taker and deliver a report to the business and Human Resources on an annual basis. This assessment serves as an additional factor when considering the individual performance and compensation review.

Independence of the Control Functions

In order to ensure the continued independence of Control Functions, Swiss Re has modified its compensation approval processes. Although the compensation framework applicable to Control Functions remains largely the same as for all other employees, some of the key annual compensation decisions for these functions are approved differently. For example the Chairman of the Audit Committee and the Chairman of the Finance and Risk Committee approve the aggregate API pool of their respective Control Functions, as well as approving the individual compensation for the head of each Control Function.