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.
Risk and Control Related Behaviour assessment of Group and business functions
Focus on the link between compensation and risk and control related behaviours continues. The Control Functions annually perform a quantitative and qualitative assessment of each of these behaviours independently and summarise the outcomes in a consolidated Group report.
Risk and Control Related Behaviour 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.
In 2015, Swiss Re has identified 213 positions that qualify as Key Risk Takers. This group consists of the members of the Group EC, GMDs and other roles with significant risk taking authority. The list of Key Risk Takers is reviewed on an annual basis.
The reason for the increase in the number of Key Risk Takers (141 in 2014) is driven by the need to introduce more sustainable and repeatable selection criteria based on clear rules rather than judgements. This revised definition ensures that all individuals with first line of defence activities that could significantly influence the risk profile of Swiss Re are part of the assessment process.
Influence of the behavioural assessment on compensation
The risk and control related behaviour assessment of Group and business functions provides additional input for helping determine the Group API pool and its allocation to each business function.
The Control Functions assess the risk and control related behaviour of each Key Risk Taker and deliver a report to the business, the Group Chief Risk Officer and the Chief Human Resources Officer on an annual basis. This assessment serves as an additional factor when considering individual performance and compensation outcomes.
Independence of the Control Functions
In order to ensure the continued independence of Control Functions, their compensation approval processes differ in that the annual compensation decisions for these functions are approved at the Board level.
This includes the approval by the Chairmen of the Audit and the Finance and Risk Committees, of the aggregate API pool of their respective Control Functions, and the approval of the individual compensation for the head of each respective Control Function.