Business activities

Reinsurance strategy and priorities

The Company’s near-term priorities focus on achieving growth in targeted areas and sustaining the risk knowledge that underpins the capital allocation overall.

Large and tailored transactions in Reinsurance provide an attractive growth opportunity. They reinforce differentiation through tailored offerings, leveraging the strong risk knowledge base. The Company is responding to the expanding need for health protection driven by ageing societies and will apply its risk knowledge experience to help reduce the protection gap in all regions.

The Company intends to maintain its leading position in high-growth markets, establishing a strong presence. These world regions continue to remain a key element of the strategy, even when they are temporarily challenged.

Property & Casualty Reinsurance business

Market environment

The capital position of global reinsurers was more or less stable over the recent years. Capital growth has been managed increasingly via dividend payments and share buy-back programmes, hence returning almost all of the industry’s net income to shareholders. Nevertheless, there was still some excess capital in traditional reinsurance by mid-2017, and this has been significantly reduced by the losses from hurricanes Harvey, Irma and Maria.

Outlook

The three major hurricanes in 2017 led to rate hardening both for loss-affected accounts, and to a lesser extent for loss-free accounts at the January 2018 renewals. Capital abundance in traditional reinsurance has been reduced, and alternative capacity will require additional funds from investors to operate at the same level as before the hurricane losses.

In 2018, advanced markets non-life reinsurance premium growth will likely reflect a hardening of rates and slightly stronger nominal growth in the primary market. Demand should also be supported by new solvency regulations: non-life reinsurance has become more attractive for European insurers under Solvency II, since it better reflects the risk mitigating effect of reinsurance.

Life & Health Reinsurance business

Market environment

The life reinsurance industry registered a 4% increase in premiums written in 2017. Underlying reinsurance premium growth in traditional reinsurance areas like mortality and morbidity risk has remained relatively subdued with an estimated growth rate of 1% in real terms in 2017. In mature markets, slight contractions in the US and UK were set off by positive developments in Canada, Japan, Australia and Continental Europe. In the emerging markets, premiums grew by 11%, driven largely by China, with other emerging markets seeing more modest growth.

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. In Europe, for example, Solvency II has underpinned interest in reinsurance to boost available capital, reduce required regulatory capital or to economise on reserves.

Outlook

Continued recovery in primary insurance should support growth in life reinsurance revenues, including a recovery in traditional renewable business. Premium growth will, nonetheless, likely remain modest, especially in the large advanced markets. In real terms, global life reinsurance premiums are forecast to increase by just over 1% in 2018. Premiums in the advanced markets are projected to decline after adjusting for inflation, driven by developments in the US, where cession rates continue their long-term down trend and growth in the primary market remains weak. In Western Europe, where cession rates are usually lower, reinsurance premiums are forecast to grow by about 1%. The strongest contribution to real growth in the advanced markets will likely come from developed Asia.

Investments

Strategy and priorities

Financial investments are managed in accordance with Swiss Re’s asset management policy and the Company’s investment guidelines, which are intended to ensure compliance with regulatory requirements. The general principle governing investment management in the Company is the creation of economic value on the basis of returns relative to the liability benchmark, while adhering to the investment guidelines and the general prudence principle. The liability benchmark is determined by approximating an investable benchmark from projected liability cash flows. A cash benchmark is used for the economic surplus.

Outlook

In terms of the economic outlook, the moderate global growth environment is set to continue during 2018, both in developed and emerging market economies, while inflation is forecast to modestly increase globally. From a regional perspective, growth is set to stay solid in the Eurozone and the US where it is supported by expected improvements in US corporate earnings from the recently passed tax reform legislation, while growth for China is expected to slow somewhat in 2018. For the UK, growth is expected to be more modest amid continued Brexit-related uncertainty.

Reinsurance and sub-holding company

The Company, domiciled in Zurich, Switzerland, performs a dual role within the Group as both a reinsurance company and a sub-holding company for the Reinsurance Business Unit. The Company is a wholly owned subsidiary of Swiss Re Ltd, the ultimate parent company, domiciled in Zurich, Switzerland.

Claims on and obligations towards affiliated companies

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CHF millions

2016

2017

1

In 2017, the netting process of assets and liabilities from reinsurance towards the same counterparty was decommissioned. This led to a gross-up of the receivables from reinsurance as well as the reinsurance balances payable. The effect of such a gross-up for intercompany balances in 2016 was CHF 2 377 million.

2

Thereof at the 2017 balance sheet date CHF 2 million (2016: none) were towards the parent company Swiss Re Ltd.

3

Thereof at the 2017 balance sheet date CHF 2 720 million (2016: CHF 2 178 million) were towards the parent company Swiss Re Ltd.

4

Thereof at the 2017 balance sheet date CHF 733 million (2016: CHF 127 million) were towards the parent company Swiss Re Ltd.

Loans

8 743

8 025

Funds held by ceding companies

13 533

15 051

Premiums and other receivables from reinsurance

2 7191

6 7981

Other receivables

86

21

Other assets

1 9412

1 9082

Debt

2 6053

4 6293

Liabilities from derivative financial instruments

300

149

Funds held under reinsurance treaties

3 664

7 913

Reinsurance balances payable

1 8611

5 3351

Other liabilities

4 9374

4 6044

Share capital and major shareholder

The share capital of the Company amounted to CHF 34 million. It is divided into 344 052 565 registered shares, each with a nominal value of CHF 0.10. The shares were fully paid-in and held directly by Swiss Re Ltd. As of 31 December 2017 and 2016, the Company was a wholly owned subsidiary of Swiss Re Ltd.

List of branch offices

  • Swiss Reinsurance Company Ltd, Australia Branch
  • Swiss Reinsurance Company Ltd, Beijing Branch
  • Swiss Reinsurance Company Ltd, Canada Branch
  • Swiss Reinsurance Company Ltd, Hong Kong Branch
  • Swiss Reinsurance Company Ltd, India Branch
  • Swiss Reinsurance Company Ltd, Israel Branch
  • Swiss Reinsurance Company Ltd, Japan Branch
  • Swiss Reinsurance Company Ltd, Korea Branch
  • Swiss Reinsurance Company Ltd, Kuala Lumpur Branch
  • Swiss Reinsurance Company Ltd, Singapore Branch

Significant events

The Company further aligned the legal entity structure with the management view, and thus transferred risks allocated to the Life Capital Business Unit to Swiss Re Life Capital Reinsurance Ltd via novation and retrocession transactions, effective 1 January 2017.

In addition, the Company was affected by several intra-group transactions in preparation of the redomiciliation of Swiss Re Asia Ltd from Switzerland to Singapore per year-end 2017. Effective 1 October 2017, the Company assumed the Canadian life and health business, which was previously novated from Swiss Re Asia Ltd to Swiss Re Life Capital Reinsurance Ltd. Furthermore, the Company entered into a new intra-group agreement with Swiss Re Asia Ltd to cover the property and casualty business originally written in the Asian branches of the Company and retroceded to Swiss Re Asia Ltd.

The aforementioned intra-group transactions were all undertaken at Swiss statutory book value, hence, did not impact the Company’s net income at inception, but significantly affected various balance sheet and income statement positions in 2017.

Following the redomiciliation of Swiss Re Asia Ltd from Switzerland to Singapore per year-end 2017, the Company is going to sell any assets and liabilities of its Singapore branch to Swiss Re Asia Ltd, effective 1 January 2018. With this sale the Company will transfer any related rights and obligations of the branch to Swiss Re Asia Ltd, including the entire reinsurance business as well as the employees, employed by the branch. Furthermore, the Company will sell its remaining Asian branches to Swiss Re Asia Ltd in the upcoming years.

Report of the statutory auditors

PricewaterhouseCoopers Ltd is the auditor of the Company. For more information, please see the (PDF:) Report of the statutory auditor in the 2017 Annual Report (available on www.swissre.com).