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Munich Re

Remuneration system for the Board of Management as of 1 January 2021

Disclaimer: This document is based on a resolution by the Supervisory Board. The remuneration system will be part of the agenda at the Annual General Meeting of Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft in München ("Munich Re") on 28 April 2021.

Content

1.

Remuneration system for the Board of Management

p. 3

2.

ESG criteria

p. 5

3. Success and performance criteria

p. 6

4.

Malus/Clawback

p. 7

2

Relative share

Component

Performance criteria

Target corridor

Evaluation

Payment

Further components

(Form, time)

~ 49%

Basic remuneration

Function

-

-

Cash

Shareholding obligation

remuneration

~ 1%

Responsibility

remuneration,

(Share Ownership Guidelines)

Regular fringe benefits/remuneration in kind

As of 1 January 2021, no employer-financedpension scheme for new members of the

5-yearbuild-up phase or

Length of service on

monthly

100% of the annual gross

Board

basic remuneration

During the period of service

on the BoM

Fixed

Board of Management and members of the Board of Management who were members of

2 years if service on the

the Board before 2021 and decided within the scope of their voting rights to switch to the

BoM commenced before

new system

2019

Obligation to provide proof

~ 15%

Annual bonus

IFRS consolidated result

Scaling

Achievement of

Overall performance

Cash

Assessment of

(AB)

0-100% /100-200%

annual target

assessment for AB + MYB

remuneration,

appropriateness of total

(bonus-malus aspects)

in the year after

remuneration

0% =

T - (2*X) €bn

the one-year

in comparison with the

100% =

T

Adjustment of target

plan term

market

200% = T + X €bn

achievement by Supervisory

DAX30 companies

Board, taking into account

within the company

T = Target in €bn

individual and collective

upper management and

remuneration

evaluation)

~ 35%

(MYB)

X = Deviation in €bn

Munich Re

management performance

remuneration,

staff overall

0 - 200%

other boards

(T and X to be

(also over time)

determined annually)

Loading/reduction of up

Multi-year bonus

Total Shareholder Return

Linear scaling

Performance of

to 10 pp on the basis of

Cash

In the case of seats held on

Variable

(100%

ESG criteria

(TSR) of Munich Re shares

shares in

Loading/reduction of up

in the year after

remuneration for board

Term: 4 years

in comparison with a

0% = lowest TSR in

comparison with

to 10 pp on the basis of

the four-year

memberships must be paid over

defined peer group

peer group

peer group

success- and

plan term

to the Company

performance-related

(Peer group: Allianz, AXA

200% = highest TSR

Severance payment cap

criteria (including

Generali, Hannover Re,

in peer group

situation, success and

two years' total remuneration,

SCOR, Swiss Re, Zurich

future prospects of the

no more than remaining term of

Insurance Group)

Company)

the Board member's contract if

this term is shorter

Subsequent adjustment of target values or comparative

In the event of post-

parameters excluded

contractual non-competition

agreement

100%

Target overall remuneration (total remuneration for 100% evaluation of the variable remuneration components)

severance payments are

taken into account in

The defined maximum remuneration for the BoM function groups Chair (€9.5m) and ordinary member (€7.0m) limits the overall remuneration (including irregular/event-related

compensation for the period of

fringe benefits, e.g. removal costs, compensation for bonuses forfeited by previous employers) allocable to a financial year.

competitive restriction

3

Annual bonus - Change of scaling

New scaling as of 2021

Rationale for change of scaling

  • Linear scaling always appears appropriate when business-inherent earnings volatilities are symmetrical in nature. At Munich Re, however, they are highly asymmetrical.
  • The asymmetry in earnings is mainly driven by:
    • The natural asymmetry of the business model - positive deviations are limited, negative deviations can be much more pronounced
    • Munich Re Group's steering approach - Particularly prudent reserving methods
  • Therefore, the former scaling will be replaced by a new scaling where the range between 0% and 100% will be twice as high as the one between 100% and 200%.

4

Criteria for the evaluation of overall performance (1/2):

Stronger focus on ESG topics with precise criteria

ESG criteria (loading/reduction of up to 10 percentage points)

Ecological aspects

  • Reduction of the CO2 footprint in line with Munich Re's climate strategy (covering assets, liabilities and own emissions)

Governance-related aspects

  • Leadership skills
  • Diversity
  • Adherence to guidelines/ compliance requirements
  • Appropriate establishment of governance functions

ESG criteria

(individual

and collective management performance)

Social aspects

  • Access to healthcare and corporate health initiatives
  • Training costs and days
  • Sickness rate

5

Criteria for the evaluation of overall performance (2/2):

Discretionary evaluation of success and performance using adequate criteria

Success and performance criteria (loading/reduction of up to 10 percentage points)

Collective management performance

  • Result of field of business (reinsurance and/or primary insurance)
    • Reaction to special market circumstances and unforeseeable
      developments

Situation, success and future prospects of the Company

  • Financial situation of the Company
  • Short-termand long-term profit prospects
  • Market environment (interest rates, situation in the industry, etc.)

Success and performance criteria

Individual management performance

  • Result of division/divisional unit, contribution to overall performance
  • Personal performance (qualitative and/or quantitative)
  • Consideration of special market circumstances or unexpected developments
  • Implementation of strategy, improvements in organisation and processes, innovation

6

Malus/Clawback

Current malus regulations sufficient - no introduction of a clawback clause

  • No (legal) obligation to introduce a clawback clause (German Corporate Governance Code: malus or clawback)
  • Malus mechanisms are included in the evaluation of overall performance (AB and MYB)
  • Severe compliance breaches generally entail termination for good cause and can also be sanctioned within the current system
  • In many cases, severe compliance breaches imply a provable (appraisable) damage for which an action can be filed pursuant to Section 93 of the German Stock Corporation Act (AktG)
  • Forfeiture of bonuses not yet paid in the case of termination for good cause for all members of the Board of Management
  • Risk of a compliance clawback: invalidity, as such a clause would barely meet the (German) legal requirements related to General Terms and Conditions of contracts
  • Compliance clawback can endanger long-term corporate management by avoiding value-creating but potentially higher-risk opportunities

7

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Disclaimer

Munich Re Group - Münchener Rück AG published this content on 12 January 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 18 January 2021 13:29:01 UTC