Tokio Marine : Introduction of New Stock-Based Compensation System for Directors and Executive Officers of Tokio Marine Holdings and Its Main SubsidiariesPDF

March 22, 2021

Tokio Marine Holdings, Inc.

TSE code number: 8766

Introduction of New Stock-Based Compensation System for Directors and Executive Officers of Tokio Marine Holdings and Its Main Subsidiaries

Tokio Marine Holdings, Inc. (the "Company") has announced today that its Board of Directors reviewed the Company's compensation system for directors and officers at a meeting held on March 22, 2021 and approved the introduction of a new stock-based compensation system (hereinafter, the "New System") for its Directors and Executive Officers (hereinafter, the "Directors, etc."). The New System will replace the existing stock options that are provided as stock-based compensation. In conjunction with this move, the Company's main subsidiaries (*) (hereinafter, the "Target Subsidiaries,"; together with the Company, the "Target Companies") are scheduled to likewise approve the introduction of the New System for their Directors, etc. (hereinafter, the Company's Directors, etc. and the Directors, etc. of the Target Subsidiaries shall be collectively referred to as the "Eligible Directors, etc.") at their respective Board of Directors meetings to be held on later dates. They will then submit a proposal to introduce the New System to their respective general meetings of shareholders.

The Company will submit to its 19th ordinary general meeting of shareholders scheduled in late-June 2021 a proposal to introduce the New System in connection with compensation for the Company's Directors. An overview of the New System is presented below.

(*) Tokio Marine & Nichido Fire Insurance Co., Ltd., Nisshin Fire & Marine Insurance Co., Ltd., and

Tokio Marine & Nichido Life Insurance Co., Ltd.

• 1. Introduction of the New System

• (1) The Company will introduce the New System for the Eligible Directors, etc. so that the Eligible Directors, etc. will share with the Company's shareholders the benefits and risks arising from share price fluctuations. The New System is also designed to better incentivize the Eligible Directors, etc. to improve the Group's corporate value over the medium- to long-term.

• (2) The introduction of the New System is subject to approval of the respective general meetings of shareholders of the Company and Target Subsidiaries.

• (3) As a new stock-based compensation system, the Company will adopt a structure called Board Incentive Plan Trust (hereinafter, the "BIP Trust"). The BIP Trust is an incentive plan for officers and directors. Its design is based on the Performance Share Plan and Restricted Stock Plan adopted in the United States. The Company will deliver and pay to the Eligible Directors, etc. after their resignation (or at the time of their death if the relevant Eligible Director, etc. has died; the same shall apply hereinafter) the Company's shares acquired by the BIP Trust and money in the amount equivalent to the conversion value of the Company's shares (hereinafter, collectively referred to as the "Company Shares, etc.") (the acts of such delivery and payment shall be hereinafter referred to as "Delivery," "Deliver," or "Delivered").

2. Transition to the New System from Stock Options Provided as Stock-based Compensation

On the condition that the general meetings of shareholders of the Company and Target Subsidiaries approve a proposal to introduce the New System, the Company will stop granting new share subscription rights as stock options granted as a form of stock-based compensation. If any Eligible Director, etc. currently holds any share subscription rights which are stock options that have been granted to him or her as a form of stock-based compensation and have not yet been exercised, the said Eligible Director, etc. will waive such rights. This waiver is subject to certain conditions including the launch of the New System. As a transition measure, the Company will grant to the said Eligible Director, etc. the number of points corresponding to the number of shares that she or he could have acquired by exercising the share subscription rights she or he has waived. If any Eligible Director, etc. is to lose his or her status as Directors, etc. at the close of the general meeting of shareholders of the Company or the relevant Target Subsidiary, the said Eligible Director, etc. may exercise the share subscription rights that have already been granted to him or her as stock options after the day on which he or she loses such status. In this case, the Company will not grant any point to the said Eligible Director, etc. under the New System.

3. Overview of the New System

(9) Deliver residual assets

(8) Transfer without compensation / cancel residual shares

(1) Resolution of the general meeting of shareholders

(1) Resolution of the general

[Trustor]

Company

• (5) Dividends

• (4) Payment for shares

  • (4) Company shares

  • (3) Create a trust

    Stock market

    (4) Company shares

    (4) Payment for shares

    [Trustee (co-trustee)] (planned)

    Mitsubishi UFJ Trust and Banking

    Corporation

    The Master Trust Bank of Japan, Ltd.

    The Trust

    Company shares and money

    (6) Instruction not to exercise voting rightsTrust Administrator

    • (1) The Company and Target Subsidiaries obtain approval to introduce the New System at their respective general meetings of shareholders.

    • (2) The Company and Target Subsidiaries establish share delivery rules concerning compensation for directors and officers at their respective Boards of Directors in connection with the introduction of the New System.

    • (3) The Company entrusts with the trustee the monies to pay for the Company's stock-based compensation and the monies received from the Target Subsidiaries to pay for their stock-based compensation and

creates a trust (the "Trust") whose beneficiaries are the Eligible Directors, etc. who meet the beneficiary requirements. The Company and Target Subsidiaries may contribute the amount of money up to the scope approved by the general meetings of shareholders in (1) above.

• (4) Pursuant to the instructions given by the Trust Administrator, the Trust acquires the Company's shares from a stock market or the Company (disposal of treasury stock) using the monies entrusted in (3) above. The number of shares acquired by the Trust may not exceed the scope approved by the general meetings of shareholders in (1) above.

• (5) The Company pays dividends on the Company's shares held by the Trust in the same manner as other shares.

• (6) No voting right attached to the Company's shares held in the Trust will be exercised throughout the trust period.

• (7) Pursuant to the share delivery rules, a certain number of points will be granted to the Eligible Directors, etc. during the trust period according to their positions and other conditions. The Eligible Directors, etc. who meet certain beneficiary requirements will receive, after their resignation, the Company's shares in the number that is equivalent to a certain ratio of the number of points accumulated. In addition, after the Company's shares equivalent to the remaining accumulated points are converted into cash within the Trust, the Eligible Directors, etc. will receive money corresponding to the conversion value of such shares in accordance with the provisions of the trust agreement.

• (8) If there are any residual shares upon the expiration of the trust period due to reasons such as a reduction in the number of the Eligible Directors, etc. during the trust period, the Company will either continue using the Trust by amending the trust agreement and making additional contributions to the Trust or the Trust will transfer the residual shares to the Company without compensation for the Company to retire the said shares based on a resolution of the Board of Directors.

• (9) Any assets remaining at the time of the termination of the Trust after distributions are made to beneficiaries will belong to the Company within the scope of the trust expense reserve calculated by deducting from money in trust the funds for acquiring shares. Any amount exceeding the trust expense reserve will be donated to organizations that have no vested interests in the Company, Target Subsidiaries, or Eligible Directors, etc.

  *

  If, during the trust period, there arises a possibility that the number of shares held in the Trust may fall short of the number of shares corresponding to the accumulated points granted to the Eligible Directors, etc. (as stipulated in (5) below) or that money in the trust asset may not cover the payment of trust fees or trust expenses, the Company may entrust additional monies into the Trust within the scope of money in trust described in (7) below.

(1) Overview of the New System

The New System covers a three-year period from July 2021 (hereinafter, the "Covered Period"). It is designed to Deliver the Company Shares, etc. to the Eligible Directors, etc. as officers' and directors' compensation based on their positions and other conditions after their resignation.

If the Trust is continued pursuant to (4) (ii) below, each of the subsequent three-year periods shall be theCovered Period.

(2)Resolution of the general meeting of shareholders for the introduction of the system

Each Target Company will resolve in their respective general meeting of shareholders the maximum amount of money that can be paid into the Trust as compensation for directors, the maximum number of points that can be granted to directors (as prescribed in (5) below), and other necessary matters.

If the Trust is to be continued pursuant to (4) (ii) below, the Target Company will make a resolution at their Board of Directors meeting to amend the trust agreement upon the expiration of the trust period and to make additional contributions to the Trust, within the scope approved by the general meetings of shareholders of the Company and Target Subsidiaries.

(3) Beneficiaries of the New System (beneficiary requirements)

The Eligible Directors, etc. may, after their resignation and undertaking stipulated beneficiary confirmation procedures, receive from the Trust the Delivery of the Company Shares, etc. in the number corresponding to the points accumulated during the period of their tenure (as stipulated in (5) below) on the condition that they meet the following beneficiary requirements.

(i) The beneficiary has served as the Eligible Director, etc. during the Covered Period (including those who became the Eligible Directors, etc. during the Covered Period).

• (ii) The beneficiary is a resident of Japan.

• (iii) The beneficiary has resigned from his or her position as the Eligible Director, etc. (*)

• (iv) The beneficiary was not dismissed as the Eligible Director, etc. due to a legitimate ground for dismissal; the beneficiary did not resign on account of a recommendation made by the Board of Directors of the relevant Target Company; and the beneficiary has not committed a certain illegal act during his or her service.

• (v) Other requirements that are deemed necessary to achieve the objective of a stock-based compensation system and stipulated in the trust agreement or share delivery rules

(*)If the trust period is extended pursuant to (4) (iii) below and the claimant still serves as an Eligible Director, etc. who may meet the beneficiary requirements at the time of the expiration of the extended trust period, the Trust will be terminated at that point of time, and the said claimant will receive the Delivery of the Company Shares, etc. during his or her tenure as an Eligible Director, etc.

(4)Trust period

• (i) Initial trust period

  The initial trust period will be approximately three years from August 2021 (planned) to August 2024 (planned).

• (ii) Continuation of the Trust

  The Trust may be continued upon the expiration of the trust period through amendment to the trust agreement and additional contributions to the trust. In this case, the trust period will be extended by further three years. The Company will make additional contributions for each extended trust period within the maximum amount of money in trust approved by the general meetings of shareholders of the Company and Target Subsidiaries. During the extended trust period, the Company will also continue granting points to the Eligible Directors, etc. If the Company is to make additional contributions and there are any residual shares of the Company (excluding the undelivered shares in the number equivalent to the points granted to the