Zurich Insurance : Risk review

Risk review

Annual results 2021

Zurich Insurance Group

Zurich Insurance Group

Annual results 2021

Message from our Group Chief Risk Officer

Managing risk to help things go right.

In 2021, risk management was at the center of the return toward normality, helping us to navigate through an increasingly dynamic environment. By effectively managing our risks, we maintained our resilience and made sure we were there to help when our customers needed us most.

Peter Giger

Group Chief Risk Officer and Group

Chief Investment Officer ad interim

2

Risk management, at the center of what we do

In 2021, we returned toward normality following the severe disruption of the previous year. Zurich successfully navigated through a dynamic environment as the risk landscape evolved rapidly. Despite uncertainty from the continuing pandemic, we remained operationally resilient and maintained our focus on enabling our people to adapt

and support our customers.

Maintaining principled and focused risk management was at the center of this journey. The Group's continued focus on high-priority matters allowed us to identify, assess and manage uncertain situations. Risk management equipped our business leaders with the right level of information and discipline to actively take risks within the Group's risk appetite and tolerance.

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Annual results 2021

Message from our Group Chief Risk Officer (continued)

This process was supported by our experts in risk management who helped drive a culture where risk-rewardtrade-offs are transparent, understood and appropriately managed.

Our integrated Enterprise Risk Management Framework helped advance the Group's strategy by supporting effective risk identification and assessment to help protect our capital, liquidity, earnings, and reputation. Similarly, our well- established Total Risk Profiling™ methodology continued to support in delivering risk insights and focus on the risks that mattered.

By effectively managing our risks, we maintained our resilience and made sure we were there to help when our customers needed us most.

A dynamic risk landscape

The speed of change was a key element in the risk landscape of the Group in 2021. This was best illustrated by the evolution of cyber risk as attacks changed rapidly in scale, sophistication and targets. Cyber insurability is an area of increasing focus as risk appetites are adjusted.

Elsewhere, the sudden re-appearance of inflation concerns has brought to the fore the continued large-scale fiscal costs of the pandemic and the disconnect between markets and the real economy due to expansionary monetary policy. With limited appetite for changes to current policies, economic risks will continue to build.

We continue to apply our expertise and tools, such as dynamic scenario and sensitivity analyses, to assess and proactively manage potential impacts. Using output from the scenario assessments, we continue to develop, implement and monitor actions to give optimal outcomes for our customers, shareholders and other stakeholders.

Sustainability

Various events in 2021 illustrated the increasing risks posed by climate change. The Group's commitment to sustainability, including managing the risks posed by climate change, continues to be an integral part of Zurich's risk management approach.

Zurich is but one part of a financial system that, on its own, cannot meet the challenges posed by climate change. Rather, action from the whole of society is required, given the scale of the challenges we face. As a result, the Group aims to inspire action together with its customers and investees by continuing to promote best practices in managing the interconnectivity of environmental, social and governance (ESG) risks.

Strong financial position

Our financial strength returned to pre-pandemic levels during 2021. This strength reconfirms our resilience and ability to continue to support our customers. Swiss Solvency Test results can be found on page 10.

Peter Giger

Group Chief Risk Officer and

Group Chief Investment Officer ad interim

Development of Swiss Solvency Test ratio

The Group Swiss Solvency Test (SST) ratio increased to 212 percent¹ as of January 1, 2022 from 182 percent as of January 1, 2021. The development of the SST ratio in 2021 reflects strong underlying capital generation and an improved economic environment, in particular higher interest rates and higher equity valuation.

SST ratio

in %

300

250	221%	222%	212%�
216%

200	182%
150

100

50

0

January	January	January	January	January
2018	2019	2020	2021	2022

1 The SST results as of January 1, 2022 are estimated and may differ from the final SST results, which will be presented in the Financial Condition Report at the end of April 2022.

Analysis of Group total risk capital

in %, as of January 1, 2022

Highlights by risk type

Insurance risk

The Group's insurance risk is diversified by geography, line of business, product and customer, supported by our centralized purchase of reinsurance which led to continued sound insurance outcomes in 2021 in the face of COVID-19 and natural catastrophes.

Read more:

Pages 13-19

Market risk

The economic recovery of 2021, lower market volatilities and improved asset-liability-matching reduced the required capital held by the Group for investment risk taking. The portfolio remains well diversified across risk drivers and geographies.

Read more:

Pages 20-26

Other credit risk

In the face of the pandemic, the Group's credit risk exposures continuously remained at high credit quality.

Read more:

Pages 26-27

Operational risk

Zurich's operational risk management approach enables the Group to focus on high-priority matters under demanding circumstances.

USD 24.3bn

Total risk capital

Insurance risk	36%
Market risk, including investment credit risk	63%
Other credit risk	1%

Read more:

Pages 28-29

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Annual results 2021

Risk review

Contents

Risk management	5
Objectives of risk management	5
Enterprise Risk Management Framework	5
Risk governance and risk
management organization	7
Capital management	8
Objectives of capital management	8
Capital management framework	8
Capital management program	8
Risk and solvency assessment	9
Regulatory capital adequacy	9
Regulatory solvency regimes	9
Swiss Solvency Test (SST) ratio	10
Insurance financial strength rating	12
Analysis by risk type	13
Insurance risk	13
Market risk, including investment
credit risk	20
Other credit risk	26
Operational risk	28
Liquidity risk	30
Strategic risk and risks to the
Group's reputation	31
Sustainability risk	31
Disclaimer and cautionary statement	33

The risk review information marked 'audited'

is an integral part of the consolidated financial statements.

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Annual results 2021

Risk review (continued)

Audited

Audited

The risk review information marked 'audited' is an integral part of the consolidated financial statements.

Risk management

Objectives of risk management

Taking and managing risk is an integral part of the insurance business. Zurich takes and manages risks in an informed and disciplined manner and within a pre-determined risk appetite and tolerance.

The major risk management objectives at Zurich Insurance Group (Zurich, or the Group) are to:

• Support achievement of the Group's strategy and protect capital, liquidity, earnings and reputation by monitoring that risks are taken within the Group's risk tolerance.
• Enhance value creation by embedding disciplined risk-taking in the company's culture and contributing to an optimal risk-return profile where risk-rewardtrade-offs are transparent, understood, and risks are appropriately rewarded.
• Efficiently and effectively diversify risk and avoid or mitigate unrewarded risks.
• Encourage openness and transparency to enable effective risk management.
• Support decision-making processes by providing consistent, reliable and timely risk information.
• Protect Zurich's reputation and brand by promoting a sound culture of risk awareness, and disciplined and informed risk-taking.

Enterprise Risk Management Framework

The Enterprise Risk Management Framework is based on a governance framework that sets forth clear responsibilities for identifying, assessing, managing, monitoring and reporting risks.

The Group's risk appetite and tolerance statement reflects Zurich's willingness and capacity to take risks in pursuit of value creation and sets boundaries within which the businesses act. Zurich protects its capital, liquidity, earnings and reputation by monitoring that risks are taken within agreed risk appetite levels and tolerance limits. The Group regularly assesses and, as far as possible, quantifies material risks to which it is exposed.

The Zurich Risk Policy sets the principles and approach for effective risk management throughout the Group. The policy describes the Group's Enterprise Risk Management Framework and provides a standardized set of risk types. Risk-specific policy manuals provide requirements and procedures to implement the principles in the Zurich Risk Policy.

The Group identifies, assesses, manages, monitors and reports risks that have an impact on the achievement of its strategic objectives by applying its proprietary Total Risk Profiling™ methodology. The methodology allows Zurich

to assess risks in terms of severity and likelihood, and supports the definition and implementation of mitigating actions. At Group level, this is an annual process, followed by regular reviews and updates by management.

To foster transparency about risk, the Group regularly reports on its risk profile at business and Group levels.

The Group has procedures to refer risk topics to senior management and the Board of Directors in a timely manner.