EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Introduction

We are a leading global reinsurer, providing multi-line reinsurance to insurance companies. We are an economic entity that exists to take risk and earn an adequate return on the capital that shareholders provide. Three principles drive our behavior. First, we sell a product of value to selected insurance and capital markets clients backed by our financial ability to meet our commitments. Second, we deliver an adequate return on the shareholders’ capital to compensate them for the risk that we assume on their behalf. Third, we aspire to be a well-managed company through our sound governance practices and processes and our commitment to provide a challenging work environment where employees can both develop their careers and be appropriately rewarded for their performance.

Executives and employees with the skills to assess, value and manage risk are critical to the creation of shareholder value. We seek to establish compensation policies which both further the rights of the shareholders to receive an adequate risk adjusted return and the expectation of employees to be adequately compensated for their ability to create value.

Compensation Committee

The Board is responsible for managing strategic decisions throughout the organization. To best manage this responsibility, the Board has established five standing committees: the Audit Committee, the Compensation Committee, the Finance and Risk Management Committee, the Human Resources Committee and the Nominating and Governance Committee. Each committee is detailed under the heading “Committees of the Board of Directors” on pages 18-21. Membership of each committee, including the Compensation Committee, has been determined to maximize the requisite abilities and professional experience of each of the respective directors. The assignment of directors to specific committees and the designation of committee chairs is the responsibility of the Nominating and Governance Committee. The Nominating and Governance Committee organizes and approves the rotation of committee membership and committee chairs on a regular basis.

The primary responsibilities of the Compensation Committee are to set our compensation philosophy, to review and approve recommendations from the Human Resources Committee and to make recommendations to the Board, as necessary, with respect to the compensation and benefits of executive management. In addition, they manage any plan that provides equity-based awards. The Compensation Committee also oversees the application of the compensation philosophy to the compensation and benefits policies for the named executive officers and any other officers subject to Section 16 of the Securities Exchange Act, whom we refer to as the Section 16 officers. These compensation and benefit policies govern cash and equity compensation, perquisites, retirement, severance and change in control benefits.

The Compensation Committee is comprised of four directors, namely, Mr. Jean-Paul L. Montupet (Chairman), Mr. Vito H. Baumgartner (Vice-Chairman), Mr. Kevin M. Twomey and Dr. Jürgen Zech. Further information relating to the experience and background of each member of the Compensation Committee, including the Chairman and Vice-Chairman, can be found under the heading “Executive Officer and Director Biographies” on pages 5-10.

Each member of the Compensation Committee is an independent director as defined under the New York Stock Exchange rules and as determined by the Board on an annual basis. The roles and responsibilities of the Compensation Committee are outlined in the PartnerRe Ltd. Compensation Committee Charter which is available on our website at www.partnerre.com.

Roles and Responsibilities of the Members of the Compensation Committee

Chairman

The responsibilities of the Chairman of the Compensation Committee include:

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Vice-Chairman

The responsibilities of the Vice-Chairman of the Compensation Committee include:

Committee Membership

Each member of the Compensation Committee is required to prepare for each meeting, consider the materials provided and discuss any issues raised. Members are also required to provide input and support to the Chairman of the Compensation Committee on decisions and recommendations.

The Compensation Committee meets a minimum of four times per year. The meeting dates correspond with the regularly scheduled Board meetings, as set by the Chairman of the Board. The Chairman of the Compensation Committee may call additional meetings as required.

Compensation Committee Consulting Services

The Compensation Committee Charter permits the Chairman of the Compensation Committee to engage outside consulting services. In August 2005, Mr. Montupet engaged PricewaterhouseCoopers for their expertise in the strategic design, and governance controls of executive, director and corporate compensation and benefit programs.

Mr. Montupet has direct access to PricewaterhouseCoopers and he requests information, analysis and proposals from them on a regular basis. Mr. Montupet and the other committee members receive full copies of all final work products generated by PricewaterhouseCoopers for the Compensation Committee. Mr. Montupet may also request that PricewaterhouseCoopers attend any meeting of the Compensation Committee as appropriate. PricewaterhouseCoopers invoices us for their services with a copy sent to Mr. Montupet. Fees for these services are agreed on a project-by-project basis. No annual retainer fees are paid to PricewaterhouseCoopers.

Management uses the services of another team within the PricewaterhouseCoopers organization to provide technical expertise on the compliance of broad-based global employee equity programs and new U.S. accounting and tax regulations. Management also obtains consulting services from other independent compensation consultants on an ad hoc basis throughout the year. Typical projects include market pay studies, industry benchmarking and input on current trends and developments in executive compensation.

Management Role in Compensation Committee Activities

The Chief Executive Officer is not a member of the Compensation Committee and does not attend any Compensation Committee meetings unless specifically requested to do so by the Chairman of the Compensation Committee . The Chief Executive Officer may act as a key discussion partner with Compensation Committee members to provide information regarding business context, the market environment and our strategic direction. The Chief Executive Officer also provides recommendations to the Compensation Committee on individual performance evaluations and compensation for the named executive officers, other than himself. The Chief Executive Officer is a member of the Human Resources Committee together with the members of the Compensation Committee.

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The Chief Human Resources Officer is not a member of the Compensation Committee, but does attend Compensation Committee meetings. The Chief Human Resources Officer supports the Compensation Committee by presenting information and proposals to the Compensation Committee as outlined in the meeting agendas. The Chief Human Resources Officer also ensures technical and administrative support for the Compensation Committee as required.

The Director of Group Compensation and Benefits is not a member of the Compensation Committee, but does attend Compensation Committee meetings. The Director of Group Compensation and Benefits acts as staff to the Compensation Committee, as a resource on technical issues, as well as committee secretary.

PartnerRe Executive Total Compensation Program

The Compensation Committee has developed and approved the Executive Total Compensation Program, which is designed to fairly reward executives for above average performance. The Compensation Committee has determined the following guidelines:

Additional design elements within the Compensation Committee guidelines include:

The intent of the Compensation Committee is to establish compensation and benefit programs for our Chief Executive Officer, Mr. Patrick A. Thiele, and certain executive officers that will incent and reward the contributions, results and behaviors that will most effectively produce optimal financial results while ensuring the continued stability and long-term success of our company for our shareholders.

To proactively manage the strategic and operational risks, the Compensation Committee developed an Executive Total Compensation Program which was implemented in 2004. Individuals who are eligible to participate in the Executive Total Compensation Program are the Chief Executive Officer, and Messrs. Benchimol, Meyenhofer and Moore (together, the “Program Participants”). The Executive Total Compensation Program was designed to meet the following strategic objectives, set by the Board:

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Full details on each compensation and benefit component contained in the policy appear in subsequent sections of this document.

Compensation of Program Participants: Roles and Responsibilities

Board of Directors

The Board is responsible for the final approval of all compensation elements for each Program Participant, including the Chief Executive Officer.

Compensation Committee

The Compensation Committee reviews the analysis from the Chief Human Resources Officer, the compensation consultant and the Chief Executive Officer (with respect to the other Program Participants) in determining the final compensation recommendations to the Board for the Program Participants.

Chief Executive Officer

The Chief Executive Officer provides information and recommendations to the Compensation Committee related to the compensation of the Program Participants other than himself. Annually the Chief Executive Officer proposes financial performance metrics, weights and scales and organizational performance objectives for each Program Participant for the subsequent performance period. Following the performance period, the Chief Executive Officer makes compensation recommendations based on both the financial performance results and the Chief Executive Officer’s qualitative assessment of each Program Participant’s performance in achieving the organizational objectives and contribution to the organization. Compensation recommendations for the Program Participants are aligned with our compensation philosophy, annual incentive guidelines, equity grant methodology and the Executive Total Compensation Program.

Human Resources Committee

The Human Resources Committee (as described in further detail under “Human Resources Committee” on page 19) is comprised of the members of the Compensation Committee together with the Chief Executive Officer and is staffed by the Chief Human Resources Officer and other members of the Group Human Resources department.

The Human Resources Committee charter requires the Human Resources Committee to oversee human resources philosophy, strategy, policy and administration applicable to all employees within the PartnerRe group.

Human Resources Management

The Chief Human Resources Officer provides information and analysis on executive compensation and equity programs for the Compensation Committee, as requested.

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On an annual basis, Human Resources management provides analysis on internal pay equity, tally sheets, compensation mix, executive stock ownership and competitive market comparisons.

The Chief Human Resources Officer and PricewaterhouseCoopers present the Compensation Committee with alternatives in the compensation of our Chief Executive Officer to consider, based on benchmarking data and our executive compensation programs.

Recommendations for the Chief Executive Officer and Program Participants are then presented to the full Compensation Committee by the Chief Human Resources Officer. Base salary recommendations are analyzed for market competitiveness. Annual incentives are calculated based on our financial performance results (organizational performance ratings may only be determined by the Compensation Committee). Equity award recommendations are based on equity grant methodologies and adjusted as appropriate for individual performance.

The Compensation Committee recommends the Program Participants’ total compensation to the Board for their ratification and approval.

Once approved, the Chief Human Resources Officer is responsible for implementing the base salary adjustments, the annual incentive payment and the equity award grant.

Compensation Consultant

PricewaterhouseCoopers is responsible for providing information and guidance to the Compensation Committee as requested. Annually at the November meeting of the Compensation Committee, PricewaterhouseCoopers presents a competitive peer group analysis for review and approval. Based on the approved peer group, PricewaterhouseCoopers prepares a competitive compensation analysis on executive compensation which is presented to the Compensation Committee at the following February meeting for ratification and approval. Each element of total compensation for the Program Participants is compared to respective counterparts for each company within the competitive peer group.

Named Executive Officers in the Proxy

Within the PartnerRe group, the principal decision-maker is the group Chief Executive Officer, Patrick A. Thiele. In reaching a determination on principal decisions, the Chief Executive Officer relies heavily on the Chief Financial Officer, the Chief Executive Officers of the major business units and the Chief Actuary. This group constitutes the named executive officers.

Mr. Costas Miranthis, the Chief Actuary, was designated as a named executive officer and a Section 16 officer on April 5, 2006. Mr. Miranthis’s remuneration is the same as offered to all other management level employees, who are not included in the Executive Total Compensation Program. Mr. Miranthis is eligible to receive an annual incentive with a target payout of 80 percent of salary. In February 2007, Mr. Miranthis was awarded an annual incentive payment of $620,686, based on company results and the performance of the actuarial function in 2006. Mr. Miranthis’ annual incentive payment is indexed to the pound sterling and is based on the average rate for the prior year (i.e., 2006 for 2007 payment) against a base period defined as the 12 month average at the time his employment commenced. Mr. Miranthis is eligible for annual grants under our long term incentive plan but is not included in the Executive Total Compensation Program.

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Further details about the Program Participants are included below:

Summary of Elements of Compensation

Base Salary

Base salary is set at market competitive levels using disclosed peer company comparisons. This is a fixed expense that does not vary with performance. It is intended to remunerate executives for their extensive years of experience and industry specific expertise that does not vary with performance. Our peer group is discussed below under the heading “External Pay Equity—Competitive Peer Group”. At the Chief Executive Officer’s request, and as agreed by the Compensation Committee, Mr. Thiele’s salary will be capped at $1 million per year from 2007 until retirement.

Annual Incentive

Each named executive officer has a bonus target that is set as a percentage of salary with the Chief Executive Officer’s bonus target set at 125 percent and the other Program Participant percent’s bonus target set at 100 percent. As applies to all employees the named executive officers can earn between 0-200 percent of their individual target bonus based on performance.

For the Program Participants, a variable amount is paid based on pre-determined, quantitative measures intended to incent and reward performance. In our case, the primary measure of performance for our executives is group annual operating return on equity. The Compensation Committee approves the performance goals including the weights and measures for each named executive officer prior to or at the beginning of each performance period. For more detailed information, please see the “Annual Incentive Guidelines” and “Performance Weightings, Metrics and Scales” sections below.

Equity Grants

Equity grants are made in accordance with the Executive Total Compensation Program with the amounts granted by the Compensation Committee using operating return on equity as the measure of performance. We set ownership targets for each of our Program Participants and have designed a structured award program that allows each Program Participant to reach the targets within a reasonable period of time. Once the Program Participants reach these targets, we allow them to customize the form of the grant.

For more detailed information, see the “Annual Equity Grant Methodology” and “Executive Stock Ownership” sections below.

Mix of Compensation

We analyze and review the mix of compensation for the Program Participants on an annual basis. The intent of the Compensation Committee is to ensure that the balance between fixed and variable compensation supports a pay for performance approach and that the equity component is sufficient to align the executives’ interests with those of shareholders, focused on the long-term success of the organization.

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The following table illustrates the breakdown of compensation of target compensation for the Program Participants for 2006. The numbers shown are percentages of total annual compensation which is the aggregate value of salary, annual target bonus and target equity awards:

As detailed above, Mr. Miranthis is not a Program Participant. The following table illustrates the breakdown of compensation of target compensation for Mr. Miranthis:

The Compensation Committee has concluded that our target incentives and equity methodologies provide the appropriate mix of total compensation in support of our compensation philosophy.

Internal Pay Equity

The Compensation Committee analyzes and reviews the appropriate level of compensation for the Program Participants on an annual basis. In addition, the Compensation Committee analyzes and reviews the compensation of our section 16 officers, including Mr. Miranthis and the group Chief Accounting Officer, Laurie Desmet, on an annual basis. The Compensation Committee reviews compensation information based on both internal pay equity analysis and the external competitive market where we compete for talent.

Each year, the Compensation Committee recommends the Chief Executive Officer’s total compensation package and any revisions to the package are approved by the Chairman of the Board. Management prepares an internal equity pay analysis annually comparing the compensation levels of each element of basic compensation as well as total compensation consisting of base salary, annual incentive and equity awards.

The analysis presented for review by the Compensation Committee in 2006 compared average compensation levels from 2001 to 2006 for the Chief Executive Officer and other Program Participants and section 16 filers.

The Compensation Committee believes that the Chief Executive Officer’s compensation levels, compared to the other Program Participants, are appropriate and reflect the scope and responsibilities of the Chief Executive Officer relative to other Program Participants. The Compensation Committee has also determined that the other Program Participants are appropriately positioned between the Chief Executive Officer and the next level of management.

Based on the aggregate of the salary, annual incentive and equity value averaged over the last three years, the Chief Executive Officer’s annual compensation was 29 times the average annual compensation paid to our employees.

External Pay Equity—Competitive Peer Group

To aid retention and recruitment of potential executive officers, the Compensation Committee analyses and reviews the compensation data of a selected market peer group. We define our competitive peer group as those organisations with whom we compete for executive talent. The Compensation Committee has established an annual peer group review process in which companies included in the existing peer group are reviewed for their

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continued relevance and other companies are considered for inclusion to the group. Criteria used for analysis and consideration include size (revenues and market capitalization), corporate strategy, business mix, location and the availability of compensation data. All companies included in the peer group are in the insurance or reinsurance industry.

The 2006 market peer group was chosen by the Compensation Committee based on recommendations from PricewaterhouseCoopers, the retained compensation consultants to the Compensation Committee. In November 2006, the Compensation Committee approved the following companies for our peer group analysis: ACE Ltd., XL Capital Ltd., W.R. Berkley Corporation, Reinsurance Group America Inc., Everest Re Group Ltd., Transatlantic Holdings Inc., Arch Capital Group Ltd., Scor SA, Axis Capital Holdings Limited, Endurance Specialty Holdings Ltd., and RenaissanceRe Holdings.

In January 2007, PricewaterhouseCoopers provided a compensation analysis for the Program Participants relative to their counterparts within the competitive peer group. Their report, including all supporting documentation, was provided to the Compensation Committee. The key findings of the analysis demonstrated to the Compensation Committee that the Program Participants are being fairly compensated relative to their peers.

Linkage of Compensation to Business Strategy

Annual Incentive

Annual Incentive Guidelines

All employees of the PartnerRe group are eligible for a cash annual incentive based on the achievement of pre-determined performance goals. The Compensation Committee approved the PartnerRe Group Annual Incentive Guidelines. These guidelines provide a framework for the structure and payout of annual incentives in the organization, including guidance on performance metrics and weights as well as process and governance. The components are:

The target annual incentives and 2006 payout ranges for the named executive officers are as follows:

Performance Weightings, Metrics and Scales

The annual incentive performance weightings, metrics and scales for the Program Participants are approved by the Compensation Committee at the November meeting of the Compensation Committee that precedes the performance period commencing in January. Metrics measure both financial and non-financial (organizational) performance against pre-determined objectives. Weights are applied to each metric based upon the importance to our strategy, the current business environment and the behaviors of each executive that the Compensation Committee wants to incent and reward.

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Each of the Program Participant’s annual incentive is heavily weighted (70-80 percent) toward our financial performance in terms of profitability and growth. In the last three years, operating return on equity has been the principal financial measure. The scale has not changed in five years and is as follows:

The above scale is calibrated to reflect the degree of difficulty associated with achieving the return on equity targets shown. The annual incentive target (i.e., payout at 100 percent) reflects 13 percent return on equity performance, which is our long-term target. The scale starts at 8 percent because we believe that at or below this level, shareholders are not being adequately compensated for the risk associated with their investment in us. The annual incentive payout is capped at 18 percent because we believe that an uncapped payout could result in behavior that is not in our best interests in the long-term or that of our shareholders.

In addition to the return on equity goal, there are other predetermined quantitative and qualitative goals. These quantitative goals are either growth of business or return on profitability. The qualitative goals relate to specific projects and actions which are determined by the Board as being part of our overall success.

2006 Annual Incentive Weightings for the named executive officers