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Teivo Pentikäinen

The 39th Astin Conference in Helsinki 2009 has been dedicated to Teivo Pentikäinen.  Who was he  and why this dedication?  That is the question this short presentation tries to give an answer to.

Teivo Pentikäinen's career can be divided to three main periods

  • Academic formation and heading of the insurance department at the Ministry of  Social Affairs and Health
  • Managing Director of Ilmarinen
  • The activities of after-retirement.

The  head of the insurance department

Pentikäinen was born in 1917 and he graduated from the University of Helsinki in mathematics in 1944 at the age of 27 the war years having delayed his graduation.  His second job was at the insurance department of the Ministry for Social Affairs and Health as an actuary.  This department was responsible for the drafting of insurance legislation (both private and social  insurance) as well as insurance supervision. With that Pentikäinen's future career seems to be decided. He remained an insurance man until his death in 2006. While being an actuary he prepared his doctor's thesis  in algebraic functions. After that his interest was more in applying mathematics in practical problems than in theoretical mathematics. He was nominated the chief director of  the insurance department in 1948 and acted as the number one of the Finnish insurance industry until 1962.

During this period Pentikäinen was the key person in the development of the Finnish statutory earnings-related pension scheme (TEL).  The scheme was established in 1962 an is run by private insurance companies and pension funds. He chaired the committee on whose work the legislation was based.

He also chaired the committee which made a total  reform of the the Insurance Companies Act in 1952 with a new solvency system based on modern risk theoretical  thinking and which marked practical consequences such as standard claims reserving methods, the equalisation reserve and reduction of the volume and costs of outgoing reinsurance as a consequence of the improved risk-carrying capacity of the companies. The equalisation reserve is still in use, and is going to vanish only now when solvency II and IFRS change the rules fundamentally.

He was also the mastermind in a major reform of the Finnish motor third party liability insurance and the workers' compensation insurance at the beginning of 1960's. The reforms meant introduction of strict liability, abolishment of ceilings on compensation paid for bodily injury, and  a complete overhaul of the actuarial bases applied to these two insurance lines.

 The managing director of Ilmarinen

In 1962 Pentikäinen  became the first managing director of the newly formed pension insurance company Ilmarinen. The company was founded to be one of the companies to take care of the new TEL-scheme that Pentikäinen had been creating.  In this role he was the key person to execute the system and create practices for running the new scheme.

As the managing director Pentikäinen was the key figure in developing the TEL-system as well as  other parts of the Finnish pension system to become a comprehensive system to cover the whole working population and their dependents.  The system has been resilient during many different economic cycles, and is again being tested by the first global financial crisis.

Post retirement activities

When Pentikäinen retired from Ilmarinen in 1977 he got  the opportunity to dedicate himself totally to risk theoretical work. During the almost 30 year long period he was one of the central figures of developing the modern risk theory. He was a pioneer in using computers and especially simulation in risk theory. He realised very early that closed form analytical formulae were not sufficient to adequately describe  the complex world of insurance risk. He aimed at a comprehensive model of an insurance company. In this model also the investment activities and theis risks were taken into account.
At the beginning 1980's the Finnish Ministry for Social Affairs and Health asked Pentikäinen to make a study on solvency of non-life insurance companies in Finland. He gathered around him a group of actuaries and as a result of the work of this team a book entitled ”Solvency of Insurers and Equalisation Reserve” appeared in 1982.  After this Pentikäinen gathered another group to continue this work on a voluntary basis. The objective was to write a more advanced version of this to be available at the 1988 IAA congress in Helsinki.

Pentikäinen took actively part in public discussion especially on the pension system. He defended  the scheme fiercely and did not save his words on those who unprofessionally or wilfully criticized the system.  He stayed  active until his death in June 2006 at the age of 88.

The literary work

Pentikäinen has published some seminal work in risk theory. First came out ”Risk Theory” (in Finnish) in 1955. This work was thoroughly revised and was published in 1969 co-authored by R.  Beard and E. Pesonen.  A further revision and modernised version was published in 1994 now co-authored by C. Daykin and M. Pesonen.

In modelling the insurance company solvency the above-mentioned book ” Solvency of Insurers and Equalisation Reserve” that appeared in 1982 was a pioneering work. The 1989  book ”Insurance solvency and financial strength” was continuation to the process of developing insurance company modelling.

Pentikäinen published several articles in actuarial journals and gave presentations in international conferences in six decades. An article titled ” A Model of Stochastic Dynamic Prognosis. An application of Risk Theory to Business Planning” which appeared in 1975, is worth while  mentioning.  It is one of the very early attempts to model insurance business in a dynamic way. We are now getting the tools that Pentikäinen was urging us to acquire. His dream of internal modelling is now being fulfilled as actuaries around the world are building these models for their companies.


Pentikäinen was an honourary fellow of the Institute of Actuaries as well as the Actuarial Society of Finland. He got the Clarence Kulp memorial award in 1984  for the best risk theory book.