The purpose of life insurance is to relieve individuals of economic risk associated with accidents, sickness etc. . . . The insurer covers the risk against a fixed, risk-free premium. It works because in a sufficiently large portfolio of independent risks, the gains and losses on the individuals will balance on average and the premium is set according to principle of equivalence: expected discounted premium are equal to expected discounted benefits. However, a presence of collective risk factors that effect all policies in the portfolio, the indepence assumption may hold true conditionally, given the outcome of these factors, but unconditionally the individual risks become dependent. Examples: catastrophes uncertain economic development demographic development Increasing the size of the portfolio exacerbates rather the mitigates such fors of risk. How to manage the risk?