Portfolio insurance protection explained

Nassim Taleb's definition of a "Black Swan" is a risk event that is wholly unpredictable and immeasurable. For example, “A Black Swan is not dying because your parachute didn't open while skydiving... it is dying because the guy whose parachute didn't open landed on you while you were golfing.”

Selling insurance is generally a profitable business. By charging a large number of customers a relatively small amount an insurer can diversify its risk enough to be able to afford to pay out on the occasional claim.

By understanding the risks, and charging appropriately, an insurer can further increase its profits.

So, one would hope, life insurance for a habitual sky diver is considerably more expensive than it is for a golfer.