  We develop a theory for pricing non-diversifiable mortality risk in an
incomplete market. We do this by assuming that the company issuing a
mortality-contingent claim requires compensation for this risk in the form of a
pre-specified instantaneous Sharpe ratio. We prove that our ensuing valuation
formula satisfies a number of desirable properties. For example, we show that
it is subadditive in the number of contracts sold. A key result is that if the
hazard rate is stochastic, then the risk-adjusted survival probability is
greater than the physical survival probability, even as the number of contracts
approaches infinity.
