Patent ID: 8392323

Claim:
A computer-implemented method, comprising: receiving a frequency model that identifies a number of losses; receiving a severity model that applies a magnitude to each identified loss; receiving loss data for fitting the frequency model and the severity model; fitting the frequency model and the severity model using the loss data; generating, by one or more processors using a model simulator, a cumulative distribution including a set of aggregate losses, wherein the model simulator identifies a number of losses using the fitted frequency model and applies a loss magnitude to each identified loss using the fitted severity model, wherein a sum of the loss magnitudes is an aggregate loss; generating, by the one or more processors, one or more parameter covariance matrices using the fitted frequency model and the fitted severity model; generating, by the one or more processors, a risk measure estimate using the cumulative distribution and the one or more parameter covariance matrices; generating, by the one or more processors, one or more vectors of derivatives using the one or more parameter covariance matrices; calculating, by the one or more processors, a confidence interval for the risk measure estimate using the one or more vectors of derivatives; and generating, by the one or more processors, a loss mitigation reserve by summing the risk measure estimate and a one-side width of the confidence interval.