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RISK ASSESSMENT/MEASUREMENT SYSTEM AND RISK-BASED DECISION ANALYSIS TOOL

  • US 20120150570A1
  • Filed: 08/20/2010
  • Published: 06/14/2012
  • Est. Priority Date: 08/20/2009
  • Status: Active Application
First Claim
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1. A computer implemented system for estimating the risk of loss for a specified time period, the system comprising:

  • an input module, operable manually to retrieve and/or receive input information relating to a plurality of observed and/or anticipated loss event occurrences, the input information providing a plurality of loss amount thresholds and the frequency of loss event occurrences at the plurality of loss amount thresholds;

    an optimization module, operable to generate ALECs based on three or more parameters, the parameters comprising two or more severity parameters from an assumed loss severity distribution and an average loss frequency parameter for the specified time period, the optimization module;

    (a) generating one or more initial value sets of the parameters, the initial value sets being provided as pre-determined values and/or provided randomly from a range and/or received manually, the range being pre-determined and/or received manually,(b) generating an ALEC for each of the value sets of the parameters,(c) calculating a weighted error test statistic to measure one or more differences at each loss amount threshold, and/or the aggregated differences, between each generated ALEC and the input information,(d) where one or more of the differences between any one or more of the ALECs and the input information show an improvement in the weighted error statistic greater than a predetermined rate or where steps (b) to (c) have been repeated less than a predetermined number of times, repeating steps (b) to (c) with new value sets of the parameters, the new value sets of the parameters being calculated to attempt to reduce the error test statistic for those ALECs,(e) determining, from the ALECs not being affected by step (d), the overall best fit ALEC based on the error test statistics calculated in step (c), and(f) where the differences between the overall best fit ALEC and the input information exceeds a predetermined precision requirement, and where steps (c) to (e) have been carried out less than a predetermined number of times, repeating steps (c) to (e) with a new weighted error test statistic, thereby providing an estimation ALEC;

    wherein the estimation ALEC represents one unique combination of the average frequency of loss event occurrences for the specified time period and the parameters of the assumed loss severity distribution that best approximate the input information;

    thereby, from the estimation ALEC, the risk of loss may be determined.

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