The claim amounts are exponentially distributed. The claims arise as a Poisson process, so the times between claims are exponentially distributed. So, both of these are obtained as simulated values from an exponential distribution (with different parameters). This is done using the inverse transform method. You should be aware of this method from your earlier statistical studies (eg it is introduced in CS1). We have included a document to remind you of the key points to know about this method in the CM2 PBOR - see 'Guidance on simulation and the inverse transform method' under the heading 'Useful documents'.
