Structural Model for Cyber Risk Loss Distribution of Multi-Tenant Smart Buildings: An Application to the Hospitality Sector

Cyberattacks persistently target networks within smart building infrastructure, leading to significant financial losses amounting to millions of dollars. Smart building operators and cyber insurers need new tools to enhance cybersecurity measures and mitigate risks. In this paper, we propose a structural framework of an aggregate loss distribution for the cyber risk of a multi-tenant smart building network. We apply our framework to the hospitality sector, specifically to hotels, where the integration of smart technologies introduces unique challenges and vulnerabilities in managing cyber risk. To our knowledge, there exists no other models of an aggregate loss distribution for cyber risk for this setting. We contextualize the problem in the appropriate probabilistic graph-theoretical framework and use a bond percolation model to compute the mean and variance of the aggregate loss distribution relevant to cyber insurance pricing.