socastcmsRssStartBy Cole Lauterbach | Illinois News NetworksocastcmsRssEnd
The University of Illinois has taken out a $60 million insurance policy to protect against a sudden drop in enrollment from students from China.
When Gies School of Business Dean Jeff Brown took his post in August 2015, his first faculty meeting addressed what he called a “serious risk” of having such a large portion of department tuition come from Chinese students.
“We had upward of 15 to 20 percent of our total tuition revenue from students who are from China,” he said.
Two of his faculty members approached him with the idea of insuring against the exposure to any uncontrollable loss of that revenue source.
By 2017, they’d found a willing underwriter to insure their potential loss for a competitive price. Since July of that year, the school has paid $424,333 annually for a three-year specialty contract with Lloyd’s of London, insuring the Chinese contingent of the business and engineering schools’ student population for $60 million, the amount Brown said would cover potential losses in the two colleges. The final payment is due in May 2019. The policy expires in 2020.
Should the revenue drop by any more than 20 percent for identifiable reasons outside of the school’s control, Lloyd’s of London would have to pay out under terms of the policy.
Because Gies is almost entirely funded by tuition and endowments, the premiums are not taxpayer-funded, rather paid for with the tuition of the students from China themselves, Brown said.
International enrollees in the graduate business school pay <a href="https://grad.illinois.edu/sites/default/files/pdfs/certoffinances.pdf">up to $60,504</a> in tuition and other expenses for a calendar year that includes a summer curriculum. The tutition revenue from international students, Brown said, makes scholarships for Illinois undergraduates possible.
"Most well-run businesses carry some sort of business interruption insurance to cover against these types of issues," State Sen. Chapin Rose, R-Mahomet, said. "It appears that the college business faculty is running the college like a business. At first blush, it appears to be a pretty savvy move."
Brown said President Donald Trump and his now-tenuous relationship with China wasn’t a factor.
“This was 2015,” he said. “I didn’t have any particular event in mind that I was concerned about but I realized that the government of China, the government of the U.S., the health outbreak, there were a lot of things that were outside of our control that could trigger a precipitous drop in enrollment from China and that felt like the type of thing we ought to think about insuring against.”
Had the college taken out the plan today, the premiums may be higher.
Reuters reported in late November that the Trump administration <a href="https://www.reuters.com/article/us-usa-china-students-exclusive/exclusive-fearing-espionage-u-s-weighs-tighter-rules-on-chinese-students-idUSKCN1NY1HE">was mulling restrictions</a> on Chinese student visas over concerns of espionage.
The Daily Illini reported in September that Chinese student enrollment for the entire university had <a href="https://dailyillini.com/news/2018/09/17/university-sees-decline-in-chinese-student-enrollment/">dropped</a> to 5,797 in 2018 from 5,932 the year before.