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University insures for a loss of Chinese students

By PAUL WELITZKIN in New York | China Daily USA | Updated: 2018-12-14 23:23
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File Photo: International education expo, Beijing. [Photo/IC]

Two colleges at an American university have taken the unusual step of purchasing an insurance policy to protect against a significant drop in tuition revenue from about 800 Chinese overseas students.

The colleges of business and engineering at the University of Illinois at Urbana-Champaign have agreed to pay $424,000 annually for coverage of up to $60 million.

Jeffrey Brown, dean of the Gies College of Business at Illinois, said he brought up the revenue situation in 2015 at his first faculty meeting.

“I was talking about the risks for our program, and one was that we had close to 20 percent of our tuition revenue coming from students in China,” Brown said in an interview.

He also was aware that at the master’s level in some programs, Chinese students represented a majority of those enrolled.

“I naturally think about risk and what to do to minimize the business impact from risk,” said the former scholar in insurance and risk management.

After the meeting, two professors told Brown that he should consider approaching an insurance company to discuss a potential policy. They contacted a local insurance broker in the Urbana-Champaign area who began to shop the idea.

By early 2017, the broker had identified a company and negotiated terms. The policy from a syndicate of Lloyd’s of London took effect in July 2017.

Brown said the policy pays a claim when a year-over-year decline of 18.5 percent of Chinese students occurs in the business and engineering schools.

“The decline must be traced to a political event from the US and Chinese governments, such as a visa restriction or a pandemic that leads to a travel disruption,” he said.

The coverage for losses of up to $60 million is about equal to the combined annual tuition from Chinese students at the two schools, Brown said.

On the undergraduate level at the business school, Chinese students make up about 10 percent of the 3,000 students enrolled at Illinois.

On the graduate level, 500 Chinese students represent about 18 percent of the graduate student body, Brown said.

Chinese students have become a significant presence at many US colleges and universities.

According to the Institute of International Education (IIE), there were nearly 1.1 million international students in the US during the 2017-18 school year. About 363,000, or 33 percent, were Chinese.

The IIE said the University of Illinois is the sixth most-popular campus for international students. The college has more than 5,000 Chinese students.

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