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University Secures First-of-Kind Insurance Against Decline in Chinese Student Enrollment, Showing Clear Risks to Academia of U.S.-China Trade and Tech Wars

If there remain doubts that the U.S.-China trade and technology wars present real risks for U.S. colleges and universities, a recent report that a U.S. university has secured insurance against the risk of material declines in Chinese student enrollment should put those doubts to bed. The risks are so real that they are insurable.

According to Quartz, the University of Illinois at Urbana–Champaign “has paid to insure itself against a major drop in tuition revenue from Chinese students.” In what is understood to be first-of-its-kind insurance cover, the University’s business and engineering colleges “signed a three-year contract with an undisclosed insurance broker to pay $424,000 annually for $60 million in coverage. The insurance pays out if revenue from Chinese students at the two colleges falls by at least 20% in a single year due to a ‘specific set of identifiable events,’ according to the dean of the college of business. “These triggers could be things like a visa restriction, a pandemic, a trade war”–something “outside of” the University’s “control.”

The development is extraordinary, but not surprising. Restrictive U.S. legal and regulatory measures aimed at China (even if not explicitly) have birthed other creative insurance offerings. For example, a few years ago– as U.S. scrutiny of Chinese foreign investment intensified–at least one insurer offered CFIUS insurance, essentially insurance to cover break up or termination fees in the event that a proposed foreign takeover (by a Chinese entity) of a U.S. business was blocked by CFIUS (the Committee on Foreign Investment in the United States) on national security grounds.

As to U.S. colleges and universities, the Quartz report should bring home the reality that U.S.-China confrontation on trade and technology– and particularly the latter– is serious and presents real financial, legal, compliance, reputational, and academic freedom issues and risks. As stated in this May 2018 MassPoint post, the U.S.-China confrontation is not just about tariffs– it is being waged on at least three fronts, with some aspects directly affecting academic institutions (e.g., foreign student visa restrictions). As indicated in this article outlining a range of U.S. restrictions on foreign access to U.S. technology, Chinese participation in U.S. academic research is under scrutiny, including corporate sponsorship of academic research. And, as most recently discussed in this MassPoint update, the DOJ’s new initiative to combat “China’s economic espionage” targets “academic espionage” and influence affecting colleges, universities, and research institutions.

American academic institutions should be aware of their place in trade and technology confrontation between the United States and China, as they face not only legal and policy consequences, but also real financial and reputational risks. Indeed, few things say risk like insurance.

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