How 3 Professors Made a Secret $24M Bet That Saved Their University
5 days ago
- #Risk Management
- #Higher Education Finance
- #University of Illinois
- Three professors at the University of Illinois—Jeff Brown, Tim Johnson, and Morton Lane—created a groundbreaking insurance policy with Lloyd’s of London to hedge against the financial risk of a drop in Chinese student enrollment.
- The policy, initiated in 2017, provided $61 million in coverage over three years, triggered if tuition revenue from Chinese students dropped by more than 18.75% due to events like a pandemic or visa restrictions.
- When COVID-19 hit in 2020, the policy paid out nearly $24 million, saving the university from severe financial losses and potential layoffs.
- The university kept the policy confidential due to political sensitivities and fears of backlash over prioritizing international students financially over domestic ones.
- A student journalist from the Daily Illini nearly exposed the policy through a FOIA request but abandoned the story, missing a career-defining opportunity.
- Renewal of the policy was mishandled by a new insurance director, leading to worse terms and exclusion of COVID-19 coverage, leaving the university exposed to future risks.
- The story highlights the tension between financial innovation and public accountability in higher education, as well as the power of individual actions to uncover institutional secrets.