How this broker helped a university get pandemic cover

Innovative Lloyd's cover and a six-figure premium may have saved this university

How this broker helped a university get pandemic cover

Insurance News

By Lyle Adriano

While insurance coverage for pandemic-related business losses continues to be a hotly-debated topic, one university was fortunate enough to be covered for COVID-19’s effects on its revenue.

The Gies College of Business and the Grainger College of Engineering of the University of Illinois at Urbana-Champaign (UIUC) together took out a three-year contract with Lloyd’s of London in 2017 to insure against a significant drop in revenue from Chinese students resulting from specific events – such as a trade war, visa restrictions, and even a global pandemic.

The policy was the creation of UIUC Gies College of Business Dean Jeff Brown and two other university professors, Tim Johnson and Morton Lane. The three collaborated with Andrew Martin, a Besso broker who syndicated the deal through Lloyd’s.

“The coverage placed was innovative and required us to design the product as nothing like it had been done before,” Martin told Yahoo Finance. “The foresight of Dean Jeff Brown and the structuring skills of Dr. Morton Lane was a fortuitous combination that resulted in what may prove to be a valuable hedge for the University of Illinois.”

Martin added that he has worked with Dr. Lane “over many years” in creating other insurance financial products, and that Lloyd’s underwriters collaborated with the UIUC team to develop an insurance program that met the university’s requirements.

UIUC’s policy provides up to $61 million in coverage to match the revenue generated from Chinese students enrolled in both the business and engineering schools; the terms trigger if both schools saw a combined revenue decline of at least 18.5% from a loss in Chinese students. Both colleges have been paying $424,000 a year in premiums.

To the university’s luck, all three stipulated events have occurred: US immigration policies continue to tighten under the Trump administration; the country has also been embroiled in a trade war with China since 2018; and, of course, the recent COVID-19 pandemic.

According to Brown in a previous statement in 2018, Chinese students account for about 11% of UIUC’s total student population – these students are responsible for a fifth of the Gies College of Business’s revenue.

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