Key statistics:
El Salvador is the smallest and most densely populated (6.5 million) of the seven Central American countries with around two-thirds of the population living in urban areas and a relatively young working age population. It is estimated that the country will reach its maximum population of 7 million before 2050.
With low insurance uptake, it is one of the few countries in the region that is developing a favourable environment for the continued evolution of inclusive insurance – with a number of public-private entities working together with development partners to progress actions to help promote and facilitate relevant products and services for the most vulnerable communities.
Addressing the socio-economic challenges
El Salvador has suffered historically from low levels of economic growth and social development – both of which have been negatively impacted by crime and violence – with annual GDP growth exceeding 3% only twice between 2000 and 2020 according to World Bank data. In spite of this, the poverty rate has declined and El Salvador has become the most equal country in Latin America and the Caribbean with a Gini index coefficient of 38.8 in 2019.
The COVID-19 pandemic had a significant impact on people’s livelihoods and although the Government rolled out brisk fiscal measures to limit the pandemic’s impact on households and businesses, GDP per capita fell by 9% in 2020 to its lowest level in five years and the crisis significantly increased public debt. However, the country’s economy is anticipated to grow by 2.9% in 2022 and 1.9% in 2023.
Like many countries in the region, informality in El Salvador is a barrier in the labour market but the country stands out as having one of the lowest unemployment rates in the region. However, for more than half of Salvadorans employed in the informal sector, they are subject to highly volatile incomes and little or no social security.
It is also worth noting that the equivalent of about one-fifth of the population live and work in the United States and they contribute significantly to the Salvadoran economy by sending remittances to support their families. It is estimated that international remittances make up just under half of the incomes of poorer households.
El Salvador also has a high exposure to natural hazards, such as earthquakes and volcanic eruptions, and is highly vulnerable to climate change impacts, including frequent floods, droughts, and tropical storms - all of which disproportionately affect poor and vulnerable segments of the population. According to United Nations Development Programme reports, 89% of El Salvador’s territory is susceptible to severe impacts of natural disasters and approximately 95% of El Salvador’s population is at some risk.
Inclusive insurance market development
The microinsurance market in El Salvador is still nascent but has significant upside potential. Financial inclusion has been high on the Government's agenda for a number of years but it was not until 2019 that the National Council for Financial Inclusion and Education was created which led to the National Policy Document on Financial Inclusion in 2021. Progress remains limited, however, and only around one-third of the country's population have an account with a financial institution or mobile money provider.
The Central American and Caribbean Microfinance Network (REDCAMIF) plays a pivotal role as an enabler for promoting access to and use of financial and non-financial services in the region by bringing together well over 100 affiliated institutions in seven Central American countries. Through its programmes, it has managed to reach 1.5 million customers in the region.
In addition, the Asociación Salvadoreña de Empresas de Seguros (ASES) – an Association dedicated to promoting the growth, coverage and culture of insurance in El Salvador – has recently developed the first working plan on inclusive insurance in collaboration with the MiN, with the aim of strengthening risk management and mitigation strategies within the country.
In May 2022, the MiN held a virtual workshop in partnership with ASES during which representatives from across the insurance industry discussed the results of the 2021 Landscape of Microinsurance Study specifically relating to El Salvador and the Latin American region, as well as the opportunities and barriers for developing inclusive insurance in the country. The 2021 edition marked the first time El Salvador took part in the Study and became the first such study ever conducted in the country.
For more details on the in-country data and results, read our country report – hot off the press!
Our country reports provide a detailed overview of specific target countries and their inclusive insurance markets as highlighted in our annual Landscape Study.
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