The Republic of Croatia, as well as a large part of the developed countries in the world, is facing unfavourable demographic trends that are caused by the aging process of the population as a result of greater advances in medicine and the extension of life expectancy. Demographic problems in the Republic of Croatia are also reflected in lower fertility rates and the emigration of mostly younger population abroad. As a result of demographic trends, the pension system of the Republic of Croatia is under increasing pressure and the average pensions are at low levels which increases the risk of poverty for the elderly population. One of the possible solutions to this problem is finding an additional source of income in old age. On the financial market there are various financial products that can be used to finance expenses in old age. Annuity insurance is a pension savings payment product that pays the policy holder temporary or lifetime annuity. This product is intended as a supplement to the pension in overall retirement strategy. Providing an additional source of income in retirement can have a positive effet on the well-being of the individual and provides him with greater financial security and stability. The annuity insurance market in the Republic of Croatia is not very significant, although it has a really important role in maintaining the standard of living in retirement. Due to the fact that annuity insurance is not very popular on domestic insurance market, annuity insurance needs to be further encouraged so the further development on the market could continue. The framework for annuity insurance development can be viewed from different aspects such as aspect of the state, financial institutions and financial regulator. There is potential for growth for annuity insurance in the Republic of Croatia, however, in order to improve and further develop this form of insurance, the engagement of all market participants is required.