This study investigates the relationship between investment of insurance funds and economic development of Nigeria. The main objective of the study is to examine the impact of insurance company’s investment activities on the output level of Gross Domestic Product (GDP) in Nigeria. The estimation period covers the period 2012 to 2012 and employing co-integration, OLS, and variance decomposition techniques, the study found a significant long run relationship between GDP and insurance investment in government securities (IVGS), stock and bonds (IVSB) real estate and mortgage (IVRM) and cash deposit (IVCD). In the short run, insurance investment in stock and bonds (IVSB) positively and significantly correlate with GDP. The short run relationship is between IVCB and GDP is positive but insignificant. The result of the impulse response and variance decomposition of GDP to shock emanating from IVGS, IVSB, IVRM and IVCD show that own shocks remain the dominant source of total variations in the forecast error of the variable. It was recommended that insurance awareness, proper fund management, efficient and effective insurance fund allocation (investment) should be fashioned to accomplish their targeted objectives in the economy.