Employing panel cointegration analysis and a panel VAR model with system GMM estimator, this paper investigates the long- and short-run dynamic linkages between insurance activities and banking credit for 45 countries within three income levels from 1980 to 2011. The estimation results indicate that there is a significantly positive cointegration relationship between the two financial sectors in most countries, but the specific relationship varies across income levels and sample periods. The panel Granger causality tests further reveal that there is a bidirectional causality between life insurance activity and banking credit in the high-income group, and a unidirectional causality running from banking credit to life insurance activity in the low-income group, while there is a unidirectional causality running from non-life insurance activity to banking credit in the high-income group. These results indicate that the dynamic interactions between insurance activities and banking credit vary strikingly across different income levels.