The intent of this study is to investigate that factors identified in developed countries which are attributed as imperative ones to attain optimal capital structure, provide compelling justifications for capital structure decisions in insurance companies of Pakistan. Empirical exploration of factors, that drives optimal capital structure apply on panel data of 31 insurance firms from 2004 to 2009. Two econometric panel data techniques, fixed effects and random effects are pertained. Hausman’s specification test is performed in order to test appropriate model for the study. The outcomes of study advocate that, profitability, age and earnings volatility have inverse relation with leverage and are significant. Liquidity also has inverse relationship with debt ratio but it is not significant. Alternatively, size and growth opportunities have direct relationship with leverage but only size is significant. These outcomes are in line with theoretical theories such as pecking order theory and trade off theory. This research has provided an initial foundation to ascertain the factors influencing decisions of capital structure of Pakistan’s insurance sector and it can be a preliminary base for more methodical investigation. Moreover, this can also be helpful for the managers in making decisions about optimal capital structure. This study, to the author’s knowledge, is conducted first time in Pakistan for investigating the capital structure theories and their implications on insurance companies of Pakistan with the most recent panel data available. Furthermore, this study validates that some features have an effect on capital structure of Pakistani insurance companies as acknowledged in developed countries.