Insurance is rarely the most exciting sector on the ASX.
However, a combination of rising premium rates, improving underwriting margins, and disciplined capital management is creating an interesting investment backdrop for Insurance Australia Group Ltd (ASX: IAG) and QBE Insurance Group Ltd (ASX: QBE).
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Why premiums keep rising
The driver behind both stocks is relatively straightforward.
Australia's insurance industry has spent the past three years repricing policies upward to recover from a period of elevated claims costs.
These costs were driven by natural catastrophes, supply chain inflation, and building cost increases that significantly exceeded what premiums had priced in.
That repricing cycle has not yet fully run its course.
IAG CEO Nick Hawkins confirmed at the company's half-year results that the business is forecasting high single-digit premium growth for the full year FY2026, with the Australian retail business delivering 14.4% top-line growth in the first half.
QBE similarly reported double-digit premium growth in Q1 2026 and maintained its optimistic full-year outlook.
Gross written premium grew 7% in constant currency across FY2025 driven by targeted expansion across its North American and International divisions.
Insurance Australia Group
IAG is Australia's largest general insurer, writing more than $14 billion in premium per annum across brands including NRMA, RACV, and CGU.
The first half of FY2026 was a noisy result on the surface, with statutory net profit after tax falling 35% to $505 million.
This was largely due to a one-off $174 million weather impact from the newly acquired RACQI portfolio before it was integrated into IAG's comprehensive reinsurance program in January 2026.
Stripping out those one-off items, the underlying picture was considerably more constructive.
Underlying insurance profit grew 7.6% to $804 million and the underlying insurance margin held at 15.1%, with management maintaining full-year FY2026 insurance profit guidance of $1.55 billion to $1.75 billion.
The board also announced an on-market share buyback of up to $200 million, reflecting a strong capital position that gives IAG the flexibility to keep returning cash to shareholders even while investing in the RACQI integration.
However, investors should note that IAG could face a claim in an upcoming Greensill court case, with the company provisioning $432 million for legal fees and claims handling while maintaining it expects no net exposure.
IAG shares have fallen in the last 12 months, which may have created a more attractive entry point for investors.
QBE
QBE offers a different but equally interesting angle on the rising premium theme.
As Australia's second largest international insurer, QBE operates across 27 countries, giving it a diversified premium base that is less exposed to Australian weather events than IAG.
QBE's FY2025 full-year result delivered a 21% lift in statutory net profit after tax to US$2.16 billion, comfortably ahead of market expectations, with its combined operating ratio improving to 91.9%, the strongest result in several years.
The company declared a full-year dividend of A$1.09 per share, a 25% lift on the prior year, and maintained a 50% payout ratio.
QBE is guiding to continued double-digit premium growth in 2026, with Q1 results confirming the momentum has carried into the new year.
Foolish takeaway
IAG and QBE are each navigating their own near-term complexities, whether that is weather events, legal uncertainty, or the pace of global premium moderation.
Nevertheless, the backdrop of rising premiums, improving underwriting discipline, and strong capital positions makes both stocks worth serious consideration for investors seeking quality financial exposure beyond the big four banks.
