Shares of QBE Insurance Group (ASX:QBE) and Suncorp Group (ASX:SUN) rose in morning trade Tuesday following the release of the Australian Prudential Regulation Authority (APRA) stress test, which showed how the widening home insurance protection gap could pose risks to the resilience of Australia's financial system.

Insurance Australia Group (ASX:IAG) shares fell nearly 2%.

APRA's Insurance Climate Vulnerability Assessment found that climate-driven pressures on insurance premiums could "significantly" widen the nation's insurance protection gap, increasing financial risks to the system, the prudential watchdog said in a statement.

A widening protection gap may lead to higher uninsured losses for households, increased credit risk for banks, and limited growth in the home insurance market, according to the statement.