Only if the insurer in question is solely involved in auto insurance.

From the insurance company's perspective, they need enough of a capital reserve to mitigate the risk of a sudden shock in payouts. Spreading across larger geographic areas mitigates that risk somewhat, as does spreading through multiple businesses. Auto insurance is probably a particularly nice gig since it's relatively unaffected by things like natural disasters and would have a relatively smooth cashflow.

So, less capital from auto insurance means more capital has to come from somewhere else - more borrowing, if nothing else. That probably translates into either reduced profitability, or higher premiums on other kinds of insurance.

I'm not an actuary by any means, but that's my guess.