I'm naive on this topic, but wouldn't a high number of claims be either neutral or positive if said level is anticipated or consistent (as in the crime-ridden metropolis of LS or LC)? Ultimately, all policyholders will pay through higher premiums, and it'd be easier to make a profit (in absolute amounts) on high premiums since bumping up $1000 to $1030 looks a lot less onerous than $300 vs $330. As I said though, I'm naive on this, but I'm guessing only unanticipated high levels of claims would hit insurers hard.
Assuming efficient market, insurance industry will do best in more volatile conditions. The reason is insurance is essentially risk trading and they have the advantage of having access to more information and therefore can come up with more optimal risk trading strategies.
