If it makes no sense, run away fast!

Insurance is a really simple business. You take in premiums and you use them to pay out claims. Anything left over is profit.

At its heart, the insurance transaction is supremely uncomplicated and down-to-earth.

That is why whenever I am confronted by anything insurance-related that looks more complicated than it needs to be, I start to sniff around and search for the part that has gone wrong.

And any developments that have no obvious strategic rationale always smell particularly bad.

With hindsight they are usually epoch-defining sell signals.

What would you give to have been able to have predicted the global financial crisis and profited like the characters in Michael Lewis's The Big Short?

Well, we all could have by using a bit of common sense.

At the beginning of 2008 there was no financial crisis, just a fairly manageable blowout at a few silly hedge funds.

But then the insurance world was stunned by a five-year, all-encompassing 20 percent quota share of Swiss Re by Berkshire Hathaway. It came right out of a blue sky.

We all spent the next two quarters wondering why one of the best reinsurers on earth would want to give up a fifth of its future profits to one of its competitors, and for five full years to boot.

It made no sense whatsoever.

Then in Q3 everything became obvious. The Swiss giant was impaired and needed capital relief.

With hindsight investors had more than six whole months to buy a long-dated put option on Swiss Re stock and make like bandits.

The shares were changing hands in range of CHF70-CHF85 in that time.

In March 2009 they touched rock bottom at CHF12.09 and only properly recovered after yet more support from Berkshire.

That quota share was the best sell signal of all time and we all ignored it.

So what are we to make of the Swiss Re-SoftBank news?

Happily this time it is not a sell signal for Swiss Re shareholders.

Nothing would ever surprise me and it is always true that a company with Swiss Re's legacy casualty exposures is never more than a couple of adverse actuarial opinions away from a few billion in reserve strengthening.

But the good news is that the Financial Times reported that SoftBank is understood to be looking at an open tender offer as a means to build its mooted 30 percent cornerstone stake.

That means there will be no new shares and therefore no net capital-raising, just existing shares changing hands at a premium.

Conclusion: Swiss Re is okay for cash.

The Japanese firm is looking for seats on the reinsurer's board, so SoftBank CEO Masayoshi Son's upcoming talks with Swiss Re chairman Walter Kielholz will be aimed at securing the board's recommendation for an offer.

But none of the strategic reasons analysts have suggested for buying into Swiss Re stack up.

A minority shareholder cannot gain control of Swiss Re's investments, which are highly regulated and minutely scrutinised by ratings agencies, so that rationale is a dead duck.

Neither can SoftBank oblige any of its other minority investment companies to do business with Swiss Re.

It could introduce them but if Swiss Re isn't providing the best or most economical option those companies will politely decline. Plus a firm the size of Swiss Re really doesn't need an introduction anyway.

Neither can a minority owner run off with Swiss Re's proprietary data. Once again introductions and paternal encouragement will be the order of the day, but there can be no obligation to do collaborative deals.

So the scary conclusion is that none of this makes any sense.

SoftBank is a highly leveraged and incoherent holding company with a habit of overpaying for trophy assets.

Looks to me like this time SoftBank is the screaming sell, not Swiss Re.