Dominic Coyle

and Siobhán Creaton

Three former VHI executives will challenge their former employer and its rival, Bupa, by entering the Irish health insurance market early next year.

Former VHI chief executive Mr Oliver Tattan and Mr Stephen Loughman, who worked as an actuary with the group, are the directors of Centura Health Administration, which was registered with the Companies Office earlier this year.

Mr Mark Cohen, a former VHI marketing director, is also understood to be working with the new group.

It is not yet clear where the funding for the new insurer will come from.

Mr Tattan currently works for financier Mr Dermot Desmond, who recruited him from VHI to head up Daon, a company that hopes to turn biometrics - the use of people's unique features such as fingerprints, retinas and voice to enhance security - into big business.

While the company's memorandum of association specifically states it will not be in the business of issuing insurance, a letter to the Companies Registration Office from the firm's solicitor indicates that this has changed.

Ms Vivienne Feaheny, of Dillon Eustace, notified the Companies Office last month that "we are setting up the above proposed company for the purpose of carrying out health insurance as its main objective".

She said the company would be seeking approval from regulators to enter the health insurance market and, once granted, would change both its name and its stated objective to bring them more in line with such business.

It is understood the company intends to trade as Westway.

Centura will have to win approval from two separate groups. First, the Irish Financial Service Regulatory Authority (IFSRA) must vet the group on a prudential basis to ensure that it has the necessary funding behind it to allow it practise as an insurer.

Centura will then have to approach the Health Insurance Authority, which certifies all players in the health market. This latter process will take about a month.

As of yesterday, Centura had not won approval from IFSRA, making it unlikely that it will win certification in time to pitch for business by January, the busiest month for health insurance renewals.

The next deadline will be April, which is seen as the second crucial peak for business - a legacy of the old tax year.

A spokeswoman for VHI acknowledged that any move by Mr Tattan's group into the health insurance market might see them headhunting talent from the State-owned group.

"However, all these people have left the group two or more years ago, so they have no immediate links," she said.

"VHI does not fear competition but the possibility of a new entrant into the market makes it all the more important for risk equalisation to be introduced," she said.

"Without risk equalisation, the system of community rating central to the Irish health insurance market will be unsustainable."