The chief executive of the VHI, Mr Oliver Tattan, said yesterday he was "doubtful" that the company would be privatised and said an equity investment or strategic partnership was more likely.

He was speaking in advance of a White Paper from the Department of Health on the private medical insurance market to be published next month. It will recommend major structural changes to the VHI and outline future investment requirements.

Mr Tattan said the VHI needed more "commercial freedom" to develop new products and compete against new entrants to the market. He said this would be possible if the VHI became a public limited company.

He was speaking to The Irish Times after addressing the monthly meeting of the Leinster Society of Chartered Accountants in Dublin. He said the VHI needed between £50 million and £60 million in capital investment. "We urgently need to be capitalised and obviously anyone who provides those funds will want a return on their investment." He added that this would have implications for the company in the future.

If an outside investor comes in, it is likely there would be an increase in premiums. This was spelt out in a report on the company by PricewaterhouseCoopers last year, which said a 20 per cent rise might be needed.

Mr Tattan said the level of interest from outside investors would depend on "how the company handles its business". He said the company's business plan, put in place recently, would help VHI grow its surplus and this would attract potential investors.

According to sources, a direct investment by the State is unlikely because the VHI's sole competitor, BUPA, would be likely to object to the EU.

Mr Tattan claimed the VHI currently had 96 per cent of the private health insurance market. "Our latest sales figures show a record growth in VHI membership and our Option Plans, launched just over a year ago, are heading towards £100 million in sales," he said.

More competitors are likely to enter the market, he said. "We understand there are other companies interested in this market, but they are probably waiting to see how the regulatory environment turns out," he said.

The Department's White Paper is likely to create a new regulator for the health insurance sector.

Mr Tattan said the regulatory environment would have to maintain the "community rating" system. "There is no reason why any commercial company cannot grow in that environment," he said.