The Quinn Group is to go ahead with the buy-out of health insurer Bupa and is to fight emergency legislation that means it make payments to its main rival, VHI Healthcare.
The company also said it had offered to take over all of rival VHI's business which it said was trading illegally because the semi-State company does not have to meet the same solvency requirements as independent companies.
The Minister for Health Mary Harney has welcomed the annoucement.
Quinn Group chairman Sean Quinn strongly criticised emergency legislation changing the law giving new entrants to health insurance market a three-year derogation from making risk equalisation payments.
The scheme operates on the principle of Community Rating, which requires policy holders of all ages to pay equal premiums. This means insurers who pay out less because of a younger client base compensate companies with older clients, who make more costly claims.
Mr Quinn issued a statement this evening saying: "We completed a contract with Bupa based on existing legislation and now the Government brings in emergency legislation to make us subsidise their own business, which we believe to be trading illegally.
"How can we be expected to run a business if Government can change legislation retrospectively which changes this business from a profitable activity to a loss-making one?"
The company met with Ms Harney on Monday where it outlined its concerns about VHI's special exemption from EU rules requiring insurers to support the value of its business with 40 per cent equity.
"We also explained that the Quinn Group was willing to take over the entire VHI business without the need for risk equalisation payments in order to resolve the current impasse.
The purchase of Bupa, for a reported €150 million, would bring competition to a "dysfunctional health insurance market", Mr Quinn said.
VHI was charging "far too much for their products and is being propped up by the Irish taxpayer without any accountability", he added.
Ceo of VHI Vincent Sheridan rejected the claim saying the company was highly efficient and welcomed competition.
Mr Sheridan told Today FM: "If we compete with people on a level playing field where, if we are going to have community rating, there is a proper risk equalisation fund in place, then we will compete with anybody," Mr Sheridan said.
Commenting after the Quinn Group's announcement, Ms Harney said there was "significant potential for reform of the insurance market" and the Government was determined to achieve it.
"I will continue to pursue the Government's policies of supporting a community rated market and fair competition. It is important that health insurance remains affordable to older people and those with illnesses, and also that consumers benefit to the greatest degree possible," Ms Harney said.
Earlier today, Tánaiste Michael McDowell denied any "sleight of hand" in the rushing through of emergency legislation closing the loophole that would have allowed Quinn a three-year exemption from making transfers.
President Mary McAleese today formally signed into law the Health Insurance (Amendment) Bill 2007; it was only brought to the Oireachtas yesterday evening.