The deal is a coup for Vivas, which is backed by AIB Bank and billionaire financier Dermot Desmond, opening the way for similar deals with other multinational employers. A company spokesman refused to confirm the appointment, claiming it did not comment on specific clients or contracts.

The Citigroup deal is expected to put about 2,000 new subscribers on Vivas's books, when families of the bank's employees are included, and brings the new entrant's customer base close to 50,000 people.

Vivas has captured more than 2% of the 1bn-a-year health insurance market after 18 months in the business. It was founded in October 2004 by former VHI chief executive Oliver Tattan.

Vivas won the Citigroup deal after a three-way pitch with Bupa and VHI, which previously held the contract.

It is understood that all three were subjected to rigorous due diligence procedures before the contract was awarded. Vivas's victory is seen as a major endorsement for a start-up company, especially as it lacks the financial clout and track record of its bigger rivals.

The news comes at a time of major uncertainty for the health insurance industry.

The VHI is pushing for risk equalisation, which would force its competitors to compensate it because of the older profile of customers on its books. Health minister Mary Harney has backed the VHI's position.

But risk equalisation is being challenged in the courts by Bupa, which claims that the payments to VHI that would be required would plunge it into losses. Bupa has threatened to pull out of Ireland if risk equalisation is introduced.

Tattan says he supports risk equalisation in principle.

But he believes it would be unfair to trigger the mechanism while VHI remains the dominant market player.