VHI, the country's largest health insurer, will this Tuesday fail to meet the crucial test of its solvency levels as the company moves towards receiving direct state assistance amid a worsening financial position.

The health insurer told the Sunday Tribune that to meet the solvency test, set for 1 September, it will need require "additional equity as well as insurance and/or subordinated debt''. The company must set aside 40% of its premium income as a reserve in order to satisfy the solvency test.

However, as subscribers leave the company it will not get close to satisfying the test and as a result it will not be fully regulated by the Financial Regulator.

The Sunday Tribune understands the Department of Health will now put the deadline for the 40% test back to December as it prepares a memo for government on the best way to deal with what could become a crisis for the firm which currently claims to have a solvency ratio of 27.7%.

"It is a strategic imperative for us to achieve regulation. We are exploring how to bridge the gap,'' said a VHI company spokesperson.

Reacting this weekend the managing director of Hibernian Aviva Health, Jim Dowdall, said: "Health insurance customers are already being charged a levy on health insurance to help fund the VHI. The provision of further state aid is neither of benefit to the taxpayer who must ultimately fund that state aid''.

He said his company estimated that VHI could have a "gap'' of €150m in terms of reaching the required solvency level. The VHI declined to comment on its precise solvency level at present.