In a move that could pave the way for an early listing of insurance companies on the stock exchanges, the finance ministry has decided to revoke a clause in the law that requires them to be in business for at least 10 years before floating initial public offers (IPOs).

The decision has been taken after consultations between the law ministry and the Insurance Regulatory & Development Authority (Irda).

"The finance ministry has taken a policy-neutral view on the issue. We will move an amendment to delete the section from the insurance laws," a senior finance ministry official told Financial Chronicle.

The deletion of Section 6AA of the Irda Act, 2000, means that any insurance company that conforms to the listing requirements of the Securities & Exchange Board of India (Sebi) and Irda will be able to go ahead with its IPO, irrespective of the number of years it has been in the business.

The section also requires mandatory listing of insurance companies on completion of 10 years in business. After the section is removed, it will be left to the discretion of a company to decide whether or not to be listed.

A number of life insurance companies have shown interest in coming out with IPOs but cannot because of the clause. They include SBI Life Insurance, HDFC Standard Life Insurance and Reliance Life Insurance.

Reliance Life has already applied for permission to float an IPO before it completes 10 years in business. HDFC Standard Life started operation in 2000, SBI life in 2001 and Reliance Life in 2002. There are 22 life insurance and 21 non-life insurance companies in India -- all of them unlisted.

"Many companies plan IPOs to raise funds. Life insurance is a capital-intensive business. A government decision in this matter will bring some clarity," said the chief executive officer of a private insurance company.

"The 10-year clause has to go. It will help companies that need funds to raise them from the capital market," Shashwat Sharma, director for insurance at KPMG, said.

Irda could not be reached for comment. The amendment will be part of the Insurance Amendment Bill, now being examined by the standing committee on finance.