* IPO subscribed 2.98 times as of last day of sale
* ICICI Lombard IPO India's biggest so far this year
* Insurer IPOs to drive fund raising in 2017 (Updates with IPO closing, analyst comment)
By Devidutta Tripathy and Swati Bhat
MUMBAI, Sept 19 (Reuters) - ICICI Lombard General Insurance Co Ltd's initial public offering to raise 57 billion rupees ($886 million) was nearly three times subscribed on the last day of the sale, underscoring investor enthusiasm in India's booming IPO market.
ICICI Lombard, one of the country's biggest IPOs this year, is also the first IPO by a non-life insurer in India. It is benefiting from particularly strong demand for IPOs in the financial sector, although some analysts have cautioned about high valuations.
It received bids for 183.6 million shares, or 2.98 times the 61.7 million on offer, stock exchange data showed as of 0330 GMT.
The interest in ICICI Lombard augurs well for SBI Life Insurance Co Ltd's 84 billion rupee ($1.3 billion) IPO, potentially the biggest in local markets since 2010, which opens for subscriptions on Wednesday.
India's IPO market had raised more than $3 billion so far in 2017 ahead of the ICICI Lombard sale, and some analysts say it could even break a record $8.5 billion raised in 2010.
The local stock market has rallied about 24 percent this year, and the main index hit a record high on Tuesday. The rally has helped IPOs this year and investors are also betting on the growth potential of insurers as Asia's third-largest economy with 1.3 billion people remains relatively underpenetrated.
Pritesh Bumb, an analyst at Mumbai brokerage Prabhudas Lilladher said he had advised his clients to subscribe to the ICICI Lombard IPO with a longer-term horizon, noting the valuations were high.
"SBI (Life) also seems fairly expensive, so pricing will be key going ahead as the market also currently is expensive."
HDFC Life, state-run reinsurer General Insurance Corp of India (GIC Re) and non-life insurer New India Assurance Co are the other insurers expected to launch IPOs this year.
ICICI Lombard's two main shareholders - Indian lender ICICI Bank Ltd and Canada's Fairfax Financial Holdings Ltd - were selling a combined 86.2 million shares, or a 19 percent stake in the biggest Indian private sector non-life insurer.
Anchor investors have subscribed to 16.25 billion rupees worth of shares as part of the IPO. The stock is due to start trading on Sept. 27. ($1 = 64.3250 Indian rupees) (Reporting by Devidutta Tripathy and Swati Bhat; Editing by Subhranshu Sahu and Susan Fenton)