FRANKFURT (Reuters) - European Central Bank policy has increased the likelihood that interest rates will stay low for longer, requiring insurers and occupational pension funds to focus more closely on risk management, the EU's insurance regulator EIOPA said on Tuesday.

"Monetary policy and low crude oil prices imply a protracted low yield environment in the short to medium-term," the European Insurance and Occupational Pensions Authority (EIOPA) said in its financial stability report.

"In this environment, the 'double-hit' scenario cannot be ruled out, EIOPA said, referring to the prospects for insurers to be hit simultaneously by a rise in the value of their future liabilities and a drop in the value of assets held to meet those liabilities.

EIOPA Chairman Gabriel Bernardino warned that particularly for occupational pensions funds, prudential regimes might be underestimating the risks. EIOPA has made recommendations to improve clarity in this area, he said.

The regulator is currently conducting stress tests of how well the insurance sector can respond to financial stress.

Big, diversified insurers such as Allianz <ALVG.DE>, Axa <AXAF.PA> and Generali <GASI.MI> are seen as financially robust but smaller life insurers are seen as vulnerable the longer interest rates stay low.

(Reporting by Jonathan Gould, editing by Louise Heavenss)