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1. Member States may grant support for risk management tools under the conditions set out in this Article and as further specified in their CAP Strategic Plans.

2. Support under this Article may be granted to promote risk management tools which help active farmers manage production and income risks related to their agricultural activity that are outside their control and which contribute to achieving one or more of the specific objectives set out in Article 6(1) and (2).

3. Member States may, in line with their assessment of needs, grant support for different types of risk management tool, including income stabilisation tools, and in particular:

(a) financial contributions to premiums for insurance schemes;

(b) financial contributions to mutual funds, including for the administrative cost of setting up.

4. When providing the support referred to in paragraph 3, Member States shall establish the following eligibility conditions:

(a) the types and coverage of eligible risk management tools;

(b) the methodology for the calculation of losses and triggering factors for compensation;

(c) the rules for the constitution and management of the mutual funds and, where relevant, other eligible risk management tools.

5. Member States shall ensure that support is granted only for covering losses which exceed a threshold of at least 20 % of the average annual production or income of the farmer in the preceding three-year period, or a three-year average based on the preceding five-year period excluding the highest and lowest entry. Sectoral production risk management tools shall calculate the losses either at holding level or at the level of the holding’s activity in the sector concerned. Member States may provide support in the form of standalone working capital finance under financial instruments referred to in Article 80(3) for the compensation of losses referred to in the first subparagraph of this paragraph to farmers who do not participate in a risk management tool.

6. Member States shall limit the support to one or more rates not exceeding 70 % of the eligible costs. This paragraph shall not apply to the contributions referred to in Article 19.

7. Member States shall ensure that any overcompensation resulting from the combination of the interventions under this Article with other public or private risk management schemes is avoided.