NAIROBI (Reuters) — Insurers can win new customers and help encourage adaptation to global warming by creating climate change instruments for developing nations, a major United Nations conference in Kenya heard yesterday.In March, the UN signed the world's first insurance deal for humanitarian emergencies with French insurer Axa Re to cover Ethiopia in the case of devastating drought.

The $930,000 policy would pay out more than $7 million to Ethiopian farmers if rainfall drops below a certain level during harvest season.

"There is a lot of noise about this now (from insurance companies) because they want to get new clients in new markets ... India and China are very promising," said Thomas Loster, chairman of the Munich Re Foundation.

In April, Jeffrey Sachs, an architect of the UN Millennium Development Goals for easing world poverty, urged countries plagued by natural disasters to take out insurance policies rather than hope for humanitarian aid.

Armin Sandhoevel of Dresdner Bank, who heads a climate change working group for a UN Environment Programme-private finance partnership, said there was great interest in micro-insurance schemes for farmers in the world's poorest nations.

"In these areas there is no safety net and no access to insurance, so it is a viable option," Sandhoevel told at an insurance session on the sidelines of the Nairobi meeting.

"More and more companies are offering these services."

More than 40 percent of farmers in poor countries face weather-related threats to their livelihoods, the World Bank says, while it says floods, drought and other weather conditions cause crop losses of up to $429 billion a year.

The bank has proposed a new reinsurance vehicle, the Global Index Insurance Facility (GIIF), to establish and underwrite weather, disaster and commodity price risks in developing nations.

Ian Noble, of the bank's climate change team, said 100 million euros was initially being sought for the GIIF.

Africa had huge potential for insurers, he told the meeting, because only 15 percent of its farmers had ever tried to use insurance -- and almost all of them were in Egypt.

But he said great care had to be taken with such schemes to avoid making farmers less inclined to adapt to the threats of climate change -- and just wait for pay-outs instead.

"We want to link development insurance to actions which also mitigate against future climate variability, so people do improve their response capacity," Noble said.