Weather insurance is traditionally reserved for farmers in rich countries, enabling them to offset some of the losses that can occur from extreme weather events such as droughts, flood and hail.

The pilot scheme, launched in Ethiopia in March 2006, provided insurance for crop failure and loss of livestock if local rainfall levels this year were significantly below historical average.

The policy, purchased from the reinsurance giant Axa Re by the UN's World Food Programme (WFP) with the help of donations from the Ethiopian government and the United States, did not have to pay out at the October 31 deadline as this year's rainfall did not dip below that threshold.

If it had, the WFP would have been awarded seven million dollars to administer relief in the form of food, social services and cash to help 62,000 households in about a dozen most-affected areas.

A severe drought, according to their calculations, would have cost the farmers 55 million dollars.

"The key benefit of this type of insurance-based emergency funding is that it allows for objective payouts and timely interventions," WFP said, in a presentation on the sidelines of the November 6-17 UN climate conference here.

Historical records show an 80 percent correlation between drought and food aid campaigns between 1994 and 2004. And families that become destitute can take around 10 years to recover the loss.

The WFP said the insurance scheme was an innovative way of harnessing market mechanisms to soften the blow from weather-related disasters in poor countries.

The initiative will now be stepped up to a second phase in Ethiopia, and the World Bank is working on a separate insurance scheme in which local farmers can participate.

The UN Environment Programme (UNEP) cautioned, however, that in order to replicate the pilot scheme across Africa, "urgent attention" needed to be paid to developing the continent's meteorological stations.

Reliable weather data was essential for encouraging insurance companies to cover African countries, it said. Weather insurance depends on determining the risk when compared with historical norms.

"Overall, it is estimated that Africa needs 200 automatic weather stations, a major effort to rescue historical data and improved training and capacity building on climate and weather reporting," UNEP said.

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