Why is this important? Because, by an equation called the Clausius-Clapeyron relation, as the space occupied by the atmosphere warms it is also capable of carrying near-exponentially more water vapor. Superficially, therefore, considerable amplification of the original warming might be expected. In practice, however, as you rightly point out, the likelihood is that more water vapor in the atmosphere will lead to the formation of more clouds. And it is here that the UN's analysis goes completely astray. For it makes no allowance for the additional cloud-albedo effect that these clouds generated by the water-vapor feedback will create. This leads to a catastrophic overvaluation by the IPCC of the water-vapor feedback; and, though this is partly compensated for by the treatment of all cloud albedo as a forcing, it creates an overstatement of the final warming effect of adding greenhouse gases such as CO2 to the atmosphere after all feedbacks have been taken into account.
Fallacy: oversimplification