The main reason for the hood "insulation" is for fire suppression in the engine bay. Either the plastic fixtures melt or the hood binder material burns off and the hood drops down and acts as a fire blanket to smother the flames. It is not intended to put the fire out but rather delay its progress and give the occupants of the car more time to escape. The hood itself is made from fire resistant fibres. How much time is another matter, but it is primarily there for that purpose.