While the bubble wrap insulation from Home Depot won't go up in flames, it does melt. I used it for several years while brewing in the Michigan winters, and in time I would forget and light the burners while recirculating the mash and...smell something. It never caught fire, but was unpleasent to smell.
I just used masking tape to hold it to the keg, and in time I would punch a termometer through it into the thermo-probe thingy on the kettle. This worked to also keep it in place.