There are some concerns about toxic fumes when extruded polystyrene burns.
Here is a quote from this website - http://www.healthyhouseinstitute.com/a-1038-Insulation-Overview
Also, many synthetic foam insulating materials release toxic substances when heated and burned. This is one of the reasons fire fighters routinely wear oxygen masks when entering a burning building. Since oxygen masks are rarely available to typical occupants of a burning house, inhaling smoke means breathing toxic gases. In most fires, deaths are not caused by flame contact, but rather due to inhalation of carbon monoxide and other toxics. Building codes require flammable foam insulation be separated from living spaces by fire-resistant materials such as drywall or plaster.
When installed improperly, insulation may also cause some electrical fixtures to overheat and start a fire. This is especially true when recessed ceiling lighting fixtures are covered with attic insulation. Instructions supplied with insulation typically specify the proper clearance to be maintained between the insulation and lighting fixtures, furnace flues, water heaters, etc. If a device is not specifically designed to be in direct contact with insulation, proper clearance should be provided to minimize the chance of fire.
- See more at: http://www.healthyhouseinstitute.com/a-1038-Insulation-Overview#sthash.Jj5pvr5f.dpuf
I am using it for my West of Worcester layout because I wanted something light enough for one operator to carry but if it ever caught fire, I'd be running. Also, one of the railway clubs here was refused insurance because of the high level of polystyrene used in scenery on their club layout. Not trying to be alarmist, but I think everyone needs to know there is a risk.