That's just like the house that I grew up in, in eastern Nebraska. Ten below in the winter and a hundred and five in the summer. Silver painted bituminous compound impregnated cloth and paper sheath, old thermoset plastic or rubber insulation (depending upon the stock that the supplier had), and no equipment grounding conductor at all.
The 1953 NEC Article 336 Non Metallic Sheathed Cable is silent about thermal insulation. This is not unusual.
Even Knob & Tube was legal to be covered in thermal insulation until that was prohibited by quotable rule in the mid Eighties.
So, the answer is: The NEC does not prohibit the installation of NM in thermal insulation.