Fusebox insulation

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Hello, my 1992 940 GL had a problem in June (2019) where there was a smell of burning whilst driving and just before I reached the local Volvo garage (I live in Dubai), I saw smoke coming from the fusebox area.

The garage have had the car since then and told me two weeks ago that "all insulations are damaged" and they cannot fix it as there is too much risk involved. They have not specified anything more than that and seem unable to repair the car. Has anyone else had a similar experience and can you advise please on what can be done? My car is in great condition and not ready for the scrapyard yet!
 

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