This makes insulating this house an absurdly bad financial decision, since once you have moisture damage in any part of this material, you can basically demolish most of the walls since it soaks like a sponge.
Mind you, I have not started going into the pitfalls of the legality of even touching a house this old in Germany, where you have to deal with "Denkmalschutz".
Insulating new construction and retrofitting insulation are two absolutely different things and barely have anything to do with each other from the cost-benefit ratio.