Being middle of winter in Canterbury and and frustrated by heat loss from when I go to bed with the lounge room at ~26°C and waking up to it at ~17°C (Not taking away from the fact that 17° when it's -5° outside is nothing to be sneezed at) It got me to thinking of the large hole around my Outer Flue. I splashed out on R6.3 275mm thick earthwool insulation in the ceiling and have always felt alot of heat escapes out this un-insulated area around the flue. A comment I read once saying that having an un-insulated section of ceiling is like having a hole in your bath tub has always stuck in my head.

So I got up in my ceiling space to have a look and the current un-insulated area that the (most incompetent ever) installer left around my flue and it is 300mm on 2 sides and  150mm on the other 2 sides. from some googling it seems the recommended minimum gap is 50mm-75mm but then I came across this BRANZ Appraisal Document for my specific Insulation - Knauf Earthwool that says 

" Earthwool glasswool insulation is considered a non—combustible material and need not be separated
from heat sources such as fire places, flues and chimneys. However, when used in conjunction with
or attached to heat sensitive materials, the heat sensitive material must be separated from fire
places, heating appliances, flues and chimneys in accordance with the requirements of Part 7 of
NZBC Acceptable Solutions C/ASl to C/ASG and NZBC Verification Method C/VMl."

I'm not exactly sure what they mean by in conjunction with or attached to heat sensitive materials, But i'm guessing they could be referring to when the insulation has a backing or something like that?

Anyway it would seem from reading that that I can go ahead and replace the insulation around my flue without having to worry, I did find it reassuring also that the Outer Flue was cold to touch, not even a slight hint of warmth.

I think I have answered my own question here, hmmm. Next project will be building an insulated box to prevent heat escaping through the attic star ladder in the walk in robe.