While individual stalks of straw will burn, when condensed into bales, they actually resist combustion, due to lack of oxygen. It's like trying to burn a phone book. At a certified laboratory in New Mexico, a plastered straw bale wall system easily passed a two-hour fire test, which is required for commercial construction. Liquid moisture is a problem in bale walls, as it is in any wall system. But with a proper foundation, roof, and finish plaster, straw bale buildings can last indefinitely, as nearly century-old homes in Nebraska prove.
Anecdotal evidence indicates no problem with bugs.
In New Mexico, Pima County, AZ, and several counties in California, getting a building permit for a straw bale house is almost routine. Farmers Insurance Group will insure a bale home at preferred rates and other companies are following suit. Black Range Films Star Rt. Their latest production Straw Bale Code Testing will assist anyone, including code officials in dealing with the permitting process. No specific Subject or body is required.