Foam contains trapped air which acts as an insulator and so slows heat loss from the pipe by conduction to the colder ambient air surrounding it.
Heat is also lost by radiation (the sort of heat we feel from the sun's rays, where there is no direct physical contact to the heat source) The silver foil around the foam helps prevents this loss. Silver insulation is often fitted behind radiators mounted on cold external walls to reflect the radiated heat away from the wall from where it would be conducted away.
I can't imagine that huge quantities of heat would be radiated from a foam insulated pipe, but these days every little helps. It also adds some extra physical protection and can also be used to protect insulation from the damaging effects of direct exposure to sunlight.
it is also used on cold pipes (e.g. air con and refridgeration) to prevent condensation wetting the insulation (though I think modern stuff like Armalex is closed-cell so should be immune).
I reckon protection from sunlight degradation is a good reason though.
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