The insulation class of the transformer refers to the max (hot spot) temperature that can be safely withstood by the specific insulation material. It is the weakest of the materials used in transformer (as far as temperature withstand capability is concerned) as the other materials like steel core & copper winding can withstand much higher temperature during operation. There are different classes of insulation materials (Y, A, B, F, H & C) with max temperatures 90, 105, 130, 155, 180 & more than 180 deg. C respectively. Higher temperature class insulation allows higher copper temperature meaning smaller Copper cross sectional area thus saving cost & size.