From what I can tell, it's a borderline nonsensical regulation. Basically they are requiring a much thicker insulation on the tank, in theory to help cut down on energy wasting heat loss. Thing is, the current insulation is really really good already, and the benefit from this is pretty negligible. Just put your hand on the outside of a modern hot water heater tank. Is it warm? No, it's not, because the insulation is good. If it's not warm, then additional insulation isn't going to do anything. Looking at my gas bill, the energy loss that I experience from the hot water heater is non-existent.
What it is going to do is make stuff a lot more expensive, and not compatible when replacing old units, which will cause a lot of additional work (i.e. energy consumption and waste generation) for some people - usually those who can least afford it. But then, that's how this stuff usually works.