Basement insulation

[cdat]

A great deal of the insulation in the engine compartment and generator compartment is/has come loose from the floorboards and is handing down. The insulation appears to be a foam based covered with a plastic, the plastic is also exasperating from the from the foam, and the foam is crumbling and coming apart.
Any suggestions on a replacement insulation, is it necessary to have the insulation, I would think so. Can I glue a foam board type up on the underneath of the floorboards?

Thanks for any suggestions.

John