"Spray foam has changed that game from a cost perspective — it's expensive — but it is ... horrible stuff that has no place in a confined live/work space, in our view.
"Our goal is to offer a natural high performance option. What could possibly be better suited than wool?" Mr Legge said.
Materials in homes were contributing to poor indoor air quality, up to 500% worse than the air outside, he said.
Compounding that, people were spending 90% of their time indoors and people were becoming increasingly aware of "sick building syndrome".
Wool responded "perfectly" to the challenges in the built environment by managing moisture, absorbing indoor air contaminants and noise.
The US insulation market was "gargantuan" and Havelock Wool was after a small fraction of the overall market.
Consumers had made it clear that health was increasingly important when buying, Mr Legge said.
Demand had been sluggish but the situation had changed noticeably in the past six months.
"We attribute this to hard work paying off, a shift in marketing efforts to look beyond the trade by appealing directly to consumers, general awareness and a steady increased interest in healthy alternatives in general," he said.
NZM chief executive John Brakenridge said partnership was part of the company's value-add strategy for strong wool.
"As well as supporting traditional uses for wool, we need to seek out new markets and categories to realise the true value of ethically grown, sustainable New Zealand wool fibre.
"To reposition wool fibre as a premium natural alternative to toxic synthetic fibre, we are focusing on strategic alignment with leading global brands to tell a positive New Zealand wool story to the world," he said.
Pamu chief executive Steven Carden said working with Havelock Wool had the state-owned enterprise looking at ways it could refurbish its large portfolio of on-farm homes with more natural materials.
Wool insulation was a premium product, targeted at high-end consumers, so there were some economic hurdles to negotiate. However, seeing its wool come full circle would be "immensely satisfying", he said.
